Cloud Cannabis is a vertically integrated business that has had an incredible run since opening its first dispensary in June 2020, even while launching during the pandemic. The firm experienced over 31,000% in retail revenue growth in its first year of business (Q3 2020 to Q2 2021) and 211% from Q3 2021 to Q2 2022.
Completely self-funded, Cloud experienced a 234% increase in wholesale revenue growth from Q1 2021 to Q2 2022 and is on the road to becoming one of the largest employers in Michigan. Growing from 25 employees in 2020 to almost 300 today, Cloud’s team has served over 1.5M customers to date.
But how is this even possible in the current market?
The key seems to be in the data analysis that enabled Cloud Cannabis to be the first to market in local Michigan communities with limited licenses. Cloud's team uses data to segment its customer base, identify categories with attractive margins, build strategic partnerships across the U.S., innovate its products, navigate the real estate market and apply for licenses to develop its distribution network, retail presence and wholesale market.
Co-founders Samir Pimputkar and Nirav Shah explained that Cloud has been consistent in focusing its retail licensing and real estate strategy on limited license municipalities within the broader Michigan market.
“As the market moves through a normal business cycle of oversupply, both in terms of the wholesale products as well as in saturated local retail markets with no license caps, we've seen steady growth in our business. Cloud wins by listening to the needs and the appetites of our customers, whether it's by developing high quality, affordable products with our in-house brands, or if it's through collaborations with different groups and different partnerships that we have coming down the pipe," Pimputkar told Benzinga in an exclusive interview.
Cloud works with a very fine-grained segmentation model in geographic terms, demographics and regulations.
Shah noted that they were skilled at getting licenses.
“We realized we're really good at winning licenses in limited license markets, and that even if we just focused on these controlled markets we could still reach 90% of the statewide population. We focus on limited license markets where there are maybe 1 to 3 competitors. We chose the two largest markets in Michigan, and we concentrated our store licensing efforts predominantly between Grand Rapids and Detroit,” Shah said.
“We want to get into markets where we have a first mover advantage, and that decision-making is based on data. We're a data-driven company. Everything we do is data-driven,” Pimputkar said. “Our customers could be anybody. So we look at the data in more mature markets, to see what is taking off there, and bring those learnings back to inform our customer experiences as well as our product offerings.”
Data-Driven Partnerships and Product Innovation
The data collected by Cloud also translates to decisions in manufacturing and wholesale. Moreover, data shapes the narration of Cloud’s products and services.
“We're partnering with Tyson 2.0 to launch their Ric Flair Drip product because the Michigan demographic lines up very favorably to the brand identity presented by the Tyson 2.0 product line. This is a core demographic that we want to reach and make them loyal customers,” Pimputkar said.
Data is also driving Cloud’s partnerships. Cloud is currently selling products from the powerhouse CA brand Wonderbrett. The old-school brand entered Michigan through a first-of-its-kind strategic cultivation partnership with Cloud in September 2021.
“We have 22 licenses and we distribute to 200 stores across the state. We have a distribution network and a relationship with most major retailers. We didn't want to go and just have vanilla products for our consumers. Everyone's trying to grow the same strains. We can buy these generic products at very low prices and sell them at very high margins. With Wonderbrett, we are bringing a unique and differentiated product to the market, and we can get consistency from our partners at Wonderbrett who are curating for us,” Pimputkar explained.
In addition, Cloud will be the first retailer in the Detroit metro area to offer the coveted Belushi’s Farm product assortment. “It's similar to what we did with Ric Flair. We're getting a lot of outreach from people in different states who say, look, we need distribution, we have a good brand, we need help. So that's how the group that partners with Belushi knew us. They knew that we have this amazing, probably the top retail footprint in the state of Michigan. And our internal team said based on demographics, ‘we want to go after Jim Belushi’. He attracts people who smoke, baby boomers for example,” Shah noted.
Budtender AI
Cloud uses machine learning on millions of data points, from strain chemistry to customer feedback, to prioritize certain products online as well as in the store. Budtender AI is a digital assistant that allows consumers to choose their desired recreational effects, terpene profiles, and potency, to formulate tailored product recommendations.
“It's a focal point for our sales, our sales goals, and our initiatives. The proprietary algorithm process gathers all the necessary information and sets it into motion with a simple interface accessible to everyone, giving shoppers a way to find their ideal product in under a minute, no matter how big the actual menu is,” Pimputkar said. “So shoppers love the service and spend significantly more per transaction after they've had this particular experience.”
Michigan’s Own
With interstate trade or even federal legalization, Cloud might want to grow outside of Michigan. But, would brand consistency be a problem?
Samir explained that although Cloud has explored transactions in other states throughout the Midwest and the Northeast, the team has chosen to remain focused on dominating the state of Michigan.
“We're local here, and we won all of our licenses organically. We never paid for any. We went and we won them. So we have some of these great, amazing locations that we have to open up because there's a stigma that Michigan's not good in certain ways because at the state level, and in certain municipalities, there are unlimited licenses. But it's very limited in the densest population areas where you actually want to be. So there are cities that give unlimited licenses, and some cities that get one license. Additionally, 90% of the municipalities in the state of Michigan have opted out of cannabis, which makes bordering limited license municipalities even more attractive. We've only been around for two years and we'll have 12 stores open by the end of Q1,” Pimputkar concluded.
Photo by Billy Huynh on Unsplash.
