Episode #72: Building a New Brand Category From Scratch, with Mitchell Osak

We’re witnessing the birth of a new brand category. As cannabis and psychedelics evolve from illegal to mainstream, the industry is grappling with early-stage branding and marketing strategy. I’m joined by Mitchell Osak, trusted advisor to cannabis and psychedelic companies, to look at how this embryonic industry is building their brand identity.

Mitchell Osak’s passion is helping organizations realize their true potential, and through this effort, positively impact the lives of their shareholders, customers, employees, and communities. He has extensive experience and a deep network in the global cannabis and psychedelics industries, as well as the financial services, CPG, media, business services, and IT sectors.

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PODCAST TRANSCRIPT

Grad
Alright, alright, alright. Welcome to the CXM Experience. And today’s topic is perfectly suited to Mr. Hendrix and his tunes. As always, I am Grad Conn, CXO at Sprinklr, and I’m joined today by Mitchell Osak. And Mitch is actually a very important part of my life. Mitch is the very first person that I ever “managed.” Although, Mitch, we can all agree, I wasn’t really managing you. You were probably managing me. But technically speaking, you reported to me.

Mitch and I met many years ago at Procter & Gamble. I was brand manager, and he was my brand assistant. And we were on a brand called Cheer and had a lot of fun. Mitch went on to have a great career at Procter & Gamble and has continued on to do some very interesting things. I’ll let him tell you about it in a second. But what I want to talk about today is I want to talk about the transition of brands to customer experience when they’re moving from something that is in a quasi-illegal state.

And so let me use alcohol as the kickoff for this. So, at one point in the United States during Prohibition, alcohol was illegal. There were ways of getting it. You could get a prescription. That’s actually the reason that Walgreens became the pharmacy it is today, because Walgreens decided to be really all in on alcohol prescriptions. And Walgreens popped up all over the place, and people could go in and get alcohol by prescription. They also allowed it in clubs. So, if you look around, there’s a lot of old clubs that have usually been converted to something else, like the Elks club, and the Oaks club, and all these other different clubs. Seattle is full of them. And those clubs were a place where you could get a drink in the club, but you couldn’t drink alcohol as much at home.

What they did in prohibition, which was kind of interesting, is they didn’t actually make drinking alcohol per se, illegal. They made the production and distribution of it illegal. It made it really tricky. But then all these overnight gin places would pop up. And people were finding all sorts of ways of consuming alcohol. And it actually led to the birth of cocktails. The reason cocktails started, right around the time of prohibition, is that a lot of the alcohol that was being produced was being produced in very low quality ways. And so, it was terrible alcohol. And so, the cocktail was invented to mask the taste of poor tasting alcohol, which is kind of interesting. Prior to this time, they didn’t really have cocktails in major quantities. And so cocktails really emerged out of that culture of the 1930s. And of course we enjoy them all today.

Now there are other categories that are going through the same kind of thing. For example, cannabis. Now cannabis is sort of midway in its transition from being something that was massively prohibited and only purchased in paper bags illicitly on street corners, to something that you can now buy in dispensaries in many locations across the United States and in Canada. Mitch will talk about that a little bit. And also psychedelics which are in the very early stages of becoming legalized. And they’re also moving from being very, very, very underground to something that people will be buying. And what’s going to happen is all these products are going to go through a transition to branding. And as they go through a branding phase, they’re going to be going through a customer experience phase. And all these companies will start to think about customer experience. And I would argue that customer experience is pretty poor in most of these categories right now. So that the kickoff for today. That frames up what we’re going to talk about. Mitch, welcome. Welcome to the CXM Experience.

Mitchell Osak
Thank you Grad, it’s a pleasure to be with you.

Grad 
It’s a real honor to have you on. It’s really great talking to you. So maybe just for the folks listening, just quick background on your career and what you’ve done and where you specialized. And then let’s start jamming a little bit on where we’re going in these cannabis and psychedelic markets.

