Portal - Company - GFarma Labs

Company Name: G FarmaLabs

Categories: Edibles, Concentrates

www.gfarmalabs.com

Geographic Locations: California, Arizona, Colorado, Florida, Michigan, Oregon, Washington

List of Brands and Subcategories:

Liquid Gold: Edibles: Chocolate, Other

LG Extracts: Concentrates: Cartridges

G Drinks: Edibles: Drinks

G Stiks: Other: Pre-rolled Joints

Executive Summary

  • G FarmaLabs’ line of edibles ranks 9th in California, concentrates rank 26th, and their pre-rolls are relatively small in regards to market share
  • G FarmaLabs is one of a handful of diversified companies, with multiple brands targeting different demographics
  • Distribution is centered around Southern California with their brands rarely found in the northern California
  • Liquid Gold consumers are generally more affluent, white Gen Xers
  • Chocolate consumers look to taste and discretion, while cartridge users are interested in dosage and lab certification

Methodology

Our company profiles leverage our multi-source methodology to give you the most complete view of each company from all sides. The insights provided on consumer demographics and feedback stems from Brightfield Group’s survey of more than 1,200 California medical patients in 2016. Detailed information on precise questions providing each graph and data point can be found in the report's endnotes. Market share and distribution data is based on our brand tracker, which analyzes digital menu audits from more than 1,200 dispensaries and delivery services throughout the state on a monthly basis. This is then evaluated with select POS data, survey data and interviews with dispensary owners which are used to weigh our algorithms.

Figure 1: G FarmaLabs Performance in Major California Markets (August 2016): Edibles Category (Brands: LIQUID GOLD and G DRINKS)

Market

Percent of Dispensaries Carrying the Brand

Brand Share of Category

Brand Ranking in Category

Change in Ranking Since January 2016

California

24%

2%

9

-1

Sacramento

3%

0.03%

98

-25

Bay Area

1%

0.1%

58

+46

Los Angeles

22%

2%

9

-1

Orange County

37%

4%

5

No change

San Diego

41%

2%

9

+1

Figure 2: G FarmaLabs Performance in Major California Markets (August 2016): Concentrates Category (Brand: LIQUID GOLD EXTRACTS)

Market

Percent of Dispensaries Carrying the Brand

Brand Share of Category

Brand Ranking in Category

Change in Ranking Since January 2016

California

9%

0.3%

26

-11

Sacramento

3%

0.06%

87

-14

Bay Area

1%

0.03%

121

-37

Los Angeles

8%

0.2%

38

-12

Orange County

11%

0.5%

20

-10

San Diego

15%

1%

15

+12

Figure 3: G FarmaLabs Performance in Major California Markets (August 2016): Others Category (Brand: G STIKS - Pre-rolls)

Market

Percent of Dispensaries Carrying the Brand

Brand Share of Category

Brand Ranking in Category

Change in Ranking Since January 2016

California

14%

1%

7

+17

Sacramento

NA

NA

NA

NA

Bay Area

1%

0.1%

68

+13

Los Angeles

13%

1%

8

+22

Orange County

22%

2%

6

+19

San Diego

27%

2%

4

+12

Geographic Distribution

Only 8 other companies’ products are more widespread than G FarmaLabss (GFL) in California. However, its distribution continues to lag behind industry leaders like Kiva Confections, Cheeba Chews, and Korova. Whereas these top brands have strong distribution statewide, GFL remains extremely weak in northern California’s main markets (the Bay Area and Sacramento). The company’s near-absence from these markets contrasts with its strong performance in southern California, where more than 33% of Orange County and San Diego dispensaries carry GFL’s Liquid Gold chocolate products. Its Liquid Gold Extracts concentrates, G Drinks lemonades, and G Stiks pre-rolled joints are less widespread, but also have distribution networks focused in southern California.

Distribution and market share is more limited in Los Angeles than in the other southern California markets, but GFL still performs strongly. With only 9 other edibles brands present in a greater share of Los Angeles dispensaries, GFL’s performance in the state’s largest metropolitan market is enough to counteract its weakness in the northern part of the state and position the company among California’s most-recognized brands. One reason for the company’s more limited distribution may be that they manage their distribution through an in house direct sales force rather than using external partners as many of their competitors do.

