Wana Brands’ CEO Nancy Whiteman on Flexibility and the Cannabis Gummy Long Game

Nancy Whiteman has been at the apex of brand development in the cannabis industry for years, and it has not gone unnoticed. In 2017, Inc. crowned her “The Queen of Legal Weed,” and in 2019, Green Entrepreneur followed up with the slightly less regal but equally illustrative, “The Martha Stewart of Edibles.” The accolades are well-justified for the co-founder and CEO of Wana Brands, the venerable Boulder, Colorado-based MSO and true OG on the infused-products side of the industry. Long established as a market leader in its home state, today Wana products are available in over 2,500 retail locations in 12 states – including Arizona, California, Colorado, Florida, Illinois, Maryland, Michigan, Missouri, Ohio, Oklahoma, Oregon, and Massachusetts, and Canada – and include over 135 SKUs covering a variety of formulations, according to the company. It’s a level of growth since its first licensing deal in 2014 that sets the company and its founder apart and is all the more impressive for having been built on a foundation of gummies.

Gummies are like few other products in their adaptability and popularity, and there is no one better to discuss them with than Whitman, whose understanding of the edibles market as a whole, and the gummy segment in particular, is always edifying. “Edibles continue to grow in most states as a share of total revenue,” she said during a recent call. “But I think COVID had a hand in that to a certain degree. Because it has so many respiratory impacts, people were being somewhat careful about what they were putting into their lungs, and then also they were home, and if they had children at home, they were looking for very discreet methods of consumption, so edibles as a category I think continues to do very well. Gummies within the edibles category continue to absolutely dominate. It’s something like 80 percent of the candy segment within edibles, and candy is by far the largest category within edibles; nothing even comes close, and it is driven by gummies. So, that is all fortuitous for Wana, because gummies are our bread and butter.” Other Wana products include tinctures, tarts, and optimals. Their availability varies by state and province, so the Wana website focuses on highlighting where products can be found.

Wana literally had launched in Massachusetts the week of our call, and already had sold out of product, according to Whiteman. I asked what exactly that meant in terms of a new market. “Typically, when we start in a new market, or even when we start with a new product launch, we develop a launch quantity, what we think is a reasonable first production run, and typically it’s something that we think will last for several weeks,” she explained. “But this [batch] actually sold out in less than one week.

I asked if they like to be in a certain number of stores as they hit the ground running. “It differs whether it’s a new state or a new product launch,” she said. “Typically, we start new product launches in Colorado so we can work out all the kinks before we bring them to other markets, but a lot of times we do what we call a soft launch, where we choose launch partners and we only make the product available to those partners initially. That enables us to get a sense of the sell-through, whether the price point is exactly where we want it to be, and if there are any production or delivery glitches that we need to be aware of. We do that sort of by design, to not hit everybody all at once.”

A campaign will last “anywhere from a couple of weeks to a month, where we’re soft launching it and getting a sense of it,” she added. “And then, as we see how the market is responding to it, that informs us in terms of our production runs and how quickly we need to ramp up.”

In addition to the 12 states Wana is currently sold in, they also are in nine Canadian markets, for a total of 21 distinct markets. For Whiteman, being one of the first multistate operators was key to allowing the company room and time to learn. “It’s one of the reasons why we’ve been able to do what we’ve been able to do,” she noted. “We just started so early. I think our first licensing deal was in 2014, so we’ve had seven years to have our experiences and make our mistakes. And most important for the multistate deals, what I think Wana does really well is that we have very well-developed processes, everything from our SOPs to how we train our partners, how we do our QA with our partners, how we support them, and how we launch from a marketing point of view. But we also couple these very strong processes with a ton of flexibility, and flexibility is the key; it’s finding that sweet spot. You don’t want to be the company that’s like, “I don’t know, everything varies by every market.” You’ve got to have as much consistency as it’s logical to build in, especially around production and quality issues, but then you have to have the sensitivity to the differences in the market, and you have to have different products, and you have to have different marketing.

