By Arundati Dandapani
Cannabis brands rose in the pandemic, capitalizing on e-tail, education, equity, and experience to prove their resilience again as an essential legal business and industry.
Cannabis Consumption Surges
The pandemic might be old news by now as governments, businesses, and individuals chart our paths to recovery, in varying stages of lockdown, and re-opening measures start to roll out. However, cannabis was among the first industries that was able to, in retrospect, “embrace” the new normal. The combined legal and illegal market of cannabis in Canada is valued at $8 billion based on an average monthly consumer spend of $107, of which well under $2 billion is the legal market’s worth, representing in weight about only 25% of the total cannabis in the current Canadian marketplace. This is based on varied estimates and market projections from Vividata’s National Cannabis Consumer Study 2019.
Cannabis, as a consumer goods category, experienced a surge in the consumer share of wallet throughout COVID-19, deeming the business an essential service, barely three years into legalization in Canada. The pandemic offered an opportunity to see how this industry quickly rose as an essential service, offering not just relief to the several who needed to manage their anxiety, pain, and umbrella ailments, but also offering more jobs than any other sector, especially in retail and deliveries. Another pandemic breakthrough happened when the Business Development Bank of Canada began offering loans and emergency funding to cannabis initiatives for a sector that, prior to the pandemic, refused to “touch the plant”. The rise of virtual e-learning from cannabis brands hosting their first ever “virtual 4-20” celebrations online, heralded a new type of necessity in the post-legalization lexicon moving beyond propriety and into widespread social learning.
Cannabis and alcohol (mass market alcoholic drinks, not premium-priced drinks) sales rose in Canada, according to Statistics Canada. There were spikes and lows spread across the provinces unevenly. New cannabis brands in the country took the opportunity to realize the immense potential in leveraging an entirely digital and virtual consumer base with pre-existing shipping, delivery, transportation, and logistical infrastructures in place to meet the growing demands of self-isolating consumers.
Legal Cannabis Retail Relies on the Digital Supply Chain
In the first year of legalization, Canadian cannabis consumers secured 53% of their cannabis through legal sources, and 38% from the illicit market. The main source of legal cannabis for current users was physical retail (frequented by 55% of Canadian users) in the first year of legalization. Digital retail was a close second source with 46% of consumers obtaining legal cannabis electronically. This pointed to new opportunities and challenges as companies worked within regulations to create portals that facilitated and drove cannabis e-commerce.
The pandemic saw a growing use of electronic retail platforms with the OCS in Ontario setting the model by waiving off shipping fees and lowering their prices to compete at parity with the illicit market. Companies capitalized on free e-learning resources, and the rise in e-conferences also opened up numerous forums to introduce educational opportunities for cannabis consumers. After all, 1 in 4 non-users report willingness to use cannabis should they receive more access to education.
Cannabis users index higher on their use of social media, mobile, apps, and technology with the average number of mobile apps being used daily by current cannabis users being 4, and over half of current cannabis users (52%) having used mobile apps yesterday, and three-quarters reporting mobile-app use in the past month according to Vividata. This points to areas of opportunity sometimes tagged “Cannabis 3.0” or cannabis e-commerce that could tap into virtual and hologram budtenders, leveraging virtual reality, augmented technology, and ancillary industries like blockchain (to store secure information on the use and effects of cannabis on varied users), AI (to offer recommendations based on consumers’ past preferences), and the internet of things (to offer intuitive location-based sensory intelligence services to retailers or dispensaries). Moreover, users look to media outlets, websites, and internet searches as the top trusted sources of information on cannabis, so the onus falls not just on media outlet owners but also on investors in media to facilitate new business models that field the best information to deserving audiences.
