The surprising similarities between luxury fashion and the business of cannabis


Opinions expressed by entrepreneur contributors are their own.

Recently I have been reading The House of Gucci: A Sensational Story of Murder, Madness, Glamor and Greed, the nonfiction book on which the 2021 film is based. While I came for the high-stakes, high-fashion love affairs, I stayed for the complex business case study that mirrors what I see in long-running cannabis companies. Here are the striking similarities.

A multi-generational mess

The house of GucciIts plot revolves around Maurizio Gucci and his relationship with Patrizia Reggiani. The two meet at a party and Patrizia is struck by the legacy of Maurizio and his family. At the time, the company was owned and operated by Maurizio’s father and uncles, who inherited the business from their father and later passed it on to their respective heirs. But mixing business and family becomes difficult for Gucci.

Multigenerational dynamics like this often create complicated company-to-company relationships. That was the reality for some early cannabis businesses started by siblings or close friends when California first legalized medical cannabis. Even ten years ago, these operations were not considered a viable investment – similar to the fashion at the beginning of the 20th century, when houses began to appear. Instead, these small businesses were funded and set up by the founders or friends and family. Relationships and terms were often loosely defined. Hiring decisions were often based on who knew who, not who knew what.

As California’s medical markets evolved into adult use, increased competition and squabbles over which direction a company should take strained relationships and fractured friendships. Many early companies could have been great had they not been marred by relationships that could not separate family ties from business transactions. One need only dig into some of these legacy companies to find mountains of publicly filed lawsuits between the founders, some of which involve bold and malicious claims, particularly in California.

Cults of personality

Another striking similarity between fashion and cannabis is the characters at the center of the operation. Some famous design houses were founded by iconic and quirky personalities who become synonymous with their brands. Karl Lagerfeld. Oleg Cassini. Coco Chanel. These artists combined skill and flair. Similarly, cannabis growers have a deep passion for their work. The most talented will produce unique strains and terpene profiles and then work on the right way to prune and cure their crops.

Problematically, deep creators like these often pay little attention to faithful detail before augmentation. In addition, they have difficulty reconciling how to maintain quality while increasing volume. This becomes an issue when founders pitch to investors who want to grow revenue and market share.

When Gucci had a problem with their balance sheet, they focused on strengthening their management team. Domenico De Sole brought his business and legal skills to steer the company from bankruptcy to growth mode. His partnership and trust in the young but talented Tom Ford injected new life into the old brand, expanded the commercial product line and attracted millions of new customers. Unfortunately, the cannabis industry is young and companies are having a hard time finding a bell. Instead, founders are often pushed out and talent is brought in from other industries.

In my business, we’ve seen management teams and directors come to these companies from traditional firms like Ford, PepsiCo, Constellation, etc. We like to see teams with that combination of traditional and analog business experience combined with talent and vision.

Pressure towards the IPO

In the 1990s, fashion houses began to look at China and other Asian countries as viable markets and began to diversify their original lines to attract younger customers. To finance these expansion opportunities, several designer brands went public. While some thrived, other fashion companies failed to live up to their promises.

Donna Karan, the designer known for the minimalism of women’s fashion, had a much-anticipated IPO, and shares rose from an initial price of $4 to $24 on the first day of trading. However, expansion plans stalled and share prices fell sharply. This trend would be repeated with other companies.

Over the past couple of years, cannabis companies have also had to deal with the fallout from overcrowded IPOs (or, more commonly, Reverse Takeovers RTOs) that simply couldn’t deliver in emerging markets. Some of these companies have had to divest assets, some are tied up in ongoing litigation, and others have consolidated into even larger companies. Most likely, the company’s valuation is only a fraction of what it was in its initial public offering.

As in fashion, consolidations will continue to occur as new markets open up and ultimately winners and losers emerge. Today, we have mega-fashion houses like LVMH, which has acquired Donna Karan and owns other well-known fashion brands such as Christian Dior, Berluti and Tiffany’s. Today Gucci is owned by the French luxury group Kerig, which has a stable of other powerful brands such as Balenciaga, Yves Saint Laurent and Bottega Veneta.

Cannabis companies are also starting to build deeper benches and better market share through M&A activity. Recently, Cresco Labs announced that it will acquire Columbia Care for $2 billion. When the deal is finalized, it will create one of the largest operations in the US cannabis industry. In October, Trulieve closed a deal with Harvest Health and Recreation that gave the company over 149 retail stores in over 11 states.

While consolidation is often painful for businesses, it is good for industries. They help create economies of scale that lower the cost of goods and services and make the market more competitive – and therefore affordable – for consumers.

The fact that cannabis and fashion brands have some overlapping challenges and opportunities should come as no surprise to people. Both are cultural juggernauts and have had a wide impact on consumers. Both are related to how people see themselves and their lifestyle. Cannabis brands are also often compared to fashion brands.

In 2017, a New York Times article called Beboe the “Hermes of cannabis.” Interestingly, the co-founders of Beboe are both involved in the fashion world. Clement Kwan has worked for Theory and Dolce & Gabanna. Scott Campbell was and still is a tattoo artist who has collaborated with designers such as Marc Jacobs.

Brett Heyman brought her keen eye for unique and distinctive accessories from her Edie Parker brand to the cannabis accessories space with the launch of Flower by Edie Parker. Heyman, who spent two decades in the world of luxury fashion, says it’s only natural that cannabis and fashion have similarities.

Heyman believes there is an opportunity for luxury cannabis accessories, just as there is for high-end barware, that reflect individual tastes and personalities. She also believes that as brands mature, they will begin to move towards creating more holistic and thoughtful product lines that work together, much like fashion collections.

Indeed, fashion has many lessons to learn about how to position products and build brands that resonate with consumers. As Coco Chanel once said: “To be irreplaceable, you must always be different.”


Source link

Leave a Reply

Your email address will not be published. Required fields are marked *

1 × five =