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Sampling for success? Analyzing the ROI of cannabis samples

July 29, 2024 | Tim Wilson

Heath Canada allows producers to provide samples to provincially licensed cannabis retailers and their employees. The provinces and territories then regulate whether and how retail store employees can use the samples.

Sampling is helpful for budtender education and can be a key component of industry events where LPs are scrambling to distinguish themselves in a crowded market.

But how effective is it?

“I only have experience with sampling at the tradeshow level, and can’t speak for in-store sampling,” says Randy Rowe, CEO and President of the Grow Up Conference and Expo. “However, I think the rules currently are sufficient to allow brands to get much-needed exposure to retail buyers and budtenders.”

Rowe says that the sampling has delivered material benefits to Grow Up’s attendees, which include retail buyers and budtenders.

“We’ve heard of retailers bringing on new brands based on meeting them at our show and seeing and receiving samples,” he says. “One retailer I spoke to at our Victoria event placed an order on the spot from a brand they just met at our show during the speed networking event.”

At the retail level, sampling can significantly affect menu curation and reduce financial risk.

“Sampling is a big influence on how I do business,” says Katy Perry, Founder and CEO at TOKE Cannabis, which has eight retail locations in Ontario. “It affects who I choose to do business with, and what I carry on my menu board because it’s hard for us to purchase from the OCS without first being able to see, smell, and touch the product. In effect, not sampling puts the financial onus on me.”

A tricky business for LPs

While the value of sampling is apparent to many retailers, it’s not a simple proposition for some LPs, who must carry their own financial and regulatory burdens, including the possible repercussions of a CRA audit.

“A CRA audit will want to see how LPs differentiate between products that are sampled to retailers and their employees, and those that are for sale—although both generally require excise duty to be paid,” says Harrison Jordan of Substance Law. “The CRA is very strict when it comes to the integrity of the excise duty. The numbers have to match up.”

Perhaps the most bizarre regulatory hurdle is that LPs without a research licence are not allowed to sample their own products.

“It’s completely backwards—crazy that if you work at an LP, you can’t sample your product,” says Jordan. “To make matters worse, the requirements for research licenses are more onerous now that there are specific requirements for non-therapeutic human research, especially beyond organoleptic testing.”

Still, many LPS are finding that the extra effort is worth it.

“Sampling itself is still a tricky process,” says Omar Ali, CEO of SESS Holdings. “It does take some time to package, mail, and follow up, but, at the same time, I believe there are many benefits. From the budtender to the keyholders, the ones who are able to understand your intention of sampling are much more receptive to recommend your product.”

The cost of opportunity

Because sampling is more complex in the cannabis business than among more typical packaged retail goods, and includes additional costs, it’s critical that LPs have a strict handle on the value proposition.

“As an LP, if you’re going to do a sampling event, you need to be able to measure the ROI on the products that you’re handing out,” says Rowe from Grow Up Conference and Expo. “Simply just handing out samples to a room full of attendees without tracking can become very expensive and time-consuming.”

On the retail side, whereas some stores are thrilled to see LP representatives come through doors with samples for staff, others want to have more control over product education.

“That’s something that I respect and appreciate,” says Janeen Davis, VP of sales at Joint Venture Craft Cannabis. “You really have to take a balanced approach. I always think it’s best to reach out to store managers and to ask them what works for them.”

Many smaller producers need to monetize every gram coming out of their facilities. Given the costs of compliance, shipping, etc., poorly coordinated sampling can have a direct, negative effect on the bottom line. It’s critical for the LP to understand the specifics of a given retail environment.

“You might be sampling the wrong product at that store,” says Davis. “How many cases does it pull through a month? If they bring in a case of a more premium price product than your sampling premium product, are they moving one case in two months, or one case in one week?”

Given that market education is itself time-consuming and constantly changing, it’s understandable that an LP would stick with what it knows.

“Right now, we’re focused on our current established retailers and ensuring they have samples and the knowledge needed to win over that customer, and to keep them coming back,” says Ali from SESS Holdings.

Ultimately, the most positive effect can be seen on the sales floor.

“So many of our budtenders are also passionate consumers,” says Perry. “It’s unfair of us to ask them to purchase cannabis in order to educate the public and to be good at their jobs. We want them to help educate customers, without the added expense.”