Distribution has increased in 2016. GFL products were present in 17% of California dispensaries in January 2016 but increased to 24% in August. Popularity increased most rapidly in San Diego (25% in January to 41% in August) and Orange County (27% in January to 37% in August). In Los Angeles the increase was less (16% in January to 22% in August) primarily due to a more fragmented retail landscape that appears to be limiting the share of dispensaries the brand has been able to reach. In the Bay Area and Sacramento, distribution contracted over the same period. This suggests the brand is becoming even more unevenly distributed throughout California.

Consumer Profiles

GFL’s Liquid Gold chocolate products and Liquid Gold Extracts concentrate products rely on Gen X consumers who are more affluent and consume marijuana less frequently than the average California medical cannabis consumer. Over 50% of the customer bases for both brands are in their mid-30s or 40s, which means GFL relies on an older set of consumers than most of its competitors.[1]

More than 50% of California medical cannabis patients consume marijuana every day, but GFL customers consume less frequently. Approximately 33% of them consume marijuana on a daily basis, and another 33% do so 3-4 times per week. This means the company relies much more heavily on moderate consumers than the average brand.[2] This will require the company to spread sales over a greater number of customers to match the sales volume of other brands that appeal to heavier consumers.

Customers who purchase Liquid Gold chocolate products tend to be relatively affluent and white.[3] People who purchase Liquid Gold Extracts concentrate products tend to have higher household incomes and are significantly more likely to be married than the average California medical marijuana customer.[4] In addition, 50% are white and nearly 20% are African-American.[5]

Figure 4: Average Income of California Medical Marijuana Customers by Brand

Purchasing Drivers

Consumers choose Liquid Gold chocolate products because they trust the brand, value taste, discretion, and because of the recommendations from friends.[6] They are less likely than the average consumer to take dosage size into account when making decisions about which brand’s products to purchase.[7] This aligns with the Liquid Gold brand portfolio which offers products with a conservative range of THC content.

The factors that drive customers to Liquid Gold Extracts concentrates products are different. These consumers are twice as likely to be concerned about lab certification, and nearly 33% of them make purchasing decisions based on a product’s dosage size.[8] This illustrates the complexity companies face when operating in different categories of the market. An important aspect for diversified companies like GFL will be to what extent the success in one category of the market leads to success in another.

Customers of both product lines say they are not interested in seeking the least expensive product of the type they prefer. GFL concentrates customers are particularly uninterested in finding the lowest prices, likely due to their relatively large incomes and concern about lab-certified quality.[9]

Figure 5: Drivers of GFL Sales

Consumer Satisfaction

GFL’s chocolates and concentrates products both receive strong customer satisfaction ratings. Liquid Gold chocolates are especially strong with 61% of customers stating they are “extremely satisfied” with their products. The share of customers who said this for the average brand is just 46%. Liquid Gold Extracts concentrates products are more in line with the broader market with 47% of customers saying they are “extremely satisfied”.

Liquid Gold’s customer feedback on its chocolates products is far better than Kiva Confections, which is the leading brand in the chocolates subcategory, but only 33% of Kiva Confections’ customers said they are “extremely satisfied” with their products. These reviews appear to translate into brand loyalty as 44% of Liquid Gold chocolate customers said they are very likely to continue purchasing the brand’s products. This is significantly higher than the 30% of customers who said this for the average brand.

Liquid Gold Extracts do not perform as well on brand loyalty. Only 21% of GFL’s concentrate customers report being very likely to purchase the brand’s products again. However, the customers who say they are likely or somewhat likely to purchase the brand’s products again are significantly higher than it is for the average brand.[10] The result is GFL’s concentrate products are failing to generate the high levels of brand loyalty that GFL’s chocolate products are.

Figure 6: Overall Satisfaction Levels across Leading Medical Marijuana Brands

Consumer Preferences

Liquid Gold chocolate products receive high satisfaction ratings for taste. GFL surpasses the leading chocolate brand (Kiva Confections) in terms of the percentage of customers who are very impressed with their product’s taste. 74% of Liquid Gold chocolate consumers say they are extremely satisfied with the taste of their products, compared to just 53% of Kiva Confections’ consumers. However, taste is the only element of Liquid Gold chocolate products that outperforms the average brand.[11] Because taste is an important driver of edibles satisfaction ratings, the product line is given strong reviews.

