THE TRANSFORMATION OF PAX

Leading the cannabis industry forward

For well-established global brands, a key to ongoing success is an emphasis on innovative product development that builds upon a company’s strengths. And such strengths can be compounded by extending a company’s brand recognition into new areas. Last year, PAX started doing just that—and the process has been transformative.

Long recognized for its vaporizers dating back about a decade, PAX’s business mission is to bring exceptional experiences to cannabis consumers everywhere. And last year was really the first concerted effort of designing not only the hardware, but also the actual consumable product itself, so that they are designed to work together in perfect harmony.

“It’s a very exciting time for us,” Steven Jung, chief operating officer, told Cannabis Inc. Magazine on a recent Zoom call. “We’re now one year into a new chapter for the company and also for PAX as a brand.”

Jung elaborated: “What we saw leading up to 2022 was a clear need and a desire by consumers that loved PAX — but also broadly within the cannabis space — to have the marriage of incredibly high-quality devices with incredibly highquality and innovative cannabis products.”

He added: “And those two things, when designed for one another perfectly, is a massive opportunity in the space because nobody else is doing that.”

Jung, who joined PAX in late 2021 after serving as Weedmaps’ president and COO, recalled that a year ago the company had zero cannabis products and had not refreshed its own devices and technology for several years.

By late 2022, much had changed. “We launched four THC products between the vapor line and the flower line. We launched a very innovative product -- the first of its kind in the flower space [infused flower with solventless hash],” Jung said. “And, in addition to that, we also launched four brand new pieces of hardware last year between the PAX devices, which are our flower vaporizer line, and then the Era device, which is our oil vaporizer line.”

PAX also launched a 1G pod, which Jung described as “an incredible step forward for us as a company, and also generally the trend where the format’s going for cannabis consumers broadly in the space.”

Jung, in fact, is a graduate of the United States Military Academy at West Point and started his career as a U.S. Army Captain.

“PAX having a veteran in our C-Suite, is pretty rare across the cannabis industry,” Laura Fogelman, VP Communications & Public Affairs, said on the same Zoom call. “But it’s really important given the veteran population’s need to have access to cannabis as medicine as an alternative to some of the more harmful drugs that may be made available.”

“When we think about our mission to deliver exceptional cannabis experiences to people, and promoting health and wellness, all of these things come together,” added Jung. “And this year we are setting out to go much deeper.”

The transformation of PAX

About a decade ago, Lauryn Livengood, now senior director of brand marketing at PAX was the 16th person hired by PAX. Today, the company’s number of employees is about 150.

“Ten years ago, the cannabis industry was a completely different world,” Livengood told Cannabis Inc Magazine. “We had this one product, and nobody even knew what a vaporizer was,” she recalled.

Vaporizer was not even a word at that point in the lexicon. “So, just the idea of having something that was this beautiful, magical little thing that you could put in your pocket and actually use for cannabis was a concept that hadn’t quite yet clicked with consumers,” she recalled.

In the early days of PAX, according to Livengood, the biggest challenge was just explaining to people what the product was and what it was for. So, around 2014-2015 PAX intensely focused

INC. MAGAZINE. “WE’RE NOW ONE YEAR INTO A NEW CHAPTER FOR THE COMPANY AND ALSO FOR PAX AS A BRAND.” on consumer insights by conducting quantitative surveys and consumer focus groups.

“With that, we really started getting a much deeper insightful understanding of the cannabis consumer,” Livengood said. “And what we realized was the cannabis consumer is just like us. They were not some secret sect of people. They were not druggies, and they weren’t out, loud and proud stoners.”

There were some facets of such groups, but by and large, PAX learned that the typical cannabis consumer was just like everyone else. And the people they met were using cannabis for a wide variety of reasons.

“And one of the really interesting parts about what we were learning was that you can be a 65-70 year-old veteran and have the same consumption patterns as a 26-year-old woman living in LA,” Livengood noted. “So from a marketing lens, it was really hard for us to kind of pick a lane as far as using people in our imagery and tailoring certain language. So, what we did was we leaned into the product—and that was a magic moment for us.”

Magic, because by leaning into the product and approaching branding from a design lens, PAX avoided any polarization of the groups in the cannabis space. “It made great sense in 2015 because we only had the one product and people were anxious to learn about what it was and what it could do for them,” Livengood said.

From that first vaporizer product, PAX products can now be found in more than 40 U.S. markets and more than 40 countries around the world.

“That’s something no other cannabis brand can say,” Jung added, “and it is just one major signal that gives a sense of how big the opportunity is for PAX as a branded product.”