Mitchell Osak 
Okay, thank you Grad. So, I’m currently a consultant to the global cannabis, legal cannabis, and legal psychedelic industries. And what that means is I work with early-stage companies as well as more mature legal companies with their go to market strategy, with their operations. And on the capital market side, which basically is about raising money, valuations, and pursuing growth strategies through both the public and the private markets. These are dynamic sectors. And as you correctly pointed out, even when they go legal they’re in a state of flux because of various industry dynamics, lack of data, as well as different machinations between the firms. But it’s clearly an exciting time to be in those sectors because they are truly transformational, both from a macroeconomic perspective, as well as from a patient and consumer perspective. And as you aptly pointed out, many of the legal participants, as well as some of the former illegal ones, are looking to create brands. Because it’s essentially like tech was 20-30 years ago, it is a land grab to be able to get brand awareness and brand equity in the minds of consumers, as well as channel partners and regulators, and so on and so forth.

Grad 
How do people think about this market? I mean, are there P&G marketers in there right now? Are they thinking about customer experience? How are they thinking about brands?

Mitchell Osak 
All of the above and a lot more. So, if we just look at legal cannabis for now, which has been legal in some states for upwards of six years, and in Canada it’s been fully legal for a tad over two years, we really have a wide variety of different marketers, and what I’ll call our customer experience people. We have some traditional P&G trained folks like myself, we have a variety of tobacco and beverage/alcohol marketers, we have some pharma marketers, and we have some amateurs that have come up from the black market or from unrelated industries, who put the marketing hat on and now claim expert status. So, it really is a wide variety of them. But I would say to you that certainly none of those groups have any kind of a monopoly on insights, best practices, or how to approach this brave new world.

Grad 
Well, you know, what’s interesting to me about this, and about this market in general, is that if you think about how alcohol has moved from being literally prohibited to something that we celebrate and talk about, and we watch Super Bowl ads about it, and we have a lot of fun with it. It’s very normalized. If you look at these other substances, which have… some people would argue, are actually better for you than alcohol. And certainly, alcohol causes an awful lot of problems out there. So, it’s not exactly a consequence-free drug. But you know, people can behave responsibly. But you think about these other ones, they don’t feel that way. You always feel a little bit like you’re doing something wrong when you’re doing it. And I think this stigmatization of the product is a very interesting aspect of how you have to work through the customer experience. Because I think to a certain extent, there’s an aspect of how do customers feel comfortable even going and buying it.

Mitchell Osak 
Absolutely. So let’s look at cannabis as a broad case study on that. There is still even in Canada, I would argue, maybe 20% to 30% of Canadians — and we’re a fairly liberal country — who still hold a very strong stigma to cannabis, even for its medical usage, which is all for therapeutic benefits. That is a problem insofar as you want retail access in different markets, and local city councils bar that, or that could be through various religious injunctions, and so on and so forth. But I’m happy to say that in Canada, as well as places like California, and Colorado, and Washington, that train has left the station. Those 20% to 30% of Canadians and Americans who don’t like cannabis likely don’t like porn, don’t like gambling. And that is just a group of people that will never participate in the category in any meaningful way, except perhaps on a medical cannabis perspective, where they might need the product for, let’s say, the epilepsy of their kids. If we look at the broader number of Canadians and Americans who accept it, the question then becomes, how would they partake in the product? And what does that mean for the consumer experience? So, for example, in Canada, we know there are many consumers who don’t want to publicly identify with cannabis. Because for professional reasons or what have you, they don’t want to go into a store, be seen to go into a store, or to buy online and have that information tracked somewhere.

Grad
Look what happened to Elon Musk. Elon Musk lit up a doobie while he was on an interview. It hasn’t really hurt him. He’s now the world’s richest person. But that was shocking at the time. I think people felt that… there was a call for his resignation, calls for the board to step in and remove him. It was quite an outcry for something that was legal in the place that he was doing it, which was in California.

Mitchell Osak 
Yeah. And very benign. Cannabis has been consumed for upwards of 10,000 years.

Grad 
If he’d had a scotch, I think people would have been like, that’s a little weird he’s drinking on air. But I don’t think people would have called for his resignation.

