Opinion / Guest Column
An MSO operator argues the industry spent a decade funding the wrong discipline. The customers were always there. The job was never persuasion, it was conversion.
The Pitch and the Close
Cannabis operators have been spending money to solve a problem we don’t have. The problem we were told we had was a demand problem. The new adult-use consumer had to be persuaded. National cannabis brands were going to emerge the way they did in alcohol after Prohibition. Whichever operator got the packaging and the lifestyle photography in front of consumers first would own the category for a generation.
It was a clean story. The industry bought it. A lot of capital went out the door against it. But it was the wrong story.
The customers for cannabis already existed. They had existed for a long time. The work in front of an operator was never persuasion. It was conversion.
Anyone who has ever run a sales floor knows the difference. There is the pitch, getting someone interested who wasn’t. And there is the close, taking the transaction from someone whose interest is already there. Two different jobs, two different sets of people. Cannabis operators have staffed for the pitch when the work has always been the close.
I argued in April that the licensed retail door is the structural moat in this industry. This piece is about what wins inside that door: which discipline produces returns, why most of us have been funding the wrong one, and what changes when you stop pretending it’s a marketing problem.
The Customers Already Exist
Cannabis use predates the legal industry by thousands of years. According to the federal government’s 2024 National Survey on Drug Use and Health (NSDUH), past-year cannabis use stood at 22.3 percent of Americans 12 and older.[1] That’s 64 million people.
Most of them are not new converts who showed up because their state went adult-use last year. They have been buying for years, sometimes decades, and they have been buying from somebody. Some of those people walk into licensed dispensaries. Plenty still buy outside the licensed system. Whitney Economics doesn’t expect legal cannabis supply to surpass illicit supply until 2026 or 2027. Even in the mature legal markets, the illicit share is still real.
Both groups already want cannabis. The decision they’re making is where to buy and how, not whether to consume. That makes the operator’s job conversion, in three forms. One: convert the customer already in your store into a bigger basket and a return visit. Two: convert the customer who is still buying outside the licensed system by giving them a reason to come inside. Three: convert the customer who would otherwise walk into the dispensary down the road by being a better store than that one.
None of these jobs requires manufacturing demand. All of them require capturing demand that already exists. There is real marketing work that supports all three: letting people in your area know the store exists, letting them know what you carry, letting them know the experience is worth coming back for. That work is local, retail-level, and shows up in foot traffic and basket size on a timeline you can actually measure. It is also not what got sold to cannabis operators over the last decade.
The Story That Got Sold
The Prohibition analogy was the heart of the pitch. We were told that legalization would be our generation’s alcohol moment. Adult-use rollout was going to unlock a wave of new consumers. National brands were going to emerge in the resulting market. Operators who built brand-first would own the category for a generation.
But history doesn’t actually support that pitch. Anheuser-Busch was already a national brand before Prohibition. Adolphus Busch had built the country’s first nationwide beer distribution network in the 1870s and 1880s using refrigerated railcars he helped pioneer. Prohibition didn’t create the brand.
What happened after Prohibition was different and slower. Through the 1950s and 1960s, the regional brewers that had defined American beer for a century went out of business. Network television advertising and a national wholesale tier consolidated the market into a handful of national players. Budweiser outsold Schlitz to become the country’s top-selling beer in 1957. By the early 1970s, fewer than 100 breweries were left operating in the United States. The national-brand story in alcohol took decades to play out after Prohibition ended, and it required a brand that already existed nationally, plus the regulatory framework that allowed national distribution and national TV advertising to develop together.
But there’s a bigger problem than time. Cannabis can’t run the alcohol playbook, period. Different era, far more regulation. State-by-state licensing means you cannot ship product across state lines. License caps mean a national operator cannot just expand into every market. In the currently regulated resale environment, every transaction must flow through a state-licensed retailer who controls what goes on the shelf. Even if a brand existed in twenty states, it would be a different SKU in each one, with different packaging requirements, different testing requirements, different tax structures, and different shelf positioning controlled by different operators. That is not the alcohol playbook, it is the inverse of it. The framework that allowed national alcohol brands to develop does not exist for cannabis and is not going to exist any time soon.