“One of the things that we’ve started doing recently, for example, is that we’ve always been very active in the corporate social responsibility space within our home market of Colorado, but now we’ve started to really incorporate that into the other markets that we operate in,” she continued. “We want to be part of those communities as well, but that’s a quintessential situation where we don’t want to overlay our Colorado priorities on every market, when their perception of their community needs is different. So, our Director of CSR works with our partners and major customers in each market to customize what we do in that market, and I think that degree of sensitivity to local markets is one of the things that has helped us be successful.”

With so much experience over time selling infused products to consumers in different markets, I wondered if she had observed any distinct consumer preferences? “These are my opinions, of course,” she replied, “but we do see differences state by state in terms of whether people lean towards more Sativa-type products. Colorado’s a great example of that. Everybody is hiking and biking and very active, so our Sativa SKUs do very well there, whereas other states tend to lean more Indica and hybrid. We see different flavor preferences and different THC and CBD-ratio preferences as well. It’s very localized. We don’t think of our markets monolithically at all. We are always deeply into the details of consumer preferences in each of the markets.”

I mentioned that the focus on flexibility and local needs is rare in an industry where many of the vertical MSOs are still fixated on producing Coca Cola – identical products from sea to shining sea. “Let me clarify something,” she replied. “To the extent that we’re talking about people being able to pick up one product in one state versus another state and have the same level of quality experience – the gummy tastes the same, the flavors are the same, and the texture is the same – we actually have an a very expensive piece of equipment called a texture analyzer [that ensures] that the texture is the same market to market. So, I think that they’re correct in that building a brand does mean building in as much consistency as you can. Where I might depart is to think that market by market differences are not real, because my experience is that they are real, and that companies who are the most skillful at understanding those differences and meeting those differences will have a leg up.”

All Gummies Are Not Equal

“In terms of my observations about gummies overall, Wana has always worked very hard to be a premium product, both in fact and perception, and that begs the question of what does it mean to be premium within the gummy category,” said Whiteman in response to a question about what differentiates gummies. “I can tell you what we do that I think puts us in that category, but it also gets to what is important to people, because not everything is equally important to people. For example, because our products are made with pectin, they are vegan, and of course, they’re also gluten free. And in some markets, having a vegan offering is enormously important; people really care about that, and pectin is also important in terms of the shelf stability of the product.

“Our products also do not melt,” she continued. “No matter how hot it gets, they’re not going to melt, and that means that they’re very shelf stable. You can leave them in your car and you’re not going to come back to find a mass of goo. Beyond the pectin versus gelatin, our products are also made with all organic ingredients, which is unusual in this space. We use proprietary terpene blends that were made just for Wana, so that in every market we operate, everybody is getting the same Indica, Sativa, and hybrid terpene blends in their respective products. That means that we have complete consistency from market to market. We use organic and proprietary flavorings and colorings that are just for Wana, and only our partners can order them from our vendors. We also try to always lead the market with whatever the latest and greatest thing that is available in the marketplace, and we spend an awful lot of time watching the trends and thinking about how to get there first, ideally, but always better.

“I think the quintessential thing that I would point to on that is our quick onset gummies, which we introduced about a year and a half ago in Colorado, and they have just taken off incredibly,” she added. “We were not the first people to market with a quick onset product, but ours, in my humble opinion, is tops in terms of quality. We spent two years doing R&D on this product and tried every quick onset technology that was available at that point. Many of them make the product extremely bitter, and many of them are not as quick as we were looking for – 30 or 35 minutes versus an hour. But ours have an onset of five to 15 minutes, and the thing about the technology that we’re using is that it results in such great bioavailability that it goes directly into the bloodstream and bypasses the first-pass metabolism in the liver, so you don’t that heavy body high that you get with edibles. It’s much more of a smokers’ high, a Delta-9 high, in that it never converts into 11-Hydroxy, which is what happens when it metabolizes in the liver. So, it really is a different experience – it tastes fantastic, it’s quick, and it’s a smokers’ high. And so, to kind of illustrate all of that, we chose Happy Hour-themed cocktail inspired flavors, because what that communicates was that this is like having a happy hour – you can go to a concert, you can eat a quick gummy, you can enjoy the concert and you can drive home safely because the offset is also quicker.”

