Portal - Company - Venice Cookie Company

Company Name: Venice Cookie Company

Categories: Edibles, Concentrates

www.venicecookiecompany.com

info@venicecookiecompany.com

press@venicecookiecompany.com

orders@venicecookiecompany.com

Geographic Locations: California, Colorado, Oregon, Washington

List of Brands and Subcategories:

4.20Bar Edibles: Chocolate

Cannabis Quencher Edibles: Drinks, Candy

Subtle Tea Edibles: Drinks

Venice Cookie Edibles: Baked Goods, Savory Snacks,

Chocolate

One Brand Others: Tinctures, Oils and Sprays

Executive Summary

Venice Cookie Company is the 5^th largest brand in edibles market, ranks 5^th in baked goods, 4^th in chocolate, and 1^st in drinks
Venice has among the broadest product portfolio with a variety in brands, dosage levels and product positioning
Distribution is strongest in Southern California and somewhat lacks in the Bay Area
Venice’s core consumers are more affluent and medicate less often than the average patient
The company’s core products (4.20Bar and Baked Goods) have strong satisfaction ratings, while Cannabis Quenchers and Bagel Bites have weaker reviews

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: Venice Cookie Company Performance in Major California Markets (August 2016): Edibles

Market	Percent of Dispensaries Carrying the Brand	Brand Share of Category	Brand Ranking in Category	Change in Ranking Since January 2016
California	31%	3%	5	+1
Sacramento	33%	2%	10	+2
Bay Area	21%	1%	16	-1
Los Angeles	33%	3%	5	+2
Orange County	28%	2%	6	No change
San Diego	46%	4%	5	+3

Geographic Distribution

Only five other edibles brands are more widespread than Venice Cookie Company (VCC) in California. Three of them, Cheeba Chews, Kiva Confections, and Korova, are larger than VCC with regards to distribution levels. All three are specialized companies that have developed flagship products able to dominate a single subcategory of the market. The most diversified edibles companies, VCC, Bhang, and G FarmaLabs (GFL), occupy a second tier with significantly less distribution. Their products are in about 30% of California dispensaries (Cheeba Chews, Kiva Confections, and Korova reach 45% to 55%). This suggests diversified companies are at a disadvantage when it comes to building distribution, likely due to the extra resources devoted to operations across more complex product portfolios. Within both tiers, some brands are expanding distribution quickly (including VCC, GFL, Kiva Confections, and Korova) and some have been stagnant in 2016 including Bhang and Cheeba Chews.

VCC is a prominent brand in southern parts of the state. The company’s ability to place its products in approximately 33% of Los Angeles dispensaries, an achievement reached by just 5 other edibles companies, is an indicator of their marketing capabilities. They do even better in San Diego, where nearly 50% of dispensaries carry VCC products. The situation is different in the Bay Area where VCC products are in a lower number of dispensaries and face strong competition from local brands. In addition to the brands that lead VCC in distribution statewide, 5 smaller brands are more widespread than VCC in the Bay Area. These include companies headquartered in San Francisco like Auntie Dolores and national brands like Dixie Elixirs that have underperformed statewide, but gained a foothold in the Bay Area.

Consumer Profiles

VCC consumers tend to be wealthier, more highly educated, and more likely to be married than the average set of California medical marijuana consumers.[1] They also tend to use marijuana less frequently than the average California consumer, and are more likely to be Hispanic or Latino.[2] The company’s consumers show the same patterns of consumption by age group as seen in the broader market with more than half of their customers in their 30s or 40s.[3]

The most significant divergence between VCC consumers and average California consumers is found in frequency of consumption. Nearly 50% of California consumers use marijuana every day, but only 25% of VCC consumers do so. With 42% of VCC consumers using marijuana only 3-4 days a week, this segment of moderate users is far more important to the company than it is in the broader market (where only 18% of consumers use cannabis in this infrequently). Moderate use may be one reason why VCC’s brand share tends to be lower than the number of dispensaries that stock it would indicate. Retailers may be choosing to devote inventory to products that are used more frequently and sell more quickly.

The profile of VCC consumers shows some strength as well. They are nearly twice as likely to have household incomes over $75,000 and to have completed at least a bachelor’s degree. VCC’s ability to appeal to this demographic may prove to be an important advantage during a potential transition to recreational markets. It may help the company weaken Korova’s advantage in baked goods. Korova could struggle with such a transition due to relatively narrow consumer demographics and reliance on extremely high potency products that may be barred from recreational markets.

