Harvard Case - Tokyo Smoke: Building a Retail Cannabis Brand (A)
"Tokyo Smoke: Building a Retail Cannabis Brand (A)" Harvard business case study is written by Eric Janssen, R. Chandrasekhar. It deals with the challenges in the field of Marketing. The case study is 6 page(s) long and it was first published on : Sep 23, 2019
At Fern Fort University, we recommend that Tokyo Smoke adopt a multi-pronged strategy to solidify its position as a leading cannabis brand in Canada. This strategy focuses on leveraging its existing strengths in brand storytelling, retail experience, and community engagement to expand its reach and cater to a wider customer base while maintaining its premium positioning. This approach will involve a combination of strategic marketing, innovative product development, and a commitment to responsible growth.
2. Background
Tokyo Smoke is a Canadian retailer specializing in cannabis products and accessories. Founded in 2013, the company quickly gained popularity for its curated selection, stylish retail spaces, and focus on providing a premium customer experience. The case study focuses on Tokyo Smoke's challenges and opportunities as the Canadian cannabis market rapidly evolves and competition intensifies.
The main protagonists of the case study are:
- Jamie MacLachlan: Co-founder and CEO of Tokyo Smoke, responsible for the company's overall vision and strategic direction.
- The Tokyo Smoke Team: A group of dedicated individuals responsible for various aspects of the business, including marketing, product development, and operations.
- The Canadian Cannabis Market: A dynamic and rapidly evolving market with a diverse range of players, including large corporations, independent retailers, and online platforms.
3. Analysis of the Case Study
This analysis utilizes a combination of frameworks to provide a comprehensive understanding of Tokyo Smoke's situation:
1. SWOT Analysis:
- Strengths: Strong brand identity, premium positioning, experienced team, loyal customer base, unique retail experience, strong focus on community engagement.
- Weaknesses: Limited product portfolio, reliance on physical retail, potential for higher pricing compared to competitors, limited reach in the Canadian market.
- Opportunities: Expanding product offerings, entering new markets, leveraging digital marketing, building strategic partnerships, embracing technology and innovation.
- Threats: Increased competition, regulatory changes, consumer perception of cannabis, potential for price wars, economic downturn.
2. Porter's Five Forces:
- Threat of New Entrants: High, due to the ease of entry and the growing popularity of the cannabis market.
- Bargaining Power of Buyers: Moderate, as consumers have a range of choices and can easily switch between brands.
- Bargaining Power of Suppliers: Moderate, as there are a limited number of licensed cannabis producers, but the market is becoming increasingly competitive.
- Threat of Substitute Products: High, as consumers can choose from various alternative products, including alcohol, tobacco, and other recreational activities.
- Rivalry Among Existing Competitors: High, as the market is crowded with both established and emerging players, leading to intense competition for market share.
3. Marketing Mix (4Ps):
- Product: Tokyo Smoke offers a curated selection of cannabis products, including flower, concentrates, edibles, and accessories. The company has a strong focus on quality and innovation, but its product portfolio could be expanded to cater to a wider range of consumer preferences.
- Price: Tokyo Smoke's pricing strategy is based on its premium positioning, which can be a barrier for some consumers. The company needs to find a balance between maintaining its premium image and offering competitive prices.
- Place: Tokyo Smoke currently operates a network of physical retail stores, which limits its reach. Expanding its distribution channels, such as online sales and partnerships with other retailers, is crucial for growth.
- Promotion: Tokyo Smoke has a strong brand identity and utilizes various marketing channels, including social media, events, and partnerships. The company needs to continue investing in its marketing efforts to reach new customers and maintain its brand awareness.
4. Consumer Behavior Analysis:
- Target Market: Tokyo Smoke's target market is primarily young adults and professionals, who are open to trying new products and value quality and experience.
- Consumer Needs: Consumers are looking for high-quality cannabis products, a positive and welcoming shopping experience, and reliable information about cannabis.
- Purchase Behavior: Consumers are increasingly researching cannabis products online and making purchase decisions based on product reviews, brand reputation, and price.
4. Recommendations
Based on the analysis, Tokyo Smoke should focus on the following recommendations:
1. Expand Product Portfolio:
- Product Development: Introduce a wider range of cannabis products, including different strains, product formats, and price points, to cater to a wider range of customer preferences.
- Product Innovation: Invest in research and development to create innovative cannabis products that offer unique benefits and appeal to specific consumer segments.
- Product Positioning: Clearly define the positioning of each product within the portfolio, ensuring that consumers understand the value proposition of each offering.
2. Enhance Digital Marketing Strategies:
- E-commerce Platform: Develop a robust e-commerce platform to expand reach and offer convenient online ordering and delivery options.
- Content Marketing: Create engaging and informative content about cannabis, including product reviews, educational articles, and lifestyle content, to attract and educate potential customers.
