Long before he was CEO of one of the most successful cannabis companies and brands in the country, Robert McKinley got some advice that would stick with him, advice he would use to help make his product stand out among countless competitors.
“A very smart person told me that big brands are often attached to some kind of animal — like Budweiser and the horses or the frogs. It makes you think about them, it makes you remember them,” he says. “And everybody likes pandas.”
Good advice. Today Phat Panda is the No. 1 flower brand in Washington state, available in 460 of the approximately 500 cannabis retail stores across the Evergreen State. It’s likely the most successful privately owned cannabis producer in North America.
From its launch, Phat Panda and its parent company, Grow Op Farms, have seen growth at an incredible trajectory, rocketing to the top almost immediately on the back of a consistent product at a good price, smart and recognizable branding and a strategy that put the needs of retailers at the fore.
“We really treat our retailers as partners and try to make sure they have a wide variety; small quantity, but more variety. Instead of buying 100 eighths of one strain, we’d rather they buy 20 eighths of five strains,” McKinley says. “We’ve worked really, really hard at those kind of things to make our shelf space huge.”
In all, Grow Op Farms, the company that produces Phat Panda along with a handful of other flower, concentrate and edible brands, including Sticky Frog and Hot Sugar, is expected to generate more than $60 million in revenue this year, a jump of more than 30% from 2019’s $46 million haul.
“When we started out, we had no intention of being this big,” says chief operating officer Katrina McKinley, who handles the majority of the day-to-day managing of the facility and is “the Real Boss,” according to Robert. “It’s definitely been an adventure, for sure.”
In 2013, Robert and Katrina filed their application and in April 2014 were approved to begin construction of their then-16,000-square-foot facility in Spokane.
The company’s first product hit shelves in December 2014 and were an immediate hit with consumers and retailers. In June 2015, Grow Op Farms became the first cannabis producer in Washington to reach $1 million per month in sales.
“When you only have 16,000 square feet to start, it sounds like a lot until you don’t have any more,” Robert says. “Within three months we were running out of weed.”
The company’s staff also grew exponentially, from 15 employees to more than 100 within the first year. Today, Grow Op Farms has 620 employees and battles back and forth with Northwest Cannabis Solutions for the top revenue spot in the state. Originally launched as a flower company, Grow Op has expanded, maintaining its edge in that category and continuing to cut into its competitors’ lead in concentrates and edibles. Robert estimates that Phat Panda and the company’s other, value brands like Snicklefritz, account for about 12-14% of the flower sales in Washington and says that in total sales, his company leads “by quite a wide margin.”
Katrina and Robert both attribute the company’s success to smart hiring in the beginning and allowing people to grow into their roles. Five of the first 15 employees are now managers, running their own divisions within the company, a point of pride for the owners. Katrina calls it a “tight-knit family” who take pride in everything they do to help the company grow.
“We were lucky enough to find some really exceptional people,” Robert says.
But it was the popularity of the coco coir-grown flower that fueled the company’s rapid growth and expansion into other categories. In 2017, Grow Op Farms purchased the license of another grower in its building and took over the entire 85,000-square-foot space, ultimately building a two-story grow operation with a kitchen, lab and other work areas in addition to the 60,000 square feet of canopy. In total, Robert estimates the company has reinvested $25 million in its facility.
“I think we’re one of the only companies in the country that does everything from the start to the finish. We make our own distillate, we make our own dabbable products, we make our own candies and edibles,” Robert says. “Everything is made in house, which makes us more profitable.”
According to Robert, not being one of the first producers on the market actually worked in the company’s favor. He says that many of the growers in 2014 took advantage of high demand and low supply to make as much money as they could.
“But the retailers don’t forget,” he says.
“When we came into the market, we had a different vision,” he says. “We talked to our retail friends and we said, ‘What would be a price we could start out with that we could sell as much as possible?’”
Robert says the company felt it had a high-end product, but wanted its brand to be like Budweiser, “the brand for all the people.”
“We saw an opening there,” Katrina says.
Talking to retailers proved key, and the company settled on a wholesale price well below the competition. The company launched at $6 a gram, which was about $4 less than most competitors. When Washington’s price wars started to heat up, Phat Panda products dropped to about $4 per gram, wholesale, ticking up only slightly again this year, as the market stabilized and prices began to increase.
“Our strategy was geared toward the retailer because we wanted to make sure that we were providing a product that they could never keep on the shelf,” Robert says.