Figure 2: Average Income of California Medical Marijuana Customers by Brand

Purchasing Drivers

VCC consumers are twice as likely as average California consumers to say they value the ability to consume marijuana products discretely.[4] This is consistent with the relatively affluent and educated consumers the company relies on, who value discrete consumption in their personal and professional lives. They are also more likely to say taste is a factor in their decision to purchase VCC products, with over 50% saying this. Only approximately 33% of consumers in the broader market say a product’s taste drove their decision, so VCC appears to be differentiating itself on superior taste.[5]

VCC consumers tend to find the product in the same way consumers find most products in the market. Approximately 20% of consumers choose VCC after receiving recommendations from friends and another 20% said they have enough trust in the brand to continue choosing its products.

Figure 3: Drivers of VCC Sales

Consumer Satisfaction

VCC customers tend to be more satisfied with their purchases than the average California medical marijuana consumer.[6] The share of VCC consumers who say they would likely buy the company’s products again (39%) is 10% higher than the average brand. The share of VCC customers who are “very likely” to buy its products again is the same as the average brand at 30%. For some of the market’s leading brands, including Bhang, over 70% of customers say they are “very likely” to buy again. These numbers indicate that VCC is doing well, but not as well as some of its competitors.

Figure 4: Overall Satisfaction Levels across Leading Medical Marijuana Brands

Consumer Preferences

Three VCC products drive the company’s ratings in customer satisfaction: 4.20 Bites, Peace Krispy Treats, and the 4.20 Brownie. More than 75% of consumers said they were “very likely” to purchase these products again.[7] Taste was a key factor, with a remarkably high 65% of consumers saying they were “extremely satisfied” with the taste of these three products.[8] Other VCC products perform well too with 95% of consumers “satisfied” or “extremely satisfied” with VCC products overall.[9]

The most common complaint from VCC consumers is the price is too high. However, this is a common complaint for all brands in the market.[10] Across the market, consumers who have no specific criticism of a product often say the price is too high.

VCC customers also said they wish the company’s products were easier to find.[11] This may indicate an excess of demand for its products. They are also twice as likely as other consumers to say they wish the company’s products were lab certified, though the number who said this (14%) is small.[12] The company does submit products for third party testing, so this may indicate VCC consumers are more quality-conscious and the company’s marketing is less effective than average (or both).

At the product level, three VCC offerings underperform: Cannabis Quencher Lemonade, Peppermint Patty by 4.20Bar, and Bagel Bites. Approximately 25% of consumers said they are not likely to purchase these products again.[13] Dissatisfaction appears across all elements of these products, but consumers appear to have concerns around lab certification for these products. The number of consumers of these products who said they wish the products were certified is over twice as high as all VCC products and 6 times as high as all products.[14] This may be due to unsatisfactory or inconsistent medicinal effects, possibly caused by confusion about dosages.

Brand Portfolio and Competitors

VCC offers a diverse portfolio ranging from the high-potency 4.20 Brownies (1000, 500, or 250mg) to the Cannabis Quencher fruit sparks (25mg). Like G FarmaLabs, VCC has chosen to split its product lines into different brands, largely based on subcategory. Both companies have succeeded in competing in more subcategories than Kiva Confections or Korova, but they have not been able to dominate any primary market space in the way that Kiva Confections, Korova, or Cheeba Chews have been able to.

Chocolates

The diversified nature of VCC’s portfolio means the company faces multiple competitors. In the chocolate space, VCC has seen its market share rise quickly enough in 2016 that it is beginning to emerge as a threat to established leaders in the subcategory, especially Bhang and Liquid Gold. Kiva Confections remains dominant with its market share far above everyone else’s and growing, but Bhang has actually lost ground this year and now has just 3 times more market share than VCC (in January, Bhang had 7 times more). Liquid Gold has expanded its market share by nearly 40% since January, but VCC has grown by over 90%. If these trends continue, VCC’s chocolate products could overtake Liquid Gold’s in market share by late 2017. The distribution of VCC’s chocolate products has also expanded more rapidly than Liquid Gold or Bhang this year.

Statewide, VCC has a comfortable lead in market share over the next brands (7 are relatively stagnant at 1-2% market share). The exception is Altai, which has expanded its market share dramatically since January and could even overtake VCC in 2017. In the Bay Area, a set of brands with strong regional presence (Day Dreamers, Cali Gold, Hashman, and Veda Chews) outperform VCC. VCC tends to have less than 50% or 25% of the market share of each of these brands, but is growing more quickly than all but Cali Gold.