Mitchell Osak 
Right. And the share price wouldn’t have taken a big hit for that 24-48 hours. But what it says around customer experience is that you’ll have a lot of people who might be in favor of the product, might imbibe the product, but will still buy it through secret channels. And they don’t show up in the legal or regulated world. And you have others that will come in. And they could be, let’s say, baby boomers who used to smoke when they were 15 to 20. And now are coming back into the legal category and might be a little tentative to come into a brand spanking new cannabis store, not familiar with all the weird names like Nuclear Kush or purple cancer and weird things like that. And will be very tentative and don’t want to deal with the man or woman who’s the bud tender who’ve got eight tattoos and 12 earrings and so on. And that is a very off-putting experience for a lot of people as well. So, the customer experience is multifactorial, it depends who the customer is, depends on what they want to buy and their needs. And it’s not something that’s easily tackled through…

Grad 
I Feel like cannabis is almost still on the edge of… it’s still got this wavy gravy 60s counterculture Woodstock thing it’s stuck in for some reason. And so, the branding that you do see is kind of strange, and it looks really amateurish, and small potatoes versus what you would see from a great winery, you know. You don’t look at the label of a great winery and go, Oh, wow, they’re really stuck in the 1930s. You don’t feel that way at all right? And what do you think that is? Why is it still so backwards referential?

Mitchell Osak 
Well, you’re absolutely right in that assessment. It trades on those brand elements, and those messages and what have you, for good reason, in a way. Because that’s where a lot of the brand equity, that’s where a lot of the awareness, that’s where a lot of the buzz, pardon the pun, originated. The problem is, that is a very narrow view of branding of the product, of how it could be consumed, and ultimately, the consumer experience that you and Sprinklr focus on. If we look at that as bran ding 101, 1.0 and cannabis, we’re slowly evolving to the next phase of branding, where it becomes more like a Nike and a Procter & Gamble brand, and so on and so forth. The challenge is, that the high consumption segments within the industry, and this is where cannabis is very similar to beer and alcohol. The high consumption segments are typically males and females, let’s say 16 to 24. Those aren’t the same soccer moms that buy Tide detergent. So, there are somewhat misalignments between who your target consumers who buys the product, how you talk to them, and therefore, who you want to appeal to going forward. We will get there, but it’s gonna take a little bit of time.

Grad 
Let me challenge that for a second.

Mitchell Osak 
Please.

Grad 
I’m always quick to challenge… first of all, soccer moms actually, are not the majority buyers of those products, which is interesting. So, I’m always quick to challenge demographic stereotypes. But let me throw something your way. It’s a thought. So, what’s interesting about the market right now is that it feels like everyone’s still selling the category. Right? They’re still selling the category of: this is cannabis and you can get high from it. Which is like, got it. I think that’s been a reasonably well-known fact for quite a long time. That doesn’t seem like a giant newsflash, and so the branding is lazy because it’s just going to this 60s stuff with crazy graphics. And it feels like they’re just selling the thing. And so, what happens is the products are not differentiated from each other.

What’s interesting to me if I take a look at a market, which I think is very interestingly differentiated, would be the pain reliever market. Now, there are different compounds in pain relievers, like acetaminophen and there’s aspirin. There are different compounds. But there are many different pain reliever brands that use the same compound with some slight differences, right? Like Excedrin is acetaminophen with caffeine. They’ll do little things to it. And what they do in the market is they essentially target outcomes. This is the one for headaches. This is the one for muscle cramps. This is the one for backaches. And in fact, some of these pain relievers are incredibly specific in terms of what they think they’re going to solve, right? Now, they’re not down to your right toe yet. But they’re definitely different parts of the body, different sort of ailments and different sort of ways of approaching it. Even though principally these compounds are reasonably simple, reasonably generic, you can find all of them available as generics. And you swallow them as a pill mostly. And they mostly just go everywhere in your body, right? It’s not like this particular pill will just go to your back. That’s not the way it works. And so it’s interesting to me, if you think about the market you’re in, wouldn’t it be interesting to say, Hey, this is what you take when you’ve got epilepsy. This is what you take when you got back ache, this is what you take when you’ve got sleep problems, like a more outcome based. And then the brand is essentially targeted around those outcomes. And is anyone trying that right now? Is anyone going in that direction?

Mitchell Osak 
I think they’re trying. There’s a couple of things I want to say. first and foremost. And that is, in many markets, particularly in Canada, there are highly restrictive regulations around what claims you can make, how do you message the product, how you show it visually, in terms of things like sponsorship, and so on. So the guardrails are very tight in a lot of places about what you can say and what you can’t say. So that’s number one. We’re not talking about marketing detergent, or Chanel dresses, because we don’t have the same levers that typical consumer packaged goods would have. So that’s number one. Number two, is that perhaps the legal industry is at fault to this, but many consumers — and again, we go back to the people who are the highest consumption segments — they want, or they have been trained to want, the highest quality cannabis, which often includes the highest levels of THC for the lowest possible price.

