Just because a cannabis brand has its products in retail stores, it doesn’t mean that they actually were responsible for manufacturing those products. Similar to cosmetics and beauty products, it’s extremely common for some of the country’s most popular cannabis brands to outsource production to a third party, a process known as white labeling.
White-label manufacturers have established facilities and capabilities to handle large-scale production demands to quickly expand reach, increase exposure and provide quality control to achieve each brand’s specific vision and get to shelves in a timely, cost-effective manner.
But as the CEO of a vertically integrated cannabis company with a rapidly evolving white-labeling business, I’ve learned that not all white-label partnerships are created equal. For every mutually beneficial relationship that exists between brands and manufacturers, there can often be imposters who don’t have the best intentions.
However, there’s no shame in the white-label game and recognizing past mistakes is often the only way to move forward and discover truly great, long-lasting partnerships. It’s important for both brands and manufacturers to select their partners wisely and base their respective decisions on factors that go even beyond performance track record.
Here are some of the things both brands and white-label manufacturers should consider when selecting their partners.
Scaling Efficiently Through Partnership
Certain companies have the capital, time and experience to implement a vertically integrated business model, but for many cannabis startups, it’s simply not a feasible option to manufacture their own products. The challenge of securing and setting up a licensed facility, then hiring enough qualified manufacturers to design and create your product can take years and cost hundreds of thousands of dollars.
From a manufacturing standpoint, when I’m considering taking on a brand as a white-label client, it is important to ensure that the brand is operating in a way that ensures that both parties can succeed. Manufacturers and brands who are both able to scale up efficiently can keep cost of production to a minimum. Some of my strongest partnerships are with companies who started off with one pre-roll and scaled up to create a wide variety of products, including everything from vape cartridges to edibles and a wide range of infused products.
White-label processors provide a valuable service which should be equitable for their customers.
Two other hurdles we prioritize when bringing products to market are quality control and compliance. In my experience, quality control and compliance are best handled by companies that have operating procedures in place and people who are responsible for following up on those procedures. Products created by a manufacturer represent both parties, and any issues with contamination or compliance are ultimately the responsibility of the manufacturer, so they must invest in compliance.
Likewise, brands should select a white-label partner with a variety of experts and resources at their disposal across the supply chain. This could include scientists, researchers, chefs, terpene manufacturers and more.
I believe that a mutual trust between white-label partners and manufacturers frees up brand leaders to focus on their other strengths like marketing, building relationships with retailers and establishing a core customer base. In some states, white-label partners can even make themselves more valuable to brands by directly extending their licenses. When this occurs, the brand doesn’t have to deal with the lengthy and bureaucratic process of applying for their own licenses. Instead, they can start having their products manufactured immediately.
Making Sense of Dollars and Cents
It is much more cost efficient to establish white-label partnerships and outsource manufacturing instead of handling a product launch from start to finish in-house. When turning to a white-label manufacturer, brands don’t have to worry about production costs like equipment, rent or mortgage payments on a facility or additional production staff.
In terms of dollars, a product launch utilizing a white-label manufacturer will likely cost about $100,000 for just a single SKU (and maybe more, depending on state regulations), compared to potentially millions of dollars to set up a vertically integrated model. The Nirvana Group, for example, takes a two-part approach: we help brands formulate and manufacture products, as well as assist in distribution and sales.
With COVID-19 still creating supply shortages that can damage return on investment, I’ve found that operating as lean as possible — with partners who adhere to the same industry standards — is the best way to ensure highest quality product at the lowest price. White-label partners that can seamlessly integrate and use a facility’s equipment to execute a brand’s vision are much more likely to be profitable. Doing more homework in advance of assessing a new white-label partner can save a lot of hassle down the road.
Building Partnerships to Last
Open communication, transparency and honest reporting by white-label partner are all crucial factors.
Before inking a contract, for example, determine a schedule for determining how the manufacturing process is coming along.
I have seen the benefits of choosing great partnerships that have grown and transformed with us, as well as the pitfalls that occur when people are being disingenuous and not engaging in open communication. Having clear expectations and a roadmap to success are the only ways a great white-label partnership can thrive.
In addition, make sure that the white-label manufacturer confirms a well-established reputation for security and confidentiality. The more questions asked, and the more answers received in advance, the better.
Ultimately, I believe that successful white-label partnerships are beneficial to both parties, the cannabis industry as a whole and consumers. It spurs product innovation and allows forward-thinking brands to make strides in other areas, such as design and marketing. There will always be challenges to overcome, but for best results, it’s important for brands and manufacturers to be meticulous while researching a new partner that best fits their current production needs and future goals.
Arshad “Adam” Lasi is CEO of Nirvana Group, a vertically integrated, family-owned cannabis company in Oklahoma. Nirvana’s operations include a cultivation and extraction facility, a processing facility, house brands and the only cannabis cash and carry concept in Oklahoma. Nirvana Group also owns an expanding list of medical dispensaries throughout the state.