Why it’s high time to jump into the cannabis market
At a time when almost every retailer is closed to the public on government order, or, and even more concerning, have shuttered doors for good due to the global pandemic, launching a new cannabis retailer in 2021 may seem ill-advised.
On the contrary, I believe the time is now. I believe wholeheartedly in this sector, and feel we have barely scratched the surface of the cannabis consumer experience, and have yet to explore the breadth and potential of cannabis products.
The cannabis market is still in its infancy, and poised for solid growth in 2021.
And it’s not just me that sees the potential: Interestingly, the most obvious interest group to oppose cannabis proliferation is literally investing in the success of the space: major players like Molson Coors, AB Inbev, and Constellation can’t move fast enough to get cannabis-filled beverages to the marketplace.
These organizations know that as consumers become more enlightened about the impacts of sugar and alcohol, demand for alternative drinks derived from cannabis will only increase, and these beverage giants are financing substantial innovation to meet this need. If you can’t beat' em, join ‘em comes to mind.
History Repeating Itself
As we know, the cannabis industry has increasingly gained traction since being legalized in Canada, and is seemingly on its way to being decriminalized south of the border. In the same way alcohol was regulated during its prohibition, if cannabis is decriminalized in the US, it would be federally legal to consume for personal use, but illegal to make, sell, or transport.
It may come as a surprise to some that the decision to repeal alcohol prohibition was not led just by the people, or their desire to drink, but was also impacted by the economy; The Great Depression required a creative solution to spark the economy and generate tax revenue. It’ll be interesting to see if cannabis legalization is used in the same way to overcome government debt and joblessness created by the Covid-19 pandemic.
Based on the incredible run cannabis stocks have been on the past few weeks, it seems a lot of folks are betting that it will. Regardless of what happens in the US, I couldn’t be more excited about the cannabis industry in Canada in 2021.
We hear all the time that, following the lift of alcohol prohibition, that market took 12-18 years to hit “maturity”, meaning the end consumer was met with a product that they desired and enjoyed, not just whatever liquid could be distilled discreetly in the back shed.
At the start of our third year of recreational cannabis legalization in Canada, we’re seeing these same improvements getting us closer to normalization, and product perfection.
By the numbers
When I first started in the cannabis industry, the excitement within the sector far outpaced any tangible consumer insights or data – cannabis may have been legal, but no one wanted to talk about it. There was no precedent in the market and the legal states in the US were still gaining their footing. In 2018 most of the consumer-level data in Canada was derived from one single Caddle survey that had been completed a couple months prior, in an environment where it was tough to get people to admit to consuming cannabis.
A lot of those early days planning and strategy sessions were bolstered by data from alcohol, coffee, grocery, and general retail trends in an attempt to fill in the gaps. Work with what you have was our mantra.
The difference now in 2021, as we work on creating our cannabis retail brand, is that within a week Caddle can complete a detailed, statistically significant survey of our target market, determining where this group shops, how often they exercise, what they do to relax, who they turn to for nutritional advice, and how often they gather to socialize (pre Covid). With this information, we can speak the language that our target consumer is speaking and we can work to better fulfill their needs.
The huge strides that were made, and continue to be made, in obtaining consumer insights will accelerate at an exponential pace this year giving way to exceedingly better retail experiences and product offerings.
I’ll cheers to that
“Let’s grab a drink!” How many times (outside of a pandemic), was this line, or something similar, part of our standard repertoire as a way to catch up with a colleague, friend, or acquaintance? Now more than ever before, drinks have become synonymous with social gatherings.
Coffee consumption in Canada has increased 14% over the past decade and is on a trend to continue a similar pattern.
When asked, almost three-quarters of Canadians will confirm they’ve consumed coffee in the last 24 hours. In digging into the Caddle data, we see that women between the ages of 24 and 40 are even more likely than average to have consumed a caffeinated beverage today: 84% drink at least one caffeinated beverage daily, with 52% drinking at least two per day.
Meanwhile, when reviewing pre-Covid interactions, 68% of this same group reported gathering with friends and colleagues for beverages at minimum every two weeks, most weekly or more.
Beverages: coffees, teas, sparkling waters, beers, wines, spirits… they’re ingrained in us as a central element of our social interactions. Now, what’s important to remember is that not every social interaction requires 12 of any of those beverages - drinks need to be ‘sessionable’ and don’t require high levels of intoxication to be enjoyable.
Early on, the illicit drug market generated beverages with high levels of THC for the same reason moonshine had high alcohol content: efficiency of production and distribution. While it’s still possible to buy moonshine in Canada, StatsCan will tell you that Canadians prefer something a little lighter, and that >40% of legal sales of alcohol are for beer - the category with lowest average alcohol content. The end consumer wants to enjoy a beverage and still be able to walk the dog, wash the car, chat with friends - plus, maybe they want to have a second beverage!?
As a society, we’ve never been more image conscious and health conscious than we are today, and with that it comes as no surprise that the non-alcoholic beverage market is gaining so much momentum. From Instagram posts to inclusion in Vogue’s Drinks for a Dry January round up, THC and CBD-infused waters are seemingly everywhere.
As we see more low THC cannabis beverages roll onto the legal market, with improved flavour profiles and the consistent low-calorie content, the industry is delivering more products that fit with consumer wants and needs. This category quickly grabbed a couple percent of the market by the end of 2020, with only a limited variety of options available, so more offerings fitting specific consumer desires will only propel its growth for years to come.
Retailers: Same same, but different
If I’m on the road and yearning for caffeine, I stop at Tim Hortons, since they’re conveniently located every few kilometres and serve up a coffee that hits my minimum standard, at a price I appreciate, with service times/methods that fit my schedule. Is there better coffee available on the market? Yes. But what I value in a coffee shop offering is what they deliver. Others may place increased value on the flavour of their coffee, thus maybe they’ll stop at a Starbucks. Neither scenario is wrong. But both of these brands understanding what their target markets’ values are is important to their longevity.
If either shop tried to be all things to all consumers, they would leave the door open for a new coffee chain to swoop in and serve the needs of a specific segment, pulling that segment away from Tims or Starbucks.
During prohibition, Walgreens perfected its supply chain and service model to fit consumer needs for “medical alcohol”. Leveraging its expertise and customer service approach, the Walgreens store network expanded from 20 to a whopping 500 operating stores in the span of 10 years. Walgreens understood what their customers wanted and how they wanted it.
Thus, those taking the opportunity to learn from others already in the market have an advantage as we roll into 2021. Retailers who focus on specific segments are going to gain long term affinity from the segments they properly serve - this major shift will commence over the next 12 months and will see some stores opt to adapt or close, but the change will be best for the overall market.
2021 is going to be a great year because we’re going to better understand the various segments of the cannabis markets and be able to better serve the market with products consumers want and services that fit their needs. Continuing to learn from the market and continually improving allows us to work closer to a “mature”, more normalized market.