Grad 
Hmm, interesting.

Mitchell Osak 
So, it’s like buying a car based purely on horsepower. Horsepower is THC, in the case of this industry. We all agree, and you’ve hit on some excellent insights, we all agree we need to get to what you described. But that’s not where the market is today. And that’s not where the revenue is today. So how do you do that? And that’s the huge challenge — one of the huge challenges in the industry right now. And I’ll just throw one other point there, which I think will resonate with you and your listeners. And that is, what is this industry? Is it OTC pharma like you just described? I think it is. Is it tobacco? Is it fast-moving consumer goods? Is it beverage/alcohol. Each of those are different industries with different brand, and customer experience drivers. But they are still very different. So, we haven’t figured out yet what this industry is. The reality is it’ll be all of them. But it hasn’t coalesced into that yet.

Grad 
It’ll probably go through stages, right? Like it does feel like the prescription sort of pain reliever stage is a more legitimizing stage. And then you can move from there. I think it’s hard to go from the majority of the population being in opposition to now say 30%, but that’s still a big number, to suddenly we’re buying it in the store like it’s a can of pop. That’s a that’s a big jump. Right? But, prescription-based and ailment-based or… also I would say they don’t do a very good job of even talking about the levels. That horsepower comment is a great comment. But that’s another thing that’s almost impossible to discern. And you have to talk to, you described it, with the tattooed, multi-earringed clerk behind the counter and figure it out. I think there’s so much that can be done from the standpoint of making the customer experience easier, by making it easier to understand what you’re buying. Also, there’s not much of an online experience around it either. You can’t do that zero moment of truth stuff in advance. You walk in blind to a dispensary and you’re confronted by all these labels from San Francisco circa 1969. And you start talking to some kid who’s 20. It’s a weird… the whole thing is a very weird and very, almost like… you just feel like you’re doing something wrong. And you can’t take credit cards. Oh my gosh. The whole issue around cash and credit cards. And that just amplifies the whole sense of I got something surreptitious happening here.

Mitchell Osak 
Yes. And the United States, as much as I’m a big fan of the United States, it’s really generations behind in terms in terms of enabling companies to develop a great customer experience in certain markets. I want to go back to one of the points you just said, because the market… the branding will catch up when there’s much more research and knowledge on the plants. So, for example, THC and CBD, those are two relatively well known cannabinoids. But hundreds exist in the plant. And we’ve only really studied this plant extensively the last, I would say, 10 years, 15 years. And that began in Israel, because of the need to deal with thousands of cases of PTSD, which are particular to the conflicts in that region. But the United States and Canada fought a war on drugs for decades. So, to get to the ability to become outcome focused, we need to know a lot more about these cannabinoids, how they work together, how they work with different genome types, and so on. Going back to the car analogy for a second, you’ll know this as well as I do. Horsepower tells you nothing about how fast a car can drive. You need to understand torque and other issues. So, we need to go from a proxy like horsepower, down to what torque is, and RPMs, and so on and so forth. And we will get there, but it’s going to take a little time.

Grad 
That’s super interesting. Let’s wrap with like a little peek into the future, which is psychedelics. I mean, they’re even a step — I’d say maybe more than one step — several steps behind cannabis. But a lot of people are saying that psychedelics are the future, they may even eclipse cannabis because of what they can do and the impact they can have. So, what’s your prediction there? And where do you think that market sits right now from a customer experience standpoint.

Mitchell Osak 
So I’m one of those people. I just saw a statistic yesterday. And you can validate these or not. The potential universe of mental health issues that could be positively impacted by psychedelics, and I’m talking about various forms of psychedelics like LSD, and psilocybin, and DMT, and MDMA. We’re talking about a 17 trillion — trillion — dollar potential market. And that includes things like anxiety, depression, PTSD, eating disorders, addictions, and so on, and so forth. So, as much as I am all in on the transformational impact on cannabis, I think psychedelics is going to be a magnitude greater.

