Great moments from at the European Capital Assembly sponsored by Alphagreen and Taylor Wessing. Thank you to the 24 speakers who provided great insight and shared their expertise and knowledge.
My key takeaways are below:
Factors that investors care about when appraising opportunities
The quality of the team was mentioned throughout the afternoon. Previous experience building commercial products or having worked in the business/strategy sector is valuable in the eyes of investors.
Possession of regulatory IP such as EU-GMP provides defensibility in the crowded marketplace we currently see today.
Coherent and clear go-to-market strategy. In particular, how a business plans to win the market and work with existing stakeholders e.g pharmacies.
Investor thinking over the last two years
The era of sky-high valuations is coming to a close. Investors are more educated and are seeing the similarities of the cannabis market to other traditional sectors.
Investors are offering tailored support to the cannabis market, in specific helping portfolio companies remain compliant and ahead of regulatory challenges.
Advice to entrepreneurs considering the cannabis market
Ensure your business model and fundamentals make sense. In particular, there was a healthy discourse concerning cultivation in low-cost non-EU countries and eventual sale in the EU. Some panellists ultimately believed that EU domestic supply would become the norm and believed it would be difficult to raise funds in the current climate if you were cultivating outside the EU.
Be original. Given the young age of the industry, there is lots of whitespace for businesses to carve out their own niches instead of competing as copy-cat players.
Private vs public companies
Canadian model enabled companies to go public a lot earlier than is being seen in the European market.
PE/VC money and regulation means EU cannabis companies are staying private for longer. This is seen as a positive sign and allows companies to develop long term profitable strategies.
The difficulties the Canadian public companies have faced could also happen in the EU and is an important event to learn from.
Differentiation in the CBD consumer space
There are various ways to differentiate a consumer-focused brand. Leaders in the industry are focusing on providing accessibility to the customer. Accessibility can be achieved in several ways including price, clear signposting on when and how to consume a CBD product and transparency of the raw ingredients.
Brands are focused on communicating their origin story clearly to build authenticity and a loyal customer base.
Distribution challenges for CBD consumer brands
Although direct-to-consumer allows for brands to build a strong rapport with customers, the limited ability to advertise online has been driving brands to consider retail distribution as a second leg of the distribution strategy
Brands are overcoming advertising hurdles and using innovative methods to access customers. These include posting in private Facebook groups and utilising Instagram influencers to build a loyal customer base
General challenges for CBD consumer brands
Some brands had concerns about high churn rate if customers pay large amounts for a product but don’t experience the benefits of CBD they were expecting. In response, brands are creating affordably priced sample kits, allowing customers to discover products easily.
Given the FSA’s novel food announcement, brands should consider their white-label’s progress into a novel food application.
Preparation for international expansion
Developing partnerships is incredibly important, both with local stakeholders but also with regulators given the differences across geographical markets
When looking to choose a partner it’s important to consider their pharmaceutical and business experiences
FSA and novel foods
There was a healthy discussion on both sides of the novel foods debate. Ultimately, consumer safety is a priority but there are concerns about the effectiveness of isolates and distillates in comparison to full-spectrum products.
Future of the cannabis market
Over-the-counter (OTC) products have done well to provide visible marketing for CBD in general. However, fragmented regulation is causing difficulties for brands. There is an argument that there should be a better separation between OTC and medical products, enabling consumers to make more educated choices.
OTC products may benefit from conducting their own observational trials and studies, producing white papers and helping target audience decision making.
The next steps for the cannabis industry revolve around consumers, helping them understand and access the plethora of products available to them.
Stay safe and healthy!