I asked what sets one gummy apart from another. “I would put the answer into two big buckets,” she replied. “There is a group of companies that have chosen to compete on the basis of price, and I think it’s a bit of a race to the bottom. That’s one strategy; it’s not ours, but it’s a legitimate strategy, and certainly, you see it in every industry, [where] someone decides they’re going to try to dominate the market by being the lowest-cost provider. The other strategy is to develop highly differentiated sophisticated products – and that’s a product development and an R&D play – and build your reputation and reality that you have a better product, and the experience people have with your product is better – it tastes better, it works better, it creates specific effects that people are looking for. That’s a different way of competing, and that’s our way of competing, that’s what we do. So, different brands are going to fall on that spectrum, and having a traditional marketing background, I can tell you that it’s the people who play in the middle that probably struggle the most, that are not clearly cost leaders or quality innovation leaders; they’re kind of in the middle, and I don’t care what the industry is, I think that’s always a challenging place to live.

“You have to have something that truly is a differentiator for you,” she summed up. “For many people, price is enough; they just want a plain old distillate gummy, and they’re happy to take whatever is the lowest cost [product], even if it doesn’t work that well or taste that great. Other people are looking for a different experience.”

I mentioned that many vertical MSOs also are developing their own brands that they mean to market very aggressively, essentially moving into her lane, and I wondered if Wana might one day retort in kind. “At this point in time, we have no plans to enter either cultivation or retail,” she replied, anticipating a question about cultivation. “But I will make a comment, if I may, about the MSO and brands issue. I think they have at least two layers of brand decisions to make. One is, what do they want to do with their own house brands, the brands that they own, and that’s an interesting one, because if you look at some of the MSOs, they have many brands under their umbrella that they have either built themselves acquired. And I can tell you, as a brand developer myself, that building one brand is challenging to do well. Trying to simultaneously build seven or eight brands is really, really challenging. So, there’s just the sheer logistics of brand building. And then, of course, the essence of brands is the quality of the product for the price point that you’re selling it at. It’s not just a question of clever marketing. It really is a question of whether you have a product that’s superior to other options that are on the market?

“So, there’s this strategy question of, do we want to be a House of Brands, and people are always having that discussion,” she continued. “But then they also have another layer of brand decision at the retail level, which is, what other brands am I going to let in. Am I going to have a walled garden of just my own brands or am I going to invite in other brands? And increasingly, what we have seen – because we work with all the MSOs – is that they do understand at the retail level that people want choice and want to choose what they want. So, you can call your house brands anything you want, but if they don’t have the reputation of a brand that somebody does want, you may be cutting off your nose to spite your face to say we’re only allowing in the house brands. If you look across industries, I don’t think that tends to be a winning strategy. The only company I can think of that even comes close to that is Trader Joe’s, but of course we know that Trader Joe’s is not actually making any of those brands; they’re outsourcing all of it to manufacturers and essentially white labeling it. But in general, I don’t see people being successful creating robust retail environments where they’re locking out their own competition, so I do think that the MSO decision is a multi-level sort of nuanced decision, if that makes sense.”

I mentioned that someone recently told me it was crazy to not have established brands in your retail store, because you’re just asking a potential customer to go to another store that does carry them. “If you’re a supermarket and you don’t have Coke, and somebody is a Coke drinker, you’re not going to be able to get away with that,” Whiteman agreed. “So, it is kind of incumbent upon companies like mine to build our brand to the point where we are a destination brand, if you will. That’s our job. That’s not anybody else’s job to figure out.”

Big Gummy?