GFL’s concentrate products are popular with customers for practical reasons: they like that the products produce the desired effects, use high quality ingredients, and are accompanied by informative packaging.[12] However, these aspects are probably not enough to propel GFL into a leading concentrates brand considering the competition from new entrants and new product lines from other established companies.

Liquid Gold Extracts concentrate products earn below average scores for taste and price.[13] The positive characteristics of their products detailed above appear to counteract these weak points enough for nearly 50% of customers to say they are extremely satisfied with these products, but this only equals satisfaction ratings for the average brand.[14] It does not distinguish GFL’s concentrate products or position them to rise above the 26th rank in California’s concentrates market.

Liquid Gold chocolate products earned below average reviews for quality of ingredients and merely average reviews for package size and package labelling.[15] Yet extremely high enthusiasm about their taste appears to counteract these points of criticism, and the most frequent complaint from consumers is that Liquid Gold chocolate products are hard to find.[16] This is an indication of unmet demand likely associated with GFL’s limited distribution networks.

Brand Portfolio and Competitors

G FarmaLabs has succeeded in building a diversified portfolio of brands that have achieved solid positions in the subcategories in which they compete. Three of the company’s product lines, Liquid Gold chocolate edibles, G Drinks lemonades, and G Stiks pre-rolled joints, are within the top 10 products with regards to market share in their respective subcategories. Not many other companies have achieved success across different subcategories, but GFL’s performance is heavily reliant on the success of the Liquid Gold chocolate line due to the relative size of California’s chocolates market.

Chocolate (GFL Liquid Gold)

While most leading chocolate companies are specialized enterprises focused almost entirely on the chocolate subcategory, Venice Cookie Company (VCC) and Bhang are other examples of diversified companies that have succeeded at making it into the top 10 brands in chocolate and other subcategories. Both companies outperform GFL by market share in edibles, and Bhang does so in concentrates as well. However, GFL appears to be using its investment in distribution more efficiently. Bhang and VCC are both much more widespread than GFL in California dispensaries (particularly in the north) but their lead in market share is not as large as their distribution numbers would suggest. This indicates that GFL’s focus on southern California may actually be driving better business outcomes.

In terms of growth potential among these diversified companies, GFL appears to be in a strong position. Customer surveys indicate excess demand for its products, which is not the case for Bhang and VCC. GFL may also have an opportunity to leverage its strong brand in southern California to drive expansion in the northern part of the state. The retail landscape is easier to navigate in the Bay Area than in Los Angeles, though the high levels of loyalty towards Kiva Confections in the Bay Area are sure to pose a challenge for GFL. These considerations have helped GFL expand its distribution more quickly than Bhang and VCC in 2016 and should continue.

Figure 7: Statewide Brand Share in Chocolate Subcategory (August 2016)

Company

Percent of Dispensaries Carrying the Brand

Brand Share of Category

Brand Ranking in Category

Change in Ranking Since January 2016

Kiva Confections

52%

33%

1

No change

Bhang

30%

13%

2

No change

Liquid Gold

22%

8%

3

No change

Venice Cookie Company

19%

4%

4

+1

Altai

9%

3%

5

+23

Drinks (GFL G Drinks)

In the drinks market, G Drinks has gained market share rapidly in 2016 rising from 0.1% in January to 2.8% in August. Having entered the top 10 in the drinks subcategory, the brand now faces competition from established product lines. Kushtown Sodas and Dixie Elixirs, with their high-fructose corn syrup-laden drinks, compete for the same consumers as G Drinks (which also uses high-fructose corn syrup and does not target health-conscious consumers). In contrast, the leading drink companies (House of Jane and VCC) offer healthier products, including coffee and teas that are popular with many patients inclined to medicate with beverages. This shields G Drinks from direct competition with the strongest drinks brands, but it also suggests that GFL may be missing an opportunity to tap into health-conscious drinks customers.