Now, what’s super interesting about psychedelics is that psychedelics will enter our lives, primarily, and very quickly, on the medical pharma side, as well as through what I call psychedelics as a service. So, to be able to consume many of these products, you need to do these in conjunction with a trained psychotherapist or a psychiatrist or a psychologist, because they could be potentially very dangerous, and scary for many people. And again, I’m talking about the legal psychedelics industry. Because of the need for human facilitation, this is going to create a fascinating and a very interesting consumer or patient experience. And we will see that entire industry at least initially being built around that kind of a model — an integrated healthcare model — with both people, drugs, and a unique infrastructure, physical infrastructure that these treatments will happen in. So that will be very transformational in terms of how we deliver fundamental health care to people. And how that will evolve into a recreational situation is absolutely fascinating.

Grad 
Well, that is interesting, because you’ve got psychiatrists able to prescribe the traditional sort of drugs and, opioids and stuff like that. And that’s worked out great. But what’s interesting is, there’s a larger population of psychologists, and counselors and therapists who can’t prescribe right now. But these, I suspect, would fall through the cracks a little bit, right? And so actually open up a much larger market of individuals who would have access to this stuff. But, again, the customer experience will have to be one that’s guided, I think,

Mitchell Osak 
Well, 100%. And then we get into this wellness category, that sits between prescribed medicines, with FDA approvals and all of that, and the recreational use of magic mushrooms, which is what you get in places like Amsterdam now, and that’s something that you and I Grad have talked about in the past. And that’s the whole notion of functional mushrooms, also known as nootropics, which are things like cognitive enhancers, brain boosters, and things like that, and micro dosing. And that’s already happening right now, in the quasi legal or even firmly illegal space by biohackers in Silicon Valley, and upper middle class men and women in the neighborhood that I live in. So that is exploding in the shadows. It is all very often based on really positive good experiences. I’m not going to endorse the consumption of psychedelic mushrooms. But in a lot of cases, it’s a much more benign substance used in a very conservative way than other products are. And these markets will emerge very quickly. And what we know, in one of your neighborhoods, Oregon, it’s already legal. So, there’s going to be huge sectors emerging very quickly. And you might be surprised at the lack of stigma around psychedelics, because of the transformational impact that those substances can have on curing — I’m not talking treating now — I’m talking about curing depression, anxiety, and things like that. And when you have DARPA, which you know is a pentagon agency, that is spending tens of millions of dollars in funding psychedelic-based research for PTSD, that could quickly tip the stigma scales towards acceptance of these projects very quickly. And they already have fast tracked FDA approvals.

Grad 
Really? That’s fascinating. It’s almost feels like, in some ways, because cannabis was used recreationally for so long, it was always kind of on the “wink, wink” outskirts of everything, it continues to that kid in the basement with no ambitions, smoking weed and that kind of stuff. Whereas it’s almost like psychedelics are so much more tightly locked down. Like the war on drugs, I think was much more effective on LSD and those kinds of things. And so they were really unavailable. I don’t even know how in God’s name people get their hands on them. And so in some ways they’ve not acquired a brand stigma. They’re in some way unbranded.

Mitchell Osak 
Absolutely.

Grad 
Like what are these things? And it’s like, oh, this is a way to manage depression and cure it. Oh, well, that’s pretty interesting. It firmly plants itself in that prescription camp before it moves into something that’s more broad scale,

Mitchell Osak 
Right. So your patient, your customer experience, your branding 2.0 or 3.0 paradigm, we will get there faster with psychedelics, or quasi psychedelics than we will with cannabis. Because no one will buy LSD, they’ll buy the Grad Conn pill. And they won’t even know…

Grad 
Not so fast. I’m not sure we’re going to do that kind of branding. But I hear ya.

All right, well that is super interesting, and a very interesting brand discussion. And so for everyone who’s listening in, just think about… brands are everywhere, right? And brand evolution is everywhere. And this market is particularly interesting to me because it’s very rare to see a new set of branding paradigms emerge. It’s almost like seeing an island emerge in the Pacific from a volcano. It just doesn’t happen that often, particularly these days. And this is going to be… Mitch, if you’re right, if it’s really going to be a $17 trillion dollar category, these will be some of the biggest brands in our lives in 20 years, which will be pretty interesting,

Mitchell Osak 
Or less, or less.

Grad 
Or less. Ten years, so Okay, that’s cool. All right. Well, that’s awesome, man. Thanks. That was great.  I’m gonna wrap, and I thank you so much for joining today and sharing your insights. That was great. For the CXM Experience. I’m Grad Conn, CXO at Sprinklr, and I’ll see you next time.