3 cannabis execs share how they're positioning their firms to profit as more US states are poised to legalize recreational marijuana

  • Voters in Arizona, Montana, New Jersey, and South Dakota will decide whether to legalize adult-use cannabis in November.
  • Business Insider's Jeremy Berke talked to CEOs at three cannabis companies, who shared how they plan to profit as the cannabis market potentially grows in the coming years.
  • Companies like Miss Grass and Frigg, which are focused on building up consumer brands, say that as more states legalize cannabis, building up a national brand will be a key to winning a major stake in the market.
  • Canopy Rivers’ president Narbe Alexandrian said that the best entrepreneurs are the ones who “really understand their customer” and market cannabis not as a product, but as an ingredient in a product that can be targeted to customers.
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In anticipation that more US states may soon legalize adult-use cannabis, companies are gearing up for a market where national cannabis brands will become increasingly valuable.

In November, four states — Arizona, Montana, New Jersey, and South Dakota — are set to vote on whether to legalize recreational cannabis. 

Arizona and New Jersey are most likely to legalize, according to Cowen analyst Vivien Azer. She wrote in a September 10 note that the two states "represent by far the biggest revenue opportunity" among states with ballot referendums in November.

An adult-use program in New Jersey especially would have broad implications for a cannabis market in the Northeast, carving a path for legalization of the drug in neighboring states. Governors in Connecticut, New Jersey, Pennsylvania, and Rhode Island have said that they want to lay out a collaborative regional approach to cannabis when the time comes. Recreational cannabis isn't legal in any of those states now.

Read more: Adult-use marijuana is on the ballot in 4 states, and a top Wall Street analyst lays out which cannabis stocks could get the biggest boost from legalization

As the cannabis industry evolves and the drug becomes legal in more states, companies are stressing the importance of building up national brands, similar to how consumer packaged goods (CPG) companies that make cereal and soda sell the same products nationally. Right now, cannabis brands in the US tend to vary significantly across states and regions.

Though 33 states in the US allow cannabis for medical use, the biggest cluster of recreational cannabis states remains on the West coast, meaning that up until now there have been few opportunities to build a nationally recognizable recreational brand for any cannabis company, no matter their geographic footprint.

"I think as any industry evolves, consumer brands have more and more value," Kate Miller, the cofounder and CEO of cannabis wellness brand Miss Grass, said on Wednesday at the Luxury Meets Cannabis conference. 

Miss Grass is based in California but sells hemp products nationally online.

Kimberly Dillon, the founder of Frigg, a beauty and wellness cannabis line that launched in July, said that the key for many companies is to make sure that they can build up a national brand that would be relevant and attractive to customers both on the East and West coast. Dillon was formerly chief marketing officer at cannabis brand Papa & Barkley.

Dillon told Business Insider's Jeremy Berke at the conference that because every state has its own set of complex regulations, companies would be smart to figure out a pathway to build up a national brand that could win.

Read more: Venture investors are piling into red-hot cannabis tech startups, despite the industry's struggles. Here's why mainstream funds are betting on software over pre-rolls.

"Whoever figures that out is it's definitely going to be a major player in the game," she said.

Narbe Alexandrian, president of Canopy Rivers, the investment arm of Canopy Growth, said that the companies he looks to invest in are the ones that understand their customers and the importance of marketing.

"The best entrepreneurs that we see take that CPG type of focus," said Alexandrian, who added that companies that do their due diligence in getting as much data and information on their target audience are the ones who stand out among the crowd.

"It really comes down to execution," he said, "specifically with CPG, when there's no real hard assets and it's an idea."

Cannabis isn't a product, he continued, it's an ingredient within the product itself and should be marketed as such.

Large cannabis companies have also hired execs with CPG experience, as the sector moves from emerging to established.

This month, Aurora named Miguel Martin — an exec with experience across the hemp and tobacco sectors — as its new CEO. And Cronos Group named Kurt Schmidt, a longtime CPG exec with experience at Kraft Foods, among others, as its new CEO last week. 

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