High Tide uses retail data to build its private brand

After a rocky start, the cannabis co. is building a white label line to differentiate in a painfully saturated market.

testeur-de-cbd-PKN1coObyLA-unsplashBy Will Novosedlik

Last fall was an exciting time for licensed cannabis retailers like Fire & Flower, High Tide and Spiritleaf. All three were busy gearing up for the holiday season and had signed white label deals with manufacturers of cannabis products.

Fire & Flower, for instance, had partnered with The Valens Company to manufacture a Fire & Flower-branded Revity CBD oil for distribution in Ontario, Manitoba and Saskatchewan. High Tide cut a deal with Heritage Cannabis and Loosh brands for its selection of branded shatter and THC gummies.

Then in February, everything came to a grinding halt as the Alcohol and Gaming Commission of Ontario (AGCO) announced that it was going to prohibit retailers from creating in-house brands and white-label products.

The pushback from cannabis retailers was almost immediate. A letter on their behalf from the Ontario Chamber of Commerce dated February 25, 2022 urged the Government of Ontario to reconsider its decision, citing issues like undermining confidence in the regulatory process and inequitable treatment of the sector (if Loblaws can do it, why can’t we?).

It worked. A month later the AGCO reversed the ban, allowing white label production to go ahead after all, with sales commencing June 30. When asked about the rollercoaster ride, Andy Palalas, Calgary’s High Tide’s chief revenue officer (which really means head of sales, marketing and product development) chalked it up to the fact that it’s still very early days for the industry and so things are bound to be a bit chaotic.

While Spiritleaf and Fire & Flower declined to be interviewed, High Tide (which operates under the trade name Canna Cabana) agreed to discuss the impact of the decision on both its own business and the industry in general.

The company’s white label branded consumables will trade under the name Cabana Cannabis Co., while the retail arm will continue as Canna Cabana. When plans were first announced, president and CEO Raj Grover stated that the white label rollout had been in the works for “quite some time” and that the company had taken “a measured approach in launching our own house-branded products given the oversupply of branded biomass in the Canadian market.”

When speaking with strategy, Palalas cut right to the chase when asked what the industry’s biggest concerns would have been had the ban stood. “One word: differentiation,” he said. “This market is highly saturated. In Ontario alone, which is our biggest market, there are 1,300 stores, so the competition is intense. We need ways to stand out.”

Bill C-45’s (the Cannabis Act) tight restrictions on advertising and promotion make brand-building in this sector a distinct challenge. No brand can promise lifestyle or health benefits, so it has to find other ways to drive awareness and consideration. Similar to brands like Tokyo Smoke, one of the advantages that High Tide/Canna Cabana has is that it was in the accessory market long before weed was legal, so it entered the smokables market with significant brand equity and gives it a certain advantage as it develops its own branded line. It is also one of the world’s largest makers of pipes, bongs and rollers, with 700 SKUs in its own stores and in competitor outlets, so its brand can extend beyond its own retail footprint, creating incremental awareness.

Having grown to 120 stores, High Tide/Canna Cabana has a lot of behavioural data at its fingertips to help create a successful white label brand. “I can look across our spectrum of products to see what price points are selling, what flavors and THC levels make sense and what price points I need to hit,” says Palasa. “I can ask what kind of packaging ideas I can use to help attract a customer to shelf and what point of purchase materials are required. I can now put programming and in-store campaigns that really highlight the product and its benefits and what it’s trying to say. And I can ladder that up to the consumer through the product attributes they’re looking for. All that gives me a compelling way to craft a product offering that will connect with them and that I’m confident will sell.”

Canna Cabana also derives customer insights from its loyalty program, which has close to half a million members. “Approximately 94% of my transactions right now are Cabana Club members, and that means they are not anonymous and I can track the customer journey very closely.” When you can’t advertise, customer experience becomes the key plank in your marketing strategy. And when you are in such a crowded market, any little bit of differentiation helps.

“At the end of the day,” says Palalas, “if Loblaws didn’t have President’s Choice, it wouldn’t be much different than a Sobey’s or a Metro.”