There are more than 1,000 active distributor licenses in California, but for ambitious brands two companies are bound to come up in every conversation: Herbl and Nabis. Both companies move move product from factories to warehouses and dispensaries, and handle substantially more than 10% of California’s legal market, but they have significantly different business models. And the one a brand chooses as its partner can say a lot about how that company operates and its vision for growth.
Distributors form a key link in most consumer goods industries. As brands grow and reach more stores, getting the right amount of product on shelves when they need it becomes increasingly complex. It makes sense to let specialists handle it. During the pandemic we’ve all become aware of how janky supply chains can be, even in the hands of professionals. Cannabis deals were recently done out of backpacks, but today the state requires cannabis (and alcohol) distributors.
Herbl CEO Mike Beaudry started the company in 2016 after a career as a natural foods distribution executive. The company began operations in 2018 with four trucks out of Santa Rosa. As Beaudry did previously, Herbl operates a traditional wholesale business, akin to Sysco for food, McKesson for pharmaceuticals or Southern Glazer’s Wine and Spirits for alcohol.
- Like these companies, Herbl takes ownership of product and then uses its own sales team to sell it to dispensaries.
- While observers say both Herbl and Nabis are serious about their data offerings for partners, Beaudry says it’s his salespeople’s relationship with shops that “enable us to grow these brands.” “Our team is going in there and getting real time feedback from the store.”
- The company also expects brand partners to get involved with store promotional events, demo days, patient appreciation and similar efforts.
- Since Herbl owns the product and sells it, the company has to pick brand partners it likes and thinks it can grow.
- How do you partner with Herbl? Beyond a brand’s numbers, Beaudry said he wants the company’s portfolio — it lists 30 partners here — to represent a variety of form factors without too many lookalike products. He also likes to see brands investing in marketing and a promotional strategy.
Nabis, by contrast, is a marketplace, or what’s known in the logistics world as a third party logistics provider (3PL). Its 150+ brands have space on the Nabis site to display their goods on its site, and when a retailer buys, Nabis does the delivery. It distributes 8,000 SKUs across California.
The key difference between a 3PL and a traditional distributor is that a 3PL never takes ownership of the product and doesn’t sell them. Since Nabis is brand agnostic, companies need to have their own sales teams connecting with retailers.
- Nabis charges about half as much as a traditional distributor and the idea is that brands take that margin and build their own sales team. When a brand has its own sales team, he argues, its message doesn’t get “diluted” by a distributor’s sales team that has dozens of other brands to move as well.
- Distribution execs skew older, but Ning founded the company in 2017 and isn’t yet 30. He studied computer science and economics at the University of Virginia.
Wesley Hein, an executive with Mammoth Distribution (which only distributes brands it owns), has high regard for both companies. “The choice can come down to what distribution model best fits a brand’s business model,” he said.
- One reason Herbl may appeal to out of state companies, Hein said, is that it creates a path to reach the huge California market without requiring a major investment in the big complex state.
- Other brands find it “liberating” that Nabis offers “instant distribution” to newcomers.
- “Regardless of the distribution model that a brand decides to pursue, it’s generally a good idea to start it off in a relatively small number of stores to make sure that it is really connecting with consumers before scaling up,” Hein wrote in an email.
Switching between Herbl and Nabis, might less reflect dissatisfaction than a shift in business model, one outside executive familiar with both companies said.
- Vape company Dosist, which had previously been with Nabis, recently switched to Herbl. The popular concentrates brand Raw Garden recently switched from Herbl to Nabis. (Dosist wasn’t able to discuss the decision before press time. Raw Garden didn’t respond to a request for comment.)
- Through its acquisition of Blackbird last year, Herbl operates a 3PL in Nevada, its only other state.
The big question for both companies is where they will grow. Nabis has announced plans to enter New York. Ning’s betting the 3PL business model is well suited for a market being built from scratch.
- Beaudry said Herbl is still surveying the landscape for where to go next. Florida’s mandatory vertical integration bypasses the need for a distributor.
- And New York? “Of course we’re looking at New York, but it’s not going to be ready for Herbl or any model soon.”