As the industry matures and federal legalization sits somewhere out there, I asked if Whiteman sees Big Food coming into cannabis and trying to consolidate all existing manufacturers. “It’s interesting” she replied, “but I had the opportunity to speak this year at Sweets & Snacks, which is the large confectionery industry conference of the year, and I was talking on this very topic. So, you want to get into cannabis? What are likely to be some of the challenges? And the truth is that it’s what we were talking about – the need to localize, to think market by market as opposed to what most companies do, which is to make a new chip, or whatever, produce it in one big plant, and ship it all over the country.

“The cannabis market is a lot more nuanced than that,” she continued. “And let’s also remember that a very likely scenario, even under federal legalization, is that states are going to retain a lot of rights over how they structure their state program, which means that state by state differences are probably not going to go away anytime soon. So, I don’t see large CPGs in their traditional way of operating being ideally structured to flourish with that set of market conditions. I think they’re going to either need to acquire or they’re going to need to brand their own cannabis products, and certainly many are not going to want to hook their wholesome brands to cannabis, and many will choose not to do that. So, I think the question is not whether they have the financial resources to do that – obviously, they do – but whether they understand what they’re getting themselves into, and are they actually in a position to be successful with that? And I would respectfully say that many of them have many surprises coming.”

Wana, on the other hand, is primed for whatever comes. “Anybody who knows me knows that I like to have a lot of options,” said Whiteman. “I’m a big Plan A, Plan B, Plan C person, so I think Wana can be successful in a variety of different environments. We’ve been extremely successful in this state-by-state not federally legal world, and we can continue to be successful there. If we have federal legalization, there are a whole bunch of ways that we can become more efficient.  I think the ability to ship across state lines will be game changing for us, because then suddenly, we can start looking at regional facilities where we can produce, and we don’t have to have production in every single state. And I think that, if you ever get to a point where you can truly have standardization across markets, that’s another reality. I think we can successfully play no matter how it turns out, and we have a game plan for all of it.”

With so many partnerships under her best, I asked Whiteman if finding and vetting the right partner had gotten easier or harder over time. “Easier,” she said. “I consider it one of Wana’s central blessings that we have so many good partners. This is very much a relationship business, a word-of-mouth business. With our newer partners, most of the time we are introduced to people or they are introduced to us, and we have become far more skilled at putting those partnerships in place. We have distinct processes for how we have conversations, who we bring into these conversations, when we go see facilities, when they come to see our facilities, and how we work together on developing the cost structure. Over time, we’ve learned a lot about putting deals together, and then of course we’ve learned a lot about how to support it once it’s in place, and how to onboard people and support them on an ongoing basis.”

Future Gummy

I asked how Whiteman’s role with the company had evolved over the years. “I don’t know how much we’ve talked about this in the past, but Wana is a completely bootstrapped grassroots company,” she replied. “We started Wana in 2010, me and one partner who has since exited – just the two of us – and that’s literally how we started the company, and we built it from there. We’ve never taken on any outside money; we’ve been able to grow organically, and so with that as backdrop, as you can imagine, in the early years I personally wore a lot of different hats. I was managing marketing; I was managing sales; and I was overseeing everything. But as the company has grown, my job has become different. It’s no longer doing everything but making sure I have the right team in place, and I have just the most wonderful team. Such rock stars.”

With 100 employees overall, it’s a modest but effective team. “Over the years, I’ve been able to bring on some really terrific people, and now I have a really strong C-Suite,” said Whiteman. “Our amazing Chief Operating Officer, Dan O’Connor; Joe Hodas, who just won CMO of the year from the Denver Business Journal; our Chief Revenue Officer, Eric Block, came from a company where he was managing software sales in 22 countries, so he’s beautifully set up to manage remote teams; an incredible CFO, Logan Craven, who has upped our game in so many ways; and then the most amazing VP of Innovation, Mike Hennesy; and of course our VP of Market Expansion, Stephanie Daley, who oversees everything we’re doing in all these markets. Just an incredibly strong team. We love working together.”