Figure 5: Statewide Brand Share in Chocolate Subcategory (August 2016)

Brand	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

In terms of products, the only clear trend is companies with small, low-dosage chocolate products appear to be growing faster than companies focused on chocolate bars. Kiva Confections, VCC, Liquid Gold, and Altai all do this. Kiva Confections, VCC, and Liquid Gold offer chocolate bars as well as small products, and Altai offers exclusively smaller products, including bon bons, chocolate coins, chocolate-covered cherries, espresso beans, and almonds. Bhang, Cali Gold, and Day Dreamers focus on larger chocolate bars. These companies tend to offer a greater range of flavors and potency combinations than other chocolate bar brands, but in most cases their products are so big that patients must break off a small piece, eat it, and save the rest for later. Of this group, Cali Gold and Day Dreamers have shown strong growth in the Bay Area this year, but otherwise have tended to grow more slowly than the companies with smaller products.

VCC’s baked goods started the year ranked much lower (10^th among baked goods brands) than its chocolate products (5^th among chocolate brands) but they have more momentum. Since January, the company has overtaken 5 other brands in the California baked goods rankings and has expanded its statewide market share more quickly than all but one other brand in the subcategory. VCC faces a set of leading brands that have 2-5 times its market share and a dominant brand (Korova) that commands more than 10 times as much of the market. Two of these companies, Korova and Kaneh, focus primarily on extremely high potency products with up to 1,000mg of THC. Two others, TKO Edibles and Trikom Treats, offer more conventionally dosed rice krispy bars, cookies, and other products. VCC is attempting to do both. Its 4.20Bar is available in 1,000mg potency, but it offers a range of other products similar to TKO Edibles and Trikom Treats. Companies of both kinds have seen strong growth this year, but Trikom Treats and VCC are the only two brands in the baked goods top 10 that have more than doubled their market share.

The Bay Area also has its own set of leading baked goods brands. Kaneh and TKO (a Los Angeles-based brand) both have small market shares in the area. After Korova and Trikom Treats, regional companies like Butter Brothers, Big Pete’s Treats, Koala T. Eddies, and Auntie Dolores round out the Bay Area top ten. VCC has doubled its local market share since January, but is still smaller than 15 other baked goods brands in the region. Likewise, four are growing faster than Venice is.

Figure 6: Statewide Brand Share in Baked Goods Subcategory (August 2016)

Brand	Percent of Dispensaries Carrying the Brand	Brand Share of Category	Brand Ranking in Category	Change in Ranking Since January 2016
Korova	44%	26%	1	No change
Trikom Treats	18%	10%	2	+2
TKO Edibles	16%	5%	3	-1
Kaneh	9%	4%	4	-1
Venice Cookie Company	10%	2%	5	+5
Miss Mary Jane	3%	1%	6	-1

VCC’s product portfolio also includes healthy drinks like coffee and tea, as well as sugar-laden juices. House of Jane, historically the strongest beverage brand in the state, focuses on the healthy side. VCC nearly doubled its market share this year while House of Jane declined. This propelled VCC to the number one position in the subcategory.

Dixie Elixirs, a relatively healthy brand also grew strongly; as did Kushtown Sodas and GFL’s G Drink (both are companies that specialize in sugary drinks made with corn syrup). The drinks market is consolidating rapidly with the top 10 brands taking over 50% of the market in August, compared to just 35% in January. This appears to be driven by growth from brands focused on health-conscious consumers as well as brands that are not. VCC seems to be capturing both sources of growth on its way to establishing what could become a dominant position in drinks.

There is less local competition from Bay Area drinks brands, but Dixie Elixirs and House of Jane are booming there. Chockowaska, a relatively health-conscious brand that offers hemp milk in a variety of flavors, is in 3^rd place just behind Dixie Elixirs and House of Jane. VCC is just in 4^th place, having been overtaken by Dixie Elixirs and House of Jane since January. With four healthy or moderately healthy brands leading the charts, it appears the Bay Area drinks market is more health-conscious than the rest of the state. This suggests VCC’s diversified drinks portfolio may not be as advantageous here as it is elsewhere; even though the company’s sugary drinks avoid corn syrup and use natural sugar.

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

Brand	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
Liquid Gold G Drinks	6%	3%	6	+20

Company positioning / Competitive advantages

VCC has tried to establish itself in all of California’s edibles market segments. This approach, combined with reliance on an upper-middle class customer base that tends to consume marijuana relatively infrequently compared to other California medical marijuana users, has limited the company’s ability to build a dominant product in any large subcategory.[15] VCC is anticipating their high levels of brand recognition and growth across important product subcategories will be enough to compete with bigger brands that focus primarily on a single subcategory.