Figure 8: Statewide Brand Share in Drinks Subcategory (August 2016)

Company

Percent of Dispensaries Carrying the Brand

Brand Share of Category

Brand Ranking in Category

Change in Ranking Since January 2016

Venice Cookie Company

21%

15%

1

+1

House of Jane

12%

14%

2

-1

Zasp

9%

6%

3

+1

Dixie

6%

5%

4

+1

Kushtown

9%

5%

5

-2

G Drinks

6%

3%

6

+20

Sprig

5%

1%

7

No change

Cartridges (GFL Liquid Gold Extracts)

Liquid Gold Extracts concentrate products have failed to achieve as much success as GFL’s other brands, but in a fragmented concentrates market this could change quickly. Top concentrates companies have pursued a variety of strategies, including some that focus on cartridges. This is the model GFL has chosen to follow as well, but the company has struggled to make their products stand out from other cartridge offerings.

Figure 9: Statewide Brand Share in Cartridge Subcategory (August 2016)

Company

Percent of Dispensaries Carrying the Brand

Brand Share of Category

Brand Ranking in Category

Change in Ranking Since January 2016

Eureka

15%

10%

1

No change

Honey Vape

13%

7%

2

+3

O.penVape

19%

7%

3

+83

Kurvana

12%

6%

4

+3

Jetty Extracts

11%

5%

5

+3

Bloom Farms

11%

5%

6

+6

Heavy Hitters

8%

3%

7

-4

Bhang

10%

3%

8

-6

Dank Tank

5%

2%

9

+8

Delta 9

6%

1%

10

+9

Liquid Gold Extracts

5%

1%

11

+2

JUJU Joints

4%

1%

12

+12

Pre-rolled Joints (GFL G Stiks):

G Stiks, GFL’s pre-rolled joint products, have become a leading product in their subcategory. It is unclear to what extent GFL will be able to find synergies and opportunities for cross-marketing between its pre-rolled joints, chocolate, drinks, and cartridge products, but the company’s brand portfolio has already positioned it as a leading example of a diversified California medical cannabis enterprise. In order to maximize the benefits of diversification, GFL needs to find a way to incorporate its strategy from the Liquid Gold chocolate brand and their G Drinks brand to more of the other brands in its portfolio.

Figure 10: Statewide Brand Share in Pre-Rolled Joints Subcategory (August 2016)

Company

Percent of Dispensaries Carrying the Brand

Brand Share of Category

Brand Ranking in Category

Change in Ranking Since January 2016

Caviar Gold

26%

6%

1

No change

G Stiks

14%

3%

2

+2

Presidential Rx

6%

2%

3

No change

Top Shelf Extracts

12%

2%

4

-2

Company positioning / Opportunities

GFL has created a chocolate product consumers appear to be increasingly excited about, and its line of beverages is building market share quickly. Surveys suggest GFL’s limited distribution network is constraining sales. Expanding the share of southern California dispensaries that carry the company’s products is an opportunity in the short term. In the long term, expansion into markets in northern California is another opportunity, but a risky one. The Bay Area is home to several strong chocolate brands and a more competitive concentrates landscape.

As it considers expansion strategies, GFL will have to define the role it wants the Liquid Gold chocolate brand to play in the company’s future. Specialized companies like Cheeba Chews, Korova, and Kiva Confections have focused on single subcategories to build dominant market positions. However, they have left themselves vulnerable to disruption, either by new entrants with competing products or by regulatory changes that may shift the market in unfavorable directions.

GFL intends to be more than just a producer and distributor of medical cannabis products. The company bills itself as “Leaders of the Global Cannabis Revolution” and operates a robust communication strategy including a daily e-mail newsletter, G FarmaNews (a curated source of articles from around the country and world relating to marijuana policy) and G FarmaTV. The company has its own grow facilities, extraction processes, and keeps their distribution in house as well. GFL is managed by a large, experienced team who present themselves as more focused on business outcomes than most other California medical cannabis companies (many of which continue to brand themselves as non-profit care collectives). GFL advertises partnerships with Marijuana Business Daily, NORML, and hip-hop celebrity The Game.

The company is well-placed to adapt to potential passage of the Adult Use of Marijuana Act (AUMA). GFL, along with most medical cannabis companies in the state, would likely be required to modify existing products to comply with new regulations if the AUMA is passed. However, GFL already offers relatively small dosage products, and its large team working on business development and strategic partnerships will likely help the company grow in a recreational market.

