$6 Million Run Rate In 9 Months With DTC THC
Regulation changes can lead to big business opportunities and there’s one underway right now.
In Minnesota you can sell hemp derived THC beverages in liquor stores. THC beverages now make up 50% of industry revenue in Minnesota. The national average? 3%.
Two reasons I think this wave is happening.
Liquor stores have less stigma than dispensaries.
They’re finding new customers.
As legalization has spread the amounts of products available has exploded. But there was a group that was ignored. Those who hadn’t tried cannabis and needed an easy onramp.
But there’s brands that have figured out that there’s a group of customers who drink alcohol, but want to try cannabis. So they brought on the micro-dosed THC beverages.
This is a once in a lifetime opportunity. There’s a change in trends. You have billion dollar alcohol companies that need to grow to appease their shareholders and I think they’ll be creating micro-dosed THC offerings, or buying them in the near future.
Most notable is probably Cann. They started in 2019 and are selling around $36 million per year. They raised $32 million and have celebrity investors like Gwyneth Paltrow.
So it’s done right? Next biz idea. This one can’t work, we’re too late.
Nope. Here’s an interesting example. A fast growing DTC brand, Brez, that’s growing right in front of our eyes.
Aaron and Nick launched in April 2023. Okay on 4/20 because they know what they’re doing.
Now they have an ad agency that specializes in cannabis so they know the in’s and outs. Like how hemp derived THC under a certain threshold is legal to ship across most of the states. How to advertise fringe products legally on Meta. That’s interesting.
So they launched a 2.5mg (followed by a 5mg) THC hemp derived with lions mane (mushroom that is believed to have cognitive benefits) and positioned themselves as a premium product priced at $40 per six pack.
The orders start to flow in.
And they started growing.
And growing.
And growing.
And within 8 months they would cross $1 million in revenue. And based on the most recent podcast done with Nick, they hit $500k+ in January and are on an annual run rate of $6 million. But they’re growing quick with around 50% of their revenue as subscriptions.
They think they’ll hit $20 million in top line revenue in 2024 and I’d be shocked if they didn’t hit it.
Not only are they growing, their return on ad spend is fantastic.
Brez’s MER for a portion of January was 4.9x. That’s really good. MER stands for “Marketing efficiency ratio” and is calculated by total revenue divided by total ad spend.
At an MER near 5x you’ve created a magic money machine. You put $1 in and $5 comes out.
Biggest lessons here are to look for a growing industry.
Look at regulation changes. Find out how you can advertise effectively. And don’t think that if you didn’t launch first you’ll lose.
So instead of thinking why not…
Great interview with Nick:
Great interview with Aaron:
Additional Sources:
CBS News (Minnesota 50% beverages vs. 3% nationwide)
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