But that didn’t stop the spectators from pulling up in droves. Agencies, brand consultants, packaging firms, celebrity-partnership shops. Their objective was to solve their own revenue problem by convincing you that you had a marketing problem they had the solution to. The slide decks were sophisticated. The people delivering them were likely sincere. They had also been sold the same story, and most of them did not have to live with the consequences of being wrong. Most of the modeling didn’t survive contact with the real world. Garbage in, garbage out, as they say.
Cannabis use has grown over the past two decades, but it has grown gradually. Past-year use among Americans 12 and older roughly doubled from roughly 11% in 2002 to 22% today.[2] The curve tracks better with social acceptance and access than with any single legalization event. The dramatic post-legalization wave the pitch promised did not show up. National brands have not emerged. The licensed retail door is still the place where the transaction gets decided.
The pitch fell apart. The cost structure didn’t. Operators built creative departments, signed agency retainers, paid for lifestyle photography and influencer programs and celebrity partnerships. We added a layer of SG&A the market was never going to underwrite. The spectators got paid whether the work moved units or not, because the metrics they reported on, impressions, engagement, awareness lift, weren’t transactions. What got left behind was a marketing-shaped hole where merchandising discipline should have been.
Marketing vs. Merchandising
Marketing is the right discipline in a different kind of category. When Red Bull launched, there was no category called energy drinks. People drank coffee. They drank soda. There was no occasion. There was no shelf. There was no reason for anyone to pick a $3 can over a $1 cup. The marketing machine behind Red Bull built the occasion, the shelf, and the reason. That is real demand-creation work. Operators in those categories who don’t fund it lose.
Cannabis is the inverse. The product is older than recorded history. The use occasion has been around for a long time. The delivery formats, flower, vapes, edibles, concentrates, were already being consumed in the illicit market before any state opened a licensed store. The operator’s job at a licensed dispensary is not creating an occasion. It is converting demand that already exists, in whatever format the customer is asking for, at the shelf or the counter where the decision gets made. That work has a name. Disciplined retail has called it merchandising for a hundred years.
The Measurement Difference
Naming the work correctly is not a semantic exercise. It is what lets the rest of the organization do its job. Marketing comes with its own measurement vocabulary: clicks, impressions, engagement, awareness lift, share of voice. In a category where demand must be created, that vocabulary is the cost of admission. There is no cleaner way to evaluate brand work in real time, and operators in those categories accept the trade-off because they have to.
In a category where demand already exists, the same vocabulary becomes a problem inside the building. The CFO can’t defend a creative spend the way she defends a piece of equipment. The plant manager can’t run schedule against an awareness-lift estimate. The board can’t evaluate the marketing line the way it evaluates the margin line. Capital flows toward the discipline the rest of the organization can verify, and away from the one only the marketing team and its agencies can speak about.
There is a deeper problem under the vocabulary. Marketing is trying to prove a negative: that the campaign caused the result, and that the result wouldn’t have happened without it. Take the billboard on the highway, in a state that allows them. You put it up. The next month traffic is up four percent. Did the billboard do that? You cannot say. Maybe seasonality moved it. Maybe a competitor ran a promotion that pulled customers your direction when they didn’t get what they wanted. Maybe the weather was better. Maybe nothing you did mattered.
The agency that placed the billboard will tell you it worked. You cannot prove it didn’t. By the time you are even having this conversation, the check has been written and cashed and the next billboard is already in the queue. The decision was made up front against a promise. The honest evaluation comes on the back end against attribution where the agency holds the pen.