Leading by example

Heading up all new product innovation across PAX’s hardware and consumables businesses is Chicago-native Brian Witlin, VP of Product Development, who joined the company just over a year ago. Witlin is an award-winning designer with more than 15 years of experience developing, launching and scaling digital and physical products. He holds 10 utility patents, is a classically trained fine artist who leverages AI in his work— and he’s a DJ and also practices Jiu Jitsu.

“We’re looking at PAX as being a long-game type company,” Witlin said, “Not only are we trying to meet the standards of the future, but in many ways, we’re trying to be an example in the industry. That’s really a role we think we can play to help move the entire industry forward.”

Witlin also acknowledges the PAX legacy and how its initial vaporizer was developed originally around finding an alternate way to consume cannabis -- as a safer alternative to just burning it.

“But as we’ve grown, we’ve taken a more user-centered approach and the more opportunities that we can design and develop products that meet the needs of consumers, the better,” he said.

Witlin added: “We were somewhat limited just being a hardware company with other people’s consumables. So, the next logical step was we launched our Era system, which we were able to control a bit more.” The Era system consists of a device and a pod and PAX designed the pods. Multiple iterations and working with partners have led to continuous improvement in terms of quality, safety and more.

Over the last year, that’s been taken another step further.

“In addition to some of those partnerships, we’ve thought about how can we create formulations for these devices that work incredibly well,” Witlin said. “And that’s why we’ve launched several lines of our own oils that span the California, Colorado, Massachusetts, and Ontario-Canada markets.”

Most recently, PAX has been playing around in the flower space, according to Witlin. “And we’ve developed the first of its kind--we’re calling them infused flower pucks--essentially blending the highest quality hash with flower.”

The blends are compressed into a puck shape. “So it’s very easy for people to consume really high quality cannabis without all the mess and complication,” he said.

“And we’re not stopping there,” Witlin stressed. “We’re not limiting ourselves to thinking about one particular category for cannabis. We’re trying to explore all the different possibilities for cannabis consumption and where we can be innovative.”

He pledged: “And this year will be a consistent drumbeat of new releases of things that will be brand new to the world -- or will be formulations that are of higher quality or increasing the health and safety of products for the consumer.”

Witlin points out that PAX is one of the few teams that has toxicologists, pharmacologists, biochemists who are cannabis lovers. “When you have people like that on your team, it’s a really great cross-functional team that allows us to be incredibly innovative and truly be consumer-first,” he said.

He said PAX will continue to push the envelope as a leader in the hardware space as well. “We see opportunities this year where we’ll be launching additional devices that will be meeting the needs of the more sophisticated consumer,” Witlin previewed. “In many ways the original product was ahead of its time as a vaporizer in terms of portability, safety, consistency and other attributes, so we’re building on top of that to kind of invent the future.”

In fact, Witlin is quick to add that PAX has received several accolades from outside of the immediate industry. PAX has been recognized as Fast Company Brands that Matter, mg Magazine Best Place to Work in Cannabis, New York Times Wirecutter Best Portable Vaporizer, and High Times Cannabis Cup People’s Choice Award for one of its oils.

“People really love the products we’re developing,” Witlin beamed. “We also have a constant ear back into the market; it’s not like we’re siloed into many different organizations. We work super collaboratively, so our product team’s out there in the field.”

Challenges and opportunity

Jung notes that as of today, there are 37 legal states of which 21 are adult-use recreational, pegging total retail revenue estimates somewhere between $25 billion to $30 billion. In the next three to five years, that top line could be north of $50 billion—and that only accounts for the legal license market.

Nonetheless, he acknowledges several challenges and headwinds now confronting the industry. One of the biggest issues centers on taxation, according to Jung.

“Hand-in-hand with cannabis legalization are the taxes [levied by states],” he said. “I think we have to allow the industry to flourish and grow. And with the level of taxation that occurs, it actually ends up artificially constraining the amount of business that can be done.”

Jung says burdensome taxes can have a very adverse effect on the legal cannabis market because the cost of access for consumers can become so prohibitive that they then return to the illicit market. “There is a very clear connection between that tax rate and how much of the illicit market continues to thrive,” he said.

Another hurdle is compliance and regulatory demands, which typically differ from state-to-state. The way licenses are issued is a prime example as that can vary widely.

“If you can standardize and simplify some of these regulatory requirements,” Jung noted, “It would allow for operators to come in and quickly set up shop, create a business that follows the rules, but then also is able to raise enough money very quickly to do good in the communities on a consistent and long-term basis.”

Overall, the future is still bright for the industry, in Jung’s eyes.

“What you see is consistent growth,” he emphasized. “And when you go back several years, you’re still looking at 12% CAGR (compound annual growth rates) overall.”

Jung said: “It is still incredibly early, and I think we as a company and as brand are placed perfectly to win within it.”

For more information, visit www.Pax.com