Andy Singh, CEO of Nuvata, Discusses the Cannabis Vape Landscape and the Hurdles to Future-Proofing Your Dispensary Operations
How have the cannabis and nicotine vape markets looked similar or dissimilar over the last decade?
Before technology was where it is today, consumers had to buy e-liquids, juice, and mods in the nicotine market. This was similar to initial dry-herb vapes of the time, which were stationary, less portable, and not super well-equipped.
In the nicotine industry, we saw technology advance to a place where Juul could be the leader. They came out with portable hardware and interchangeable pods, which were sold separately, revolutionizing the industry. They became a hot commodity and did exceptionally well. Altria, a tobacco giant, invested billions of dollars in them.
While Juul was positioned as the leader, many brands started coming out with disposables. Puff Bar, for instance, blew up because they focused on a few simple concepts:
- Phenomenal flavors
- Ease of use
- Single-use disposables
- Compact and convenient form factor
Many different players recognized this is where the industry is headed, and many new nicotine brands have originated from that concept.
Fast-forward a few years. Before getting banned in the United States, Juul was losing their market share because disposables were capturing it, along with other regulatory issues they were facing. Everyone leaned into disposables because of their convenience, flavors, and form factors.
Simultaneously, cartridges were the only available product in the cannabis industry. A few years ago, there weren’t many disposable cannabis vapes; The focus was primarily on cartridges. When Nuvata launched in 2019, we predicted this trend would change. We didn’t know when, but we knew it would. We were ahead of the game. What we’re seeing today is a testament to this shift.
Now, we’re seeing cannabis disposables trending upwards and becoming more popular. We’ll see this trend remain consistent over the years, and I wouldn’t be surprised if demand for disposables took over cartridges in the future.
It’s interesting to recognize the parallel between the cannabis and nicotine industries. Traditionally, you have two components: the hardware and pod for nicotine, and the cartridge and battery for cannabis. Now you can package those technologies as single-use and price them similarly.
What has your personal experience in the cannabis wellness space suggested about the importance of mindfulness in the consumer experience?
My personal experiences in the cannabis and wellness spaces inspired me to start Nuvata and define the principles of what we stand for. Personally, when I consume cannabis, I experience this sense of transcendence. My endocannabinoid system is stimulated, and certain parts of the brain are unlocked that may not usually be active without cannabis.
When you recognize the changes that are taking place mentally and physically when you’re consuming cannabis, you can harness these effects to enhance whatever you’re doing. Cannabis can help you “be a better version of yourself” — be more reflective, slow down, and look at things differently. We’re so self-absorbed that we often forget to be in the moment and instead always live in our thoughts. Cannabis can help alleviate that and bring us a sense of presence. Nuvata’s curated product line is linked to various lifestyles and helps to bring consumers the mindfulness of cannabis in a convenient package.
Are there any consumer purchase trends pointing to success with certain vape features, such as controlled dosage, disposability or other design elements?
Headset has shown a 15% increase in demand for cannabis disposables in 2021. That should remain consistent in 2022.
I imagine that as technology advances, you could have a controlled temperature feature on cannabis disposables based on the terpene profile and the ideal temperatures for each of those terpenes. As technology advances, there will likely be a combination of controlled dosage and disposability. A convenient form factor combined with advanced disposable vape technology to allow for the perfect smooth dosed draw will drive the vape market.
Tell me about the hardest lesson you learned from the unpredictability of the cannabis market.
For me, the hardest lesson was recognizing where the limiting factors are in the supply chain.
If you look at California specifically, the lack of retailers is the bottleneck of the industry. There are not enough retailers to service California, but there are many distributors, cultivators, and manufacturers. Creating that imbalance causes saturation on one end of the market and limitations on the other. Already, you’re positioning the industry for failure by enabling this disconnect. At any given time, regulations can change, hindering businesses and how they operate. You can never anticipate how the industry will shape itself, but you can look at where it stands at the time and position yourself to mitigate as much risk as possible.