There are persisting challenges in physical retail and what the next normal will look like will depend largely on the continued resilience of industry. Cannabis, already recognized for being a top source for hiring through the pandemic, maintained a steady social reputation through the crisis with employee-care, communications, lobbying with governments, electronic/curbside delivery and pick-up retail models, all this despite tumults with access (product supply matching demand), experience, and safety, as more consumers struggle with understanding the complexity and multiple facets of a vibrant and inclusive industry that is predicted to bring in about $8 billion through legal channels alone by 2025 according to various market estimates including Vividata’s. Consumers already patronized digital retail in cannabis but the pandemic offered a new surge in e-tail, as stores innovated with click-and-collect and online deliveries. During the pandemic 43% of Canadian consumers planned to switch to e-commerce habits like click and collect and online deliveries. Post-COVID-19, stores re-opened quickly, and new ones opened up as well, leveraging best practices in physical/social distancing to offer consumers safe walk-in environments.
Society’s Growing Palate: Eating, Drinking, and Vaping
Among the top users of cannabis, it is the growth in the health and wellness cannabis user from pre-legalization to post-legalization that has seen the most increase from 32% of Canadian cannabis users in Q1 2018 to 41% in Q1 2019 according to Vividata’s Cannabis studies. The health and wellness market currently valued at about $4.3 billion annually is reflective of the growing adoption of use among Zoomers (adults over 45 years of age) and seniors who prefer to use natural products that are health and wellness cannabis remedies over medications with side-effects. Moreover, just under a third of all Canadian adults report having positive brand perceptions of established health and wellness brands that launch a product containing cannabis.
The social acceptability of cannabis consumption has grown and positively eclipsed that of tobacco consumption according to Vividata’s National Cannabis Study, with about just under a half (46%) of all Canadians perceiving cannabis consumption to be acceptable. However, a majority of Canadians (82%) think it is still acceptable to consume alcohol, so the question about whether or when a cannabis normal will overtake the alcohol normal might take a matter of time spanning a generational shift or two of creativity, education, and compliant marketing. Cannabis beverages interest more potential consumers (12%) than current consumers (2%), and similar preferences are noted among potential users (versus current) of edibles, concentrates, and topicals. It is worth noting here that the ratio of current users to potential consumers of topicals is 1:4! This trend is only reversed with vapes, where there are more current users than those who indicate potential use. It is safe to surmise then that product innovation combined with educational initiatives leads to more normalization. Canadians across all age groups already agree in the unwavering majority about the importance of cannabis brands to educate on the uses and effects of their products, having gained most of their information about cannabis through websites, internet searches, and cannabis users.
With just under three-fourths (70%) of Canadian consumers not sure they know the difference between THC and CBD, there is a clear opportunity for brands to step up and eliminate confusion about product, legal awareness, and responsible use of cannabis. At the minimum, legal cannabis products have an excise stamp on the package, carry the standardized cannabis symbol, and mandatory health warnings that provide information on risks; such critical information needs to be communicated to consumers clearly and regularly.
Successful cannabis retail will continue to push beyond the bottlenecks, innovating with e-tail, education, and customer experience to thrive. Customer experience encompasses a deep understanding of industry nuances and efforts across the supply chain to not just deliver superior products (the top criterion for Canada’s consumers when purchasing cannabis remains quality followed by form) and services but also advance social equity conversations and movements (from the hypothesized and anticipated US federalization of cannabis, to the UN’s de-scheduling the drug, to expungement of criminal records for possession, to creation of proper pathways from legacy and gray markets into the legal markets, as well as growing the representation of diversity on boards and across the sector) to enrich the canvas of cannabis with better brands at the helm, shattering old “stoner” images of consumers to normalize legal products, services and users associated with the cultivation, creation, distribution, and sale of the plant in all forms.
Arundati Dandapani advises non-profits and businesses with data storytelling at the intersection of cannabis, media and marketing (or social) research. A well-published research professional, she is the Founder of Generation1.ca, an online cross-sectoral resource and outlet for Canada’s newest residents. She has been honoured with notable industry awards, is involved with multiple industry associations, and is the Chief Editor of Canada’s MRIA-ARIM. She can be reached at arundati@generation1.ca.