The company also made sure to invest in a good sales team from the start, hiring five people to travel the state, including three on the Seattle side of the mountains, despite the farm being located about 280 miles east. It was also headed by manager John Wilson, who had previous experience with Nestle and PepsiCo, experience the McKinleys leaned on to help create an ordering platform to help retailers maintain their stock of Phat Panda products.
“He had a really good understanding of how commercial retail sales from a wholesale level really work,” Robert says.
Retailers have noticed the company’s high level of professionalism. According to Ian Eisenberg, owner of the Seattle-based Uncle Ike’s chain of retail stores, Grow Op’s “first-class business practices,” as well as “top-quality product” set the company apart from others in the market’s early days.
“Deliveries are on time, COAs are attached and invoices are correct,” Eisenberg said in an email to Marijuana Venture. “These details make a huge difference for retailers.”
While the sales strategy was geared at retailers, the branding was aimed squarely at the consumer.
It’s now the most recognizable brand in Washington, but originally, “Phat Panda” was the name of the McKinley’s pre-cannabis marketing company. But as the company looked to brand its own flower for the marketplace, Robert’s thoughts turned back to the advice he had gotten earlier, as well as feedback from his wife and others.
“Katrina and some of the employees were like ‘We really like the name Phat Panda and you should use that as the name of the flower,’” he says.
Phat Panda also packaged its product in distinctive glass jars with strain-specific artwork that made the flower stand out. The jars became something of a collector’s item, causing other producers throughout the industry to begin using more glass jars to keep up.
“When you walk in and see the display, it really draws your eye,” says Katrina, who helps design each of the labels, sometimes walking a tightrope because of the state’s regulations on marketing (Phat Panda has already won an appeal against the Liquor and Cannabis Board, which was concerned the panda imagery might draw the eyes of kids). “In the early days we just wanted to get our name out there.”
“This is one thing that’s really important to us: how our brand is perceived. We’re hip, we’re on the edge. People collect our labels,” Robert says, adding, “And having a lot of different strains also provides us with a lot of creative outlets, along with a lot of shelf space, and rotating shelf space.”
Eisenberg also says that Phat Panda was the first company to understand the importance of branding, creating a look that is not only hip to younger buyers, but appeals to older customers looking to get back into the market.
“The Phat Panda products have been a staple in our stores for years. Customers ask for them by name because of their quality and branding,” he says. “Their following is very solid and is made up of a wide variety of demographics.”
Both Katrina and Robert also point to the company’s consistency of product and variety of strains as being a key to meeting consumer expectations. The company keeps 60-80 different strains growing at any given time, including its popular Golden Pineapple and OG Chem lines, and has a total of about 500 different cultivars in its genetic library. Robert believes the company grows more cannabis per square foot than any other company in the country.
“We’re really, really efficient, and we’re really good at growing consistently and having the product be the same all the time,” he says. “We average about 250-300 pounds of trimmed flower per week that we sell, packaged in jars.”
But Grow Op is also quick to shift gears if a crop or product does not turn out as hoped. If, after a harvest, the flower does not meet standards, it gets used for oil instead of being packaged for sale. And cultivars that don’t sell get left behind as well.
“If we have something that’s great, we keep it. If we have something that sucks, it goes to the garbage, and quickly,” Robert says.
TOMORROW THE WORLD
Though Robert and Katrina are keeping their eyes on the ball in Washington, Grow Op Farms and Phat Panda have already begun to take the next step to becoming a multi-state operator and a brand with national potential, obtaining licenses in Massachusetts and California, with plans for a vertically integrated company in both states.
Already, Katrina says the company sells branded merchandise across the world.
“I stop and think every time I see (orders) coming from the East Coast or out of the country: how do they know about this brand? Is it really that big?” she says with a laugh. “It still doesn’t even seem real.”
Katrina says she hopes Phat Panda could be a national brand, but it all depends on the quality of the product, which she says is the true key to bringing customers back, no matter the price, something they learned early and hold close to this day.
“If you can stay in the middle ground and offer a top-quality product, then yeah,” she says of the company’s ability to become a major player in the national market. “Again, you’ve got be in that good price point too, or else you are appealing to a smaller market.”
But the long-term goal for the Phat Panda brand and its distinctive animal logo is to be a Budweiser or Pepsi, with “bottlers” in every state.
“I don’t want to own grows in every state,” Robert says. “The end goal is to primarily be a licensing company that manages strategic markets.”