Only two other top 10 edibles brands, baked goods specialist Trikom Treats and sugar candy powerhouse Kushy Punch, have posted more rapid growth this year. Liquid Gold, a company following a similar strategy to VCC with a product portfolio including chocolates, concentrates and pre-rolled joints, has grown almost as quickly as VCC. These diversified companies’ recent success suggests they may be succeeding in cross-marketing to customers in different subcategories. It is also possible they are two of the only companies that have combined sufficient funding, expertise, and appetite for risk to capitalize on the demand for a range of products and increased brand recognition in the marketplace.

Threats

These diversified operations pose risks as well. Venice does not command the market share its distribution numbers would predict. This may indicate inefficiencies in the company’s marketing or distribution strategies. In contrast, G FarmaLabs’ market share is higher than distribution numbers would predict, suggesting they have success selling products focused on a single subcategory at higher volumes. For now, G FarmaLabs appears to have the edge in efficiency, but it is possible that VCC’s market share could increase with an expanding distribution network. VCC is having success entering the Bay Area market, but this could strain the company’s distribution in the short term. Likewise, Brightfield Group consumer surveys highlight areas for improvement considering several VCC products received weak reviews.

Opportunities

The potential for recreational markets in California, dependent on voter approval of the Adult Use of Marijuana Act, is a significant opportunity for the company. Some of the Bay Area brands that outperform VCC in chocolate and baked goods do not have experience operating in states with recreational markets like VCC does. VCC currently sells their products in the Washington recreational market and could use their experience to gain a competitive advantage over smaller brands.

A recreational market could offer opportunities for VCC in the baked goods subcategory. Korova, which accounts for 26% of the current baked goods market, would probably experience difficulties in transitioning its high potency medical products into compliance with regulations that are likely to limit recreational potencies. Some of VCC’s most successful products would face the same problem, but as high potency levels aren’t an integral part of their branding, they shouldn’t have any trouble reconfiguring their product portfolio for a California recreational market.

[1] 43% of VCC customers surveyed reported household incomes of at least $75,000, compared to 25% of all CA medical patients surveyed.

57% of VCC customers surveyed reported having completed at least a bachelor’s degree, compared to 31% of all CA medical patients surveyed.

46% of VCC customers surveyed reported being married, compared to 31% of all CA medical patients surveyed.

[2] 58% of VCC customers surveyed reported consuming marijuana less than 5 days per week, compared to 37% of all CA medical patients surveyed.

32% of VCC customers surveyed reported their ethnicity to be Latino or Hispanic, compared to 23% of all CA medical patients surveyed.

[3] 60% of VCC customers surveyed were between the ages of 26 and 49, compared to 67% of all CA medical patients surveyed.

[4] When asked why they chose a product, 24% of VCC customers said, “It was the most discreet form of consumption.” For the average brand, 12% said this.

[5] When asked why those chose a product, 53% of VCC customers said, “I liked the taste.” For the average brand, 35% said this.

[6] When asked to rate their level of overall satisfaction with a product, 47% of VCC customers said they were extremely satisfied and another 47% said they were somewhat satisfied. For the average brand, 46% of customers said they were extremely satisfied and 41% said they were somewhat satisfied.

[7] When asked how likely they are to purchase a product again, 76% of VCC customers who had purchased one of these three products said they were very likely to do so. Overall, 30% of VCC customers said this – as did 31% of customers for the average brand.

[8] When asked to rate their level of satisfaction with the taste of a product, 65% of VCC customers who purchased one of these three products said they were extremely satisfied. The share of all VCC customers who were extremely satisfied with the taste of the VCC product they consumed was almost this high (64%). For the average brand, 54% of customers were extremely satisfied.

[9] When asked to rate their level of overall satisfaction with a product, 47% of VCC customers said they were extremely satisfied and another 47% said they were somewhat satisfied.

[10] When asked what they would change about a product, 37% of VCC customers said, “I wish the price was lower.” For the average brand, 36% of customers said this.

[11] When asked what they would change about a product, 22% of VCC customers said, “I wish it was easier to find.” For the average brand, 15% of customers said this.

[12] When asked what they would change about a product, 14% of VCC customers said, “I wish it was lab certified.” For the average brand, 6% of customers said this.

[13] When asked how likely they are to purchase a product again, 25% of VCC customers who had purchased one of these three products said they were unlikely to do so. Overall, just 8% of VCC customers said this – as did 7% of customers for the average brand.

[14] When asked what they would change about a product, 36% of VCC customers who purchased one of these thre products said , “I wish it was lab certified.” 14% of all VCC customers said this, and 6% of customers for the average brand.

[15] Drinks are a relatively small part of the market compared to baked goods, chocolate, and sugar candy.