In 2022, my company, SWM International, made a decision that would have been unthinkable just a few years earlier–we entered the cannabis industry.
We knew this was risky. SWM is a 400-year-old international paper company with deep roots in tobacco-adjacent products; a legacy company steeped in tradition, now planning to make inroads into a highly regulated and controversial market.
But we were excited about the opportunity. We saw a chance to bridge our centuries of expertise in natural fibers and specialty paper manufacturing with an emerging industry hungry for innovation. Branding our new division Botani (a play on botanicals), we leverage our experience in paper and natural fiber technology to develop groundbreaking hemp and botanical products. As Managing Director, I now find myself at the intersection of tradition and innovation, navigating the complexities of a $30 billion industry that barely existed a decade ago.
Botani’s foray into cannabis has come with challenges and wrinkles, but the wins have outweighed the losses. We’re in it for the long haul. Hopefully, our experience offers a roadmap for other companies considering this green rush. If you’re considering getting into the cannabis space, here are some suggestions.
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Recognize Your Unique Value
Before diving headfirst into cannabis, be sure to take stock of your company’s core competencies. Ask yourself: What unique skills or resources can your company bring to this new market? Perhaps you have expertise in packaging, distribution, or brand building.
Whatever the case, identifying your “right to play” is crucial for a successful entry.
Several Big Pharma companies have brought years of scientific and research experience into exploring the medical applications of cannabis. And so-called “pick and axe” companies have provided essential tools and processes.
In Botani’s case, centuries of experience in paper manufacturing translated into the production of premium hemp wraps and rolling papers. As we approached this new venture, we knew the needs of our customers were far different from the major tobacco companies, but we also had a lot to offer because of our experience of legacy paper making, working with big and small companies, and using market trends to dictate what we need to make on our machines.
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Create a Dedicated Brand
We launched Botani as a market brand of SWM International, despite the cache of our parent company. Why? First, it allowed Botani to foster its own image and identity. By creating a distinct brand, we established credibility in the cannabis community, free from other associations.
Second, this structure provided the flexibility to experiment with new products and strategies while benefiting from SWM’s resources and expertise. We could be nimble in places where it would otherwise be impossible.
Third, we needed to protect our parent company from the unforeseen obstacles of this new industry. SWM International was a public corporation listed on the New York Stock Exchange. So, there were bound to be some concerns internally.
Ultimately, this balanced approach allowed us to leverage our legacy strengths while developing the specialization needed to succeed in the cannabis market.
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Prepare for Regulatory Headaches
I’m not going to sugarcoat it. The maze of state and federal regulations governing cannabis is complex, ever-changing, and often difficult to navigate. Cannabis operates in a unique regulatory environment—legal in many states, yet illegal federally. This creates a patchwork of regulations varying not just between states, but often between cities.
We’ve been living with the regulations around tobacco for a long time, but some of the regulations in cannabis are much more rigid. The rules are different state by state, which makes it more difficult for our customers to scale quickly because they can’t have one unit in all these different places.
Compliance isn’t just following rules; it’s anticipating changes. Regulations can shift overnight, requiring quick adaptations. This demands constant vigilance. A dedicated team of legal and compliance experts is essential to interpret laws, anticipate changes, and navigate potential pitfalls.
For companies used to settled regulatory environments, this is challenging. But it’s also an opportunity. Mastering this regulatory maze provides a significant competitive advantage in the cannabis industry.
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Embrace Constant Innovation
In tobacco, brand loyalty reigns supreme. Consumers stick with one product for a lifetime. But cannabis consumers crave novelty. For this reason, we’ve had to rethink our approach to product development, shifting from long-term planning to rapid prototyping and iteration.
In the beginning, we thought we could make one or two wraps and be done with it. Not the case. We’ve changed colors, weights, and botanicals to keep up with the demand for new products.
Manage Expectations
The cannabis industry doesn’t follow the traditional growth trajectories of established markets. Therefore, you must temper not only our internal expectations, but also those of the parent company, who may be used to different timetables and outcomes.
I compare this to my past experience selling wine. We had two customers–the retail side and the restaurant side. The retail sold cases. I sold bottles. Big tobacco sells cases. Cannabis sells bottles. A big corporation is used to thinking that everything’s going to hockey stick immediately, but cannabis is different.
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Know When to Fail Fast
In a rapidly evolving market like cannabis, not every product will be a winner. We’ve had to make tough decisions to discontinue certain lines when market conditions shifted unexpectedly. This ability to “fail fast” has been crucial to our success.
For instance, when smokable hemp flower became all the rage, we were ready to put big money into it and create in-house processes that would allow for further scaling. However, we quickly realized that our first few customers weren’t expanding as rapidly as they initially projected. While initial oversupply in the hemp market led to price adjustments, farmers later optimized their planting, helping stabilize the market. This allowed us to take a measured approach to scaling while maintaining our commitment to the sector.
Faced with these changing market conditions, we had to make a swift decision to scale back investment into this particular product line. This quick pivot allowed us to reallocate resources to more promising opportunities.
As we continue to navigate this new terrain, one thing has become clear: the cannabis industry represents more than just a new market opportunity. It’s a catalyst for innovation, forcing established companies to rethink fundamental aspects of their business.
For those willing to embrace this challenge, the rewards can be significant. But success requires more than just capital and expertise– it demands a willingness to learn, adapt, and sometimes, completely reinvent oneself. Don’t expect to have hockey stick sales right away, but do expect a learning curve.
*This article was submitted by a guest contributor. The author is solely responsible for the content.