Merchandising doesn’t have that problem. The shelf change either moved velocity or it didn’t, and the answer is in the POS by the end of the week. The menu reorder either lifted attachment or it didn’t. The budtender training either changed mix or it didn’t. The data is direct. The feedback loop is short. You can stop doing what isn’t working before the next check goes out.
The metrics also live in the same language as the rest of the company: velocity by SKU, attachment rate, basket size, turns, in-stock rate on the top twenty, comparable-store sales. These are numbers that move with operational decisions, that show up in the POS in days, that operations and finance can act against in the next cycle.
What the Work Actually Looks Like
Cannabis retail does not have the merchandising flexibility of a grocery store or a liquor store, and any honest treatment of the discipline has to start there. State and local rules dictate what can be displayed, where product can sit, whether consumers can handle product before purchase, and what signage is permitted. Product is behind counters or behind glass. Consumers don’t walk aisles or encounter a planogram the way they would in any other retail category.
That doesn’t mean merchandising matters less in cannabis. It means it shows up in different places. Some of the classic retail levers don’t work in cannabis; the regulators took them off the table, and operators who keep reaching for them are going to come up empty. The work that’s left is narrower, but it’s where the operators who win actually live.
Assortment calibrated to velocity, not to vendor relationships
Most dispensaries carry too many SKUs. The top 20 percent of items drive 80% of revenue in most stores. Thinning the assortment to high-velocity items improves turns, frees up working capital tied up in slow-moving inventory, and simplifies the budtender’s recommendation task. Vendor relationships push the other direction. Every brand wants more facings, more menu lines, more presence in the recommendation flow, and the operator who can’t say no to the wrong SKU is paying the cost of the vendor’s marketing strategy.
Price architecture that meets the consumer where they actually are
This is the discipline that requires the most humility, because the consumer is not making the decision the way the brand pitch says they should. Cannabis consumers have gravitated to THC potency as the proxy for quality. THC percentage is not a clean measure of quality: terpene profile, growing technique, cure, and freshness all matter more than potency-led labeling acknowledges. But it is the measure the consumer is using. The operator who designs against the consumer’s actual decision logic will outperform the operator who designs against the decision logic the consumer ought to be using.
A tiered price ladder built around THC potency produces real lift, within limits. The consumer is price-sensitive to the trade-up. They will move from a value tier to a mid-tier for a meaningful potency step. They will not pay open-ended premiums for the next increment. The operator who prices the top tier as if cannabis buyers behave like premium spirits buyers will sit on the inventory. A lot of this industry was built on the assumption that the premium-spirits buyer was the prize. That segment exists. It is too small to be the foundation of a regional retail business.
Budtender incentives tied to the store’s margin, not the vendor’s promotion
The budtender is the single most influential person in the cannabis purchase decision. The basket gets shaped in the seconds between the customer walking up to the counter and walking out the door. The customer arrives with a preference shaped by potency, price, and prior use. The budtender shapes everything else: what flower, what concentrate, whether to add the pre-rolls, whether to add batteries to the cart.
Incentive structures that let individual brands pay budtenders for recommendations subordinate the operator’s strategy to whoever has the biggest brand budget that month. The operators who win train, measure, and compensate budtenders against the store’s margin priorities and the store’s house-brand priorities, not the vendors’. This is the conversion lever, and it is the one most have not built the muscle to use.
In-stock discipline on the items that matter
Running out of a top-twenty SKU on a Friday night is a merchandising failure with immediate revenue consequence. Operators who treat in-stock as a measured KPI capture demand competitors are forfeiting. This is one of the most direct ways to take share from the dispensary down the road, and one of the easiest to neglect when the operating team is chasing problems that look more important.
Menu architecture that reflects merchandising logic, not vendor influence
Dutchie, Leafly, Weedmaps, in-store digital menus, all have ordering logic. But if that logic defaults to alphabetical or paid placement, you have given up a lever. Menu order should be driven by margin contribution, velocity, and house-brand priority, the same logic that drives shelf placement in any disciplined retail category. Pre-checkout add-on prompts on online ordering are the closest cannabis comes to a grocery-store endcap, and operators who treat them as a deliberate merchandising decision capture attachment the operators who don’t are leaving on the table.