While opportunities abound in the cannabis space, states are vastly different from one another in terms of risk and reward. Asked if some states are better revenue-generators than others because of taxes, regulations, or other factors, Whiteman replied, “Yes, but it’s not necessarily the things you just mentioned. it’s a weird alchemy of things. The obvious one is the size of the population. Is it a medical versus adult use state? If it’s medical, what are the allowable conditions? Those are very quantifiable questions. Where it gets more nuanced are with things like the competitive situation; how many licenses are there in the state? You can have everything from a relatively small-population state like Oklahoma, with 2000 dispensaries, to an extremely large-population state like Florida that is completely vertically integrated. Those are two different markets that [do not] resemble one other at all. Then there is the competition not from the number of dispensaries but from how many brands are in those states. So, it’s a rollup of looking at all those things.”

Does an open market like Oklahoma present opportunities for Wana? “Oklahoma can be a challenging market because there aren’t a lot of regulations,” she said. “There are a lot of what I call homegrown brands, a lot of smaller operators, and it’s a very cost-sensitive market, and there are a ton of dispensaries to cover from a sales point of view. Contrast that with Florida where you choose your partner, and they have to grow, manufacturer, and dispense within their own little ecosystem, so there are no sales issues. If you’re working with a partner, you’re only going to be selling through their dispensaries and they’re all going to take it because the interests are aligned. Those are two extremely different examples.”

Does California fall somewhere in the middle. “California is its own beast,” she said. “It’s a well-established market and a huge market, but it’s insanely competitive from a brand perspective and it’s very cost-competitive. Interestingly, I don’t know whether the competition is driven as much by consumers as it is by finding buyers, but it is a very cost competitive market, so that has its own dynamic.”

Are international sales via Canada on the table? “I am having a variety of conversations already internationally, and there are a whole bunch of different potential models,” Whiteman confided, adding, “I don’t know if I’ve mentioned this in the past, but we also have a CBD-only company, called Wana Wellness. It’s a different facility, we’re not even allowed to produce the same products, and not even be in the same town. I mention this because I do think that CBD is going to be more palatable, no pun intended, for edibles for a lot of international markets first, but also for these huge food companies we were talking about. So, we are having conversations, and I think having our Canadian partner produce for us is an option that could make sense for certain situations. And then other countries are trying to get the regulatory structure set up so that they might be able to produce in market. So, we’re still sort of early stages on what the right model ends up being internationally.”

In terms of revenue, Whiteman explained it was a complex calculation. “I’ll tell you why,” she said. “We have our Colorado revenue, which is reported at the wholesale basis, and then we have our out-of-state revenue, which is the revenue share portion of it. So, one of the things I can tell you that might be a helpful number and easier to digest is that I often translate the total wholesale numbers into retail numbers, because that seems to be what people can understand. So, I’m taking our wholesale numbers in Colorado, and then our wholesale numbers in all our other markets, and then I keystone it, assuming that most dispensaries double.” Using that methodology, Wana said it will end the year with over $250,000,000 in retail sales.

Time running out, I asked some remaining requisite questions.

Is Wana acquiring? “No,” said Whiteman.

Is it acquirable? “Who knows,” she said coyly.

Will we see Wana Chocolates one day? “Chocolates is not a category we are interested in, but I wouldn’t say we’ll never consider any other product form,” she teased. “I do have to say, in my opinion, given our leading position in gummies, that we are better served to innovate within that platform.”

But where can gummies even go? “You’d be surprised,” said Whiteman, rising to the tease.

Really?! Can you give us a hint of the gummy of the future? “I guess I can give you a hint.,” she teased again. “If you look at the main reasons people use cannabis, for health and wellness, we will have a highly formulated, highly sophisticated gummy that addresses each of those factors.”

Will it be released soon? She paused before answering. “Yes, we will have two very innovative products coming in the next two months.”

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