- Social Media Marketing: Utilize social media platforms to build community, engage with customers, and promote products and events.
- Influencer Marketing: Partner with relevant influencers to reach new audiences and build credibility.
3. Optimize Retail Experience:
- Store Design: Create inviting and informative retail spaces that showcase the brand's unique identity and provide a positive customer experience.
- Customer Service: Train staff to provide knowledgeable and personalized customer service, ensuring a positive and memorable experience.
- Loyalty Programs: Implement loyalty programs to reward repeat customers and encourage repeat purchases.
4. Strategic Partnerships:
- Distribution Partnerships: Partner with other retailers to expand reach and offer products to a wider audience.
- Brand Collaborations: Collaborate with complementary brands to create co-branded products and marketing campaigns.
- Community Engagement: Partner with local organizations and events to build brand awareness and foster positive community relationships.
5. Embrace Technology and Innovation:
- Data Analytics: Utilize data analytics to understand customer behavior, optimize marketing campaigns, and improve decision-making.
- AI and Machine Learning: Explore the use of AI and machine learning to personalize customer experiences, optimize inventory management, and improve operational efficiency.
- Emerging Technologies: Stay informed about emerging technologies in the cannabis industry and explore opportunities to leverage them for competitive advantage.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core Competencies and Consistency with Mission: The recommendations align with Tokyo Smoke's core competencies in brand storytelling, retail experience, and community engagement, while also supporting its mission to provide high-quality cannabis products and a positive customer experience.
- External Customers and Internal Clients: The recommendations address the needs of both external customers and internal clients, including employees, suppliers, and investors.
- Competitors: The recommendations consider the competitive landscape and aim to differentiate Tokyo Smoke from its competitors by focusing on its strengths and leveraging its unique positioning.
- Attractiveness: The recommendations are expected to drive revenue growth, improve profitability, and enhance brand equity, leading to increased market share and a stronger competitive position.
6. Conclusion
By implementing these recommendations, Tokyo Smoke can solidify its position as a leading cannabis brand in Canada. The company needs to expand its product portfolio, enhance its digital marketing strategies, optimize its retail experience, build strategic partnerships, and embrace technology and innovation. This multi-pronged approach will enable Tokyo Smoke to cater to a wider customer base, maintain its premium positioning, and achieve sustainable growth in the dynamic and competitive cannabis market.
7. Discussion
Other alternatives not selected include:
- Focusing solely on physical retail: This approach would limit Tokyo Smoke's reach and expose it to greater competition from online retailers.
- Adopting a low-cost strategy: This approach would undermine the brand's premium positioning and potentially damage its reputation.
- Ignoring technological advancements: This approach would limit Tokyo Smoke's ability to innovate and stay ahead of the competition.
The key risks associated with these recommendations include:
- Increased competition: The cannabis market is becoming increasingly competitive, and new entrants are constantly emerging.
- Regulatory changes: The cannabis industry is subject to ongoing regulatory changes, which could impact Tokyo Smoke's operations and profitability.
- Consumer perception: Consumer perception of cannabis is evolving, and negative perceptions could impact demand for Tokyo Smoke's products.
The key assumptions underlying these recommendations are:
- Continued growth of the cannabis market: The Canadian cannabis market is expected to continue growing in the coming years.
- Consumer demand for premium cannabis products: Consumers are increasingly seeking high-quality and innovative cannabis products.
- The ability to adapt to changing market dynamics: Tokyo Smoke has the ability to adapt to changes in the cannabis market and consumer preferences.
8. Next Steps
To implement these recommendations, Tokyo Smoke should take the following steps:
- Develop a detailed implementation plan: This plan should outline the specific actions to be taken, the timeline for implementation, and the resources required.
- Allocate budget and resources: The company needs to allocate sufficient budget and resources to support the implementation of these recommendations.
- Monitor progress and make adjustments: Tokyo Smoke should regularly monitor the progress of its implementation plan and make adjustments as needed based on market conditions and customer feedback.
By taking these steps, Tokyo Smoke can successfully navigate the challenges and opportunities of the Canadian cannabis market and achieve its long-term growth objectives.
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Case Description
In 2016 (A case), the founder of Tokyo Smoke, a cannabis retailing enterprise based in Toronto, needed to attract investors. The former Google Inc. employee had taken advantage of public policy changes in Canada and was modelling his retail business on Starbucks Corporation, which had educated North American consumers about coffee and captured a huge share of the coffee market. He needed investment capital in order to build his brand and needed to determine an appropriate valuation as part of his pitch for investment capital. By 2018 (B case), he had to address new challenges in his role as chief retail officer of Canopy Growth Corporation (Canopy), the Canadian licensed producer of cannabis that had taken over the company he founded. How could he position Canopy as a world leader in retail cannabis?
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