5 Ways Quarantine Has Changed the Cannabis Industry Forever
Covid-19 lockdown sparks a ‘green rush,’ changing how consumers shop
Key insights:
Stuck in quarantine for weeks on end and hoarding necessities, consumers have made their Covid-19 buying preferences extremely clear: toilet paper, frozen pizza, jigsaw puzzles and hand sanitizer.
For certain consumers, cannabis—once likely considered a discretionary purchase—has also been added to that list, fueling an unprecedented green rush with record-breaking sales since lockdown went into force in March.
“Stocking up is the new norm,” said Roy Bingham, co-founder and CEO of analytics firm BDSA, with Brightfield Group finding that 57% of cannabis consumers say they have already stocked up, or plan to do just that.
Though the surge is welcome news for the industry, it doesn’t solve some of cannabis’ endemic problems. Heavily taxed but still federally illegal, weed businesses aren’t currently receiving any government-backed bailouts or pay protection in the small business stimulus package (though lobbyists and a few legislators are trying to change that for future rounds of pandemic relief).
Many are also cash-strapped, having no access to bank loans while venture capital has dried up, and continue to be locked in heated battle with both their above-board competitors and dealers who continue selling illicitly.
Yet cannabis brands are finding reasons to be optimistic. Virtual events were big hits on 4/20, driving sales and building community, and major players in the industry are sharing lessons they’ve learned so far during the Covid-19 crisis.
Here five key takeaways:
Cannabis shopping has likely been changed forever
The first major hurdle of the Covid-19 pandemic was securing “essential business” designation, which happened in the majority of the 33 states where cannabis sales are legal for medical patients and some of the 11 adult-use markets. The move, which put dispensaries on par with supermarkets and pharmacies, was groundbreaking, industry insiders say.
But doing business during Covid-19 posed major challenges, namely the need to shift from traditional brick-and-mortar to online shopping, curbside pickup and contactless delivery.
Though they’ve had to navigate a patchwork of rules that vary by geography, many cannabis retailers pivoted quickly to meet local, county and state guidelines. Some have been required to switch to delivery-only, for instance, while some got clearance for the first time for curbside pickup and drive-thru. Others were given permission to keep their physical doors open if they followed strict cleaning and social distancing protocols.
Having now experienced what are often more convenient purchase options, consumers might never return to their pre-crisis cannabis shopping habits.
A poll from Ganja Goddess found 67% of respondents used delivery services pre-pandemic, rising to 84% after the start of lockdown. Meanwhile, a Brightfield Group study has showed that 34% ofcannabis consumers plan to switch to some form of “click and collect” in the future. The number is markedly higher for millennials at 42%.
Online marketplace Jane Technologies reported 85,000 new registered users and a 142% boost in online orders in March (that number shot up to a 216% increase on April 20). Execs at the platform, sometimes referred to as “the Amazon of cannabis,” think this is the new normal.
“As a consumer, you don’t have to wait in line anymore,” CEO Socrates Rosenfeld said. “And as a small business, you can digitize the experience, offer that convenience and curation, and understand your consumer on a more meaningful level.”
Rosenfeld predicts that online shopping will rise from 30% of total category spending pre-quarantine to 80% in the next year, “serving as an incubator for what the future will hold” across a number of industries.
Diverse edibles and infused beverages are ready to go mainstream
Edibles and THC-infused beverages are having a moment, far sooner than industry experts had predicted, as consumers leaned toward alternatives to smoking.
Weed-laced dark chocolate, gummy candy and spiked wine occupied relatively little shelf space and captured a minuscule 1% market share, by most estimates, in the pre-pandemic world. But those numbers have ballooned recently.
“Edibles stole the show,” according to a new study from research firm Headset, with delivery platform Eaze reporting a 28% bump in the category in California alone, and BDSA recording 70% growth in sales of ingestibles in late March in Colorado.
“We thought it would take two to five years before infused beverages really caught on,” said Cynthia Salarizadeh, founder and president of House of Saka, a premium infused wine brand. “But it’s happening right now. They’re taking up at least 25% of dispensary space. And we’ll just see this accelerate.”
The products themselves have also improved—Salarizadeh said some early entrants “tasted like swamp water”—as consumers become more discerning. Green Horizons’ research points out that today’s “Chardonnay mom” and “Equinox dad” don’t want old-school pot brownies, but instead are looking for healthier alternatives and sugar-free, non-GMO, organic goodies. The current product wave fits that bill.
Marketers like Salarizadeh are predictably thrilled with the uptick, though they’re scrambling on the back end to expand their infrastructure and manufacturing to keep up with demand. They’re also educating delivery services that are more accustomed to small packaged goods and less experienced with fragile glass bottles.
The category has already had a boost in Canada, with the first weed-infused products debuting in the market from booze conglomerate Constellation Brands and its partner Canopy Growth. Constellation’s CEO Bill Newland recently called the flavored beverages “game changers,” and announced plans for spiked seltzer waters and other mixers coming soon.
And in another toe-in-the-water move north of the border, drinks giant Anheuser-Busch InBev, with cannabis player Tilray, has introduced teas and sparkling THC-centric beverages.