Other markets, like New Jersey, limit the number of cultivators but not the number of retailers. We can already predict commodity prices will be high. Product pricing will also be relatively high because there will be a lack of supply. The overabundance of retailers will create a bottleneck because they will compete with each other and fight to survive. The state could always elect to stop issuing retail licenses when the market becomes too oversaturated, or they may allow an influx of cultivator licenses to come online. It’s essential to think about the entire landscape and the economic consequences of a shift like this. The cannabis industry is so dynamic and ever-evolving. Regardless of the state or municipality you operate in, success requires adaptability, analyzing the facts in the moment, and bracing yourself to mitigate as much risk as possible.
We can look at Oklahoma for one more example. There was no cap on licenses in the state, so there are several thousands of cultivators and manufacturers and retailers. You had to realize early on that you have to achieve a certain level of scale to operate with longevity and remain competitive, which is very capital-intensive. Given the regulatory framework, commodity prices will inevitably plunge down, which we are seeing today. You must operate somewhat on an industrial scale to sustain the lower margins required for success, especially if you are a cultivator or manufacturer. If you recognized this supply chain pinch early on, you might have been able to steer your business in the right direction.
The last two years have been a rollercoaster. How do dispensary owners and operators stay ahead of unpredictable sales cycles?
Dispensary owners have to recognize that the cannabis industry is very dynamic. There could always be some regulatory change that results in reconfiguring how they operate their business. Dispensary operators must be adaptable in this type of environment.
Many dispensary owners operate on net terms, which is essentially a function of a debt instrument. If a shop operates like that and you experience an economic downturn — be it a massive sales decline or inflation — it puts them in a bad position and a worse bind. Dispensary owners need to do a few things to stay profitable:
- Recognize how to operate sustainably
- Limit the level of debt they operate under
- Keep the overhead adaptable by syncing overhead with their revenue performance
- Budget out 280E implications in real time while operating their business
What’s the biggest hurdle to matching client health and wellness needs to cannabis products in the dispensary setting?
The biggest hurdle is the information flow from brands to customers, which is essentially in the hands of the budtender. That’s why brand education is hugely critical for dispensaries. It doesn’t help that budtenders have a pretty high turnover rate. The budtender staff is constantly rotating because it’s an entry-level position, which makes it even more challenging to keep brand education fresh and consistent.
Brands must conduct budtender education consistently, either quarterly or semi-annually. Even so, when budtenders educate customers on multiple brands and products, their memorization capacity is limited. Budtenders must keep all this information fresh to best guide customers based on their needs and what they are looking for, which is challenging.
It would be beneficial if there were a more direct, consistent connection between the customers and the brands, like some sort of in-store pod, catalog, kiosk, or virtual library with brand and product information. Few dispensaries are doing that. Most rely on the budtenders to support and guide the customers, which is a human limitation.
How does a dispensary figure out how many vape products to carry and identify which are best for their target market?
Many dispensaries position their brand partners in distress by carrying too many vape brands and similar products. Stores are already limited by the number of customers they see, and creating a saturated sales menu makes it very difficult for brands to stand out and be successful.
Dispensaries must be intentional and strategic about their brands, particularly regarding vapes, as products are very similar. If you’re carrying seven or eight cartridge brands with similar potencies and strains, you’re essentially pitting brands against each other. It then comes down to whichever brand can spend more marketing dollars to acquire customers and be successful. That is often not sustainable for the brands themselves.
Accordingly, dispensaries need to be strategic about the number of brands they carry in each category and how they differentiate between the products. That’s why Nuvata picked the disposable category and why we focused on effect-based flavors; no one was doing this. We were intentional in that sense to differentiate ourselves. We also differentiated ourselves to customers by offering a more guided and tailored experience to make it easier for them to find what they’re looking for with an emphasis on terpene education.