All of these answer to the same logic. None of them needs a brand campaign to work. They need data the operator actually looks at, and the discipline to act on it in the next cycle.
What This Means for Capital Allocation
For investors, the read is direct. An operator with a brand-heavy cost structure is carrying SG&A that doesn’t convert to velocity at the shelf. In a wholesale market with compressed margins and a retail market that has tilted toward house brands and value tiers, that cost structure is a liability. The operators worth underwriting are the ones whose cost structure reflects what the category actually rewards: tight assortments, disciplined buying, budtender training, merchandising analytics and retail operations depth. When you read a cannabis operator’s financials, the marketing line is not a sign of ambition. It is a sign of capital allocation discipline, one way or the other.
Why Federal Rescheduling Doesn’t Change This
Federal rescheduling, whenever it fully arrives, will bring another wave of pitches. Operators will be told that now is the moment to build brands, that consumer awareness is the next frontier, that the category is finally ready for real marketing investment. Some of it will be sincere. A lot of it will be the same pitch in a new suit. Operators who have made it this far by running disciplined commercial operations should be ready to say no to most of it.
The reason it will be the wrong pitch is the same reason the Prohibition analogy was wrong the first time. None of the structural constraints change with rescheduling. State-by-state licensing stays. License caps stay. The regulated resale environment stays. The licensed retail operator stays the decision-maker on what goes on the shelf. The states built these markets on tax bases, employment bases, and local political constituencies. They’re not dismantling them.
What rescheduling does change is the regulatory environment for banking, the 280E tax penalty that has applied to legal cannabis operators by virtue of federal Schedule I status, and the cost of capital. The questions to ask of every pitch coming through the door after rescheduling are the same ones to ask today. How does this connect to transactions in my stores? How fast will I know if it worked? Whose problem does it solve, mine, or the person selling it to me?
Cannabis has been around forever. The customer doesn’t need to be convinced. The customer needs to be served, at the counter, on the menu, in the basket, and on the way out the door. A company is a body. When the brain points it at demand creation in a category that doesn’t need it, the limbs can’t follow. They’re built to convert demand, not manufacture it. The industry doesn’t need more marketing. It needs to stop pretending it had a marketing problem in the first place.
[1] Substance Abuse and Mental Health Services Administration, Key Substance Use and Mental Health Indicators in the United States: Results from the 2024 National Survey on Drug Use and Health (2025), past-year marijuana use among persons aged 12 or older.
[2] National Academies of Sciences, Engineering, and Medicine, Cannabis Policy Impacts Public Health and Health Equity (Washington, DC: National Academies Press, 2024), Ch. 3, which compiles NSDUH past-year cannabis use among Americans aged 12 or older at 11.0 percent in 2002 and 21.9 percent in 2022. The 2024 figure of 22.3 percent is from SAMHSA’s 2024 NSDUH (note 1).
Eric Offenberger is the Chief Executive Officer of Vext Science, Inc. and its operating subsidiary Herbal Wellness Center, a multistate cannabis operator with licensed retail dispensaries and vertically integrated manufacturing operations in Arizona and Ohio. Prior to entering the cannabis industry in 2018, Eric served as President and Chief Operating Officer of Delta Steel, a Reliance, Inc. (formerly Reliance Steel & Aluminum Co.) company, where he provided strategic oversight for six divisions across the distribution and manufacturing sectors. He is a Certified Public Accountant (inactive) and brings over 40 years of experience in operations, finance, and executive leadership across the commodity, distribution, and consumer goods industries.
This piece originally appeared in Cannabis Confidential, Todd Harrison’s Substack, where Offenberger is a guest contributor, and is republished with permission. It is an external, unpaid contribution. It does not represent High Times’ reporting and has not been edited for content or accuracy.
