How cannabis and wine can work together to share knowledge and opportunities.
By Julie Fadda
When cannabis became legalized for recreational use, many in the wine industry feared the worst. Would it take business away from wineries? But it turns out the two industries are beginning to learn how they can help each other grow instead.
“Northern California has always had a quality reputation for wine and for weed, and neither industry is going anywhere” says George Christie, founder and CEO of Wine Industry Network. “In the best-case scenario, both industries find enough common ground to create win-win situations by working together. At a minimum, however, there should be enough of a dialogue between the two that even if there are areas of conflict or competition, there’s a relationship to help overcome those situations.”
Leveraging a Brand
One of the first (and possibly easiest) ways wineries can work directly with cannabis companies is through brand licensing. This is especially true for established brands looking to expand their reach. “Early movers are using their brand name to collaborate,” says Marc Hauser, partner at Gaw Van Male, a Napa-based wine law firm, who’s currently spearheading the firm’s cannabis transactions practice. “They’re exploring putting their name on products that are produced and sold by someone else.” At this point, it’s a solid way for wineries to position themselves as cannabis-friendly, even though current laws prohibit profit sharing in such a venture. It’s all about getting the name and idea out there.
“One of the greatest assets a winery has is its mailing list,” says Hauser. “But they’re understandably protective of it. They don’t use it to solicit for other businesses. But if there’s a product they’re collaborating on, things change. It’s a creative and legal way to leverage a brand ahead of the curve.” For example, the winery could suggest winery-branded cannabis products that are curated by the winemaker.
One way to make this happen is to work with a company that has the licensing and know-how to get the products into consumers’ hands. Zack Crafton is CEO of ESILogistics.com, a distribution and logistics company that sells cannabis products statewide with an emphasis on customer service. “We work with brands and producers statewide to help them sell direct to consumer, handling everything from checkout to delivery.” As the former vice president of operations at NakedWines.com, he uses what he learned in the wine industry to help create a seamless experience for cannabis consumers.
Making an Investment
Like any investment opportunity, a top priority when it comes to cannabis is to do the proper research before any agreement is made. “Don’t fall prey to the hype that this is an amazing gold rush,” says Claudio Miranda, co-founder of Guild Enterprises, a family of companies including a San Jose-based, vertically integrated dispensary (all products are grown, processed and sold on site), a cannabis nursery in Salinas and a concentrates brand that specializes in high-potency extracts. “California needs to learn from other states, like Washington, which also has a strong wine and produce industry,” he says. “There’s no quick win. A lot of farmers there turned to cannabis but found a glut in the market and went belly-up. The industry is as hard as anything else, even harder because of all the regulations involved. The most difficult part is marketing oneself and offering consistency and reliability over time.”
Another question is how investing in cannabis works, since the banking isn’t federally backed. “It’s a practical issue that will only be solved once the U.S. Treasury allows it,” says Hauser, adding that it’s an opportunity for credit unions and state banks instead. “The equipment and services market, which doesn’t include cannabis products, has seen robust venture capital activity,” he adds. “Larger, non-cannabis companies that don’t rely on a direct to consumer program are also purchasing land as well as distribution companies to leverage farming and distribution networks.
“The biggest obstacle is the fact that it’s federally illegal,” he continues. “There’s a legitimate risk. But plenty of investors are willing to accept that risk.” The key there is knowing who you’re investing with. “Make sure they’re reliable and compliant. Know who controls what, how the economics are split and valued, what the tax impacts are and how you can exit if necessary. It’s critical not to regret what you did,” says Hauser.
Sending the Right Message
Once you’ve made the necessary choices regarding products, branding and investments, it’s time to put your winery’s knowledge base to work when it comes to marketing. One of the biggest obstacles — and opportunities — is consumer education. There are so many different strains, edibles, salves and more, it can be tough to ensure people know what they’re getting. Using winery knowledge about educating consumers regarding origin, taste, style, history and more is an ideal way to get them on the path that’s right for them.
Another important aspect is presentation. “Cannabis never had branding in the past,” says Miranda. “The brand was a Ziploc bag.” This is where the importance of working with someone whose products and ideals match your own come into play. “Now cannabis is being packaged with aesthetic branding. A high-quality product will be packaged in an elegant glass jar or will focus on sustainable, recyclable materials,” he says. “Mirror your target customer and how that translates into packaging, just as the wine industry has been doing for years.”
Next comes distribution: ensuring the products make it to their destination safely is key. Research trusted partners and providers to choose which best fit your brand message. “There’s a three-tier distribution system, like with wine,” says Miranda. “But cannabis distribution has surpassed wine regulations in rigor. A distributor needs to be able to track and trace the product from start to finish.” Once it’s in the consumer’s hand, it’s up to them to enjoy the results.
For further discussion on this topic, visit the Wine & Weed Symposium (wine-weed.com) on August 2, 2018, at the Hyatt Regency Sonoma Wine Country in Santa Rosa, Calif. Participants on the panel titled “Cannabis Opportunities for the Wine Industry” are included in this article.