Execs from both alliances report strong consumer response so far. Could a U.S. launch be far behind?
No longer niche, 4/20 is a landmark annual event
The April 20 high holiday (pun intended) may have deep roots in the Grateful Dead music culture and its originators’ high school smoke-outs in San Rafael in the 1970s, but 4/20 has graduated.
It’s now a full-fledged consumer event, with online shopping and delivery companies in California enjoying triple-digit growth. Ganja Goddess reported a 275% revenue increase this year over 2019 and a 346% jump in orders. Glass House Group, a dispensary chain and vertically integrated weed giant, saw a 300% boost in both retail and delivery sales, marking its highest sales day ever.
Nationally, Jane Technologies logged a 68% sales jump from its 1,500 dispensaries, and cannabis platform Springbig reported $18.7 million in sales, a 95% leap from the prior Monday.
The faithful, no doubt, have continued to salute this spring day in droves. But industry sources say there are plenty of newbies and canna-curious among the buyers these days, as evidenced by the noteworthy spikes in edibles and beverages, which Driven Deliveries calls “an indicator of an older and less experienced user base.”
Oasis Intelligence, diving into the trend even further, found that parents are embracing cannabis in growing numbers. Moms, in fact, have turned to cannabis at nearly double the rate of other groups, with Oasis co-founder Laura Albers interpreting that data to mean that long-held stigma is “truly receding.”
“Women are generally on the receiving end of more usage-shaming than men,” she said, “and what we are seeing today is women, and more specifically moms, engaging in more self-care with cannabis during this quarantine time.”
It helps that popular sentiment around the country, among cannabis fans and the general public, is leaning toward acceptance, she noted.
Cannabis value brands are taking the stage
An economic downturn, complete with devastating levels of unemployment, will mean far less impulse buying and experimentation, according to insiders. But Rosenfeld believes consumers “will go with their tried and true.”
That may or may not revolve around celebrity-backed brands, but products from rapper-ganjapreneur Snoop Dogg and those licensed by late singer Bob Marley’s estate are among the most recognized in the space. Famous faces, if backed by well-reviewed products, can cut through the clutter.
The current financial situation may also prompt cannabis brands to introduce discounts and more modestly priced lines, which are already in the works for a number of cannabis companies. More aggressive price offers may yet become the new reality, given that 37% of consumers surveyed by AmericanMarijuana.org fear they won’t be able to afford cannabis.
In fact, “trading down” has already fueled market growth, according to BDSA, which notes that products under $20 have been major sellers in Oregon, California and Colorado.
The Santa Barbara-based Canndescent launched its value brand, Baker’s Cannabis Co., 90 days earlier than initially planned after spotting an opportunity in this distressed landscape, marketing it as “the super affordable and supportive friend of consumers and dispensaries alike, providing dispensaries a critical new asset to help retain consumers who might otherwise have switched to the black market.”
Sources predict the glut at the top end of the market, where lots of luxury cannabis brands have been crowded together for the past several years, are likely to thin out in the long term in favor of mid-tier and lower price-point products.
Cannabis is now a driving force in content and events
Laura Albers from Oasis believes it is vital for brands in the industry to find new, and specifically virtual, ways to connect with consumers. “Cannabis has long been known for its sharing and communal practices,” she said. “Finding platforms online to engage is more important than ever.”
And there is evidence across the board that brands are really tapping into this in a big way. April 20 wasn’t just a party—it was a proving ground for original content, virtual events and digital activations. And the results are solid, according to industry experts including Weedmaps, which said it drew an audience of 300,000 viewers to its Higher Together: Sessions From Home.
The five-hour livestream with performances from Wiz Khalifa, Billy Ray Cyrus, Berner and other artists, garnered 2.3 million earned media impressions and snagged 20,000 new followers for the delivery platform. Weedmaps logged five times the number of orders on 4/20 from the previous year, with 3,000 of those coming directly from people watching the entertainment.
Meanwhile, Chronic Relief, patterned after the classic Jerry Lewis telethons, raised money for Feeding America and reached 26,000 viewers. Whoopi Goldberg, Tommy Chong, Ricky Williams and other well known weed-friendly stars took part, with overall combined impressions nearing 88,000, according to Seattle-based organizers Farechild.
Alongside those virtual events, which benefited nonprofits like Last Prisoner Project, brands and dispensaries are stepping up their content game, developing it as an important lynchpin of their marketing strategy and a way to speak to consumers authentically in a highly regulated ad environment. Many are launching webisodes, Zoom calls and Google hangouts with their budtenders and influencers to keep in touch with fans.
Malibu dispensary 99 High Tide, for example, has hosted yoga, meditation and live music via Instagram, while updating its website with daily videos and debuting a podcast. The shop, a one-of-a-kind business in the tony seaside town, will premiere a weekly live series with entertainment, product demos and tutorials starting in June, tying in with its conservation advocacy.
“Original content will be a huge driver for cannabis advertising,” CMO Sam Boyer said. “It’s definitely more engaging at a time when people are looking for information and want to hear about health and wellness. The authentic voices will really stand out.”