[1] 51% of GFL customers reported ages between 35 and 49, compared to 38% of all CA medical patients surveyed.

[2] When asked how often they consume marijuana, 36% of GFL customers said every day. For the average brand, 47% of customers consume marijuana every day. Another 31% of GFL customers said 3-4 days per week, compared to 16% of customers for the average brand.

[3] 36% of GFL customers reported household income higher than $75,000, compared to 25% of all CA medical patients surveyed.

51% of GFL customers reported their ethnicity to be Caucasian, compared to 48% of all CA medical patients surveyed.

[4] 37% of GFL’s Liquid Gold Extracts customers reported household income higher than $75,000, compared to 25% of all CA medical patients surveyed.

46% of GFL’s Liquid Gold Extracts customers reported being married, compared to 31% of all CA medical  patients surveyed.

[5] 18% of GFL’s Liquid Gold Extracts customers reported their ethnicity to be Black or African-American, compared to 11% of all CA medical patients surveyed.

[6] When asked why they chose a product, 54% of GFL chocolate customers said, “I liked the taste” compared to 35% of customers for the average brand. Another 25% of GFL chocolate customers said, “My friends purchase the same product.” 18% of customers said this for the average brand. Another 21% of GFL chocolate customers said, “I trust the brand to give me a consistent experience.” 20% of customers said this for the average brand as. 21% of GFL chocolate customers also said, “It was the most discreet form of consumption.” 12% of customers said this for the average brand.

[7] When asked why they chose a product, 18% of GFL chocolate customers said, “The dosage suited my needs/tolerance level” compared to 27% of customers for the average brand.

[8] When asked why they chose a product, 18% of GFL concentrate customers said, “It is lab certified, while others are not” compared to 7% of customers for the average brand. Another 29% of GFL concentrate customers said, “The dosage suited my needs/tolerance level” compared to 27% of customers for the average brand.

[9] When asked why they chose a product, just 4% of GFL concentrate customers and 11% of GFL chocolate customers said, “It was the least expensive product of its type.” 11% of customers said this about the average brand.

[10] When asked how likely they are to purchase a product again, 68% of Liquid Gold Extracts customers said, “Likely” or “Somewhat Likely.” For the average brand, 50% of customers gave one of these two responses.

[11] Brightfield Group surveyed customers on a range of product attributes: taste, price, dosage, produced desired effects, quality of ingredients, package size, and package labelling.

[12] When asked to rate their level of satisfaction with a product’s ability to produce the desired effects, 67% of GFL concentrates customers said they were extremely satisfied. For the average brand, this share was 49%.

When asked to rate their level of satisfaction with the quality of ingredients used in a product, 52% of GFL concentrates customers said they were extremely satisfied. For the average brand, this share was 46%.

When asked to rate their level of satisfaction with the labelling of a product’s packaging, 43% of GFL concentrates customers said they were extremely satisfied. For the average brand, this share was 37%.

[13] When asked to rate their level of satisfaction with the taste of a product, 48% of GFL concentrates customers said they were extremely satisfied. For the average brand, this share was 54%.

When asked to rate their level of satisfaction with the price of a product, 29% of GFL concentrates customers said they were extremely satisfied. For the average brand, this share was 34%.

[14] When asked to rate their level of overall satisfaction with a product, 48% of GFL concentrates customers said they were extremely satisfied. For the average brand, this share was 46%.

[15] When asked to rate their level of satisfaction with the quality of ingredients used in a product, 39% of GFL chocolate customers said they were extremely satisfied, compared to 46% of customers for the average brand.

When asked to rate their level of satisfaction with the labelling used on a product’s packaging, 35% of GFL chocolate customers said they were extremely satisfied, compared to 37% of customers for the average brand.

When asked to rate their level of satisfaction with a product’s package size, 35% of GFL chocolate customers said they were extremely satisfied, compared to 38% of customers for the average brand.

[16] When asked to rate their level of satisfaction with the taste of a product, 74% of GFL chocolate customers said they were extremely satisfied, compared to 54% of customers for the average brand.

When asked what they would change about a product, 32% of GFL chocolate customers said, “I wish it was easier to find.” Just 15% of customers said this about the average brand.

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