Cannabis soon to become largest new CPG category

Originally featured in Retail Leader
By Rich Maturo
CPG categories are poised for disruption as cannabis comes out of the shadows.

Regardless of whether you are for or against legalization, adult adoption of cannabis has arrived at an inflection point with huge implications for the retail and CPG world. More than half of the U.S. adult population has consumed cannabis at some point in their lives and in the established recreational markets of Colorado, Washington, and Oregon, roughly one third of adults legally purchased cannabis during the past year. Perhaps most noteworthy is studies showing that nearly 100 million U.S. adults would consider using cannabis if it were legal. Current and potential consumers defy traditional stereotypes, transcending generations and socioeconomic status.

With recent legalization in California, Nevada, Massachusetts, and Maine, more than 1 in 5 U.S. adults now reside in a state where recreational use of cannabis is legal. This represents a 300% increase from 2016, and means more than 35 million adults can legally consume cannabis. In Colorado, there are more cannabis dispensaries than Subway and McDonald’s restaurants combined. In Washington, there are more dispensaries than 7-Elevens; and in California, there are more than 2,000 medicinal dispensaries preparing for the recreational marketplace to be established. In 2017, there are more than a dozen states considering legalizing recreational use of cannabis. The upshot here is that legal cannabis soon will become the largest new CPG category most of us in the industry have ever experienced.

This phenomenon is a threat and an opportunity to retailers when considering the basic needs consumers look to satisfy through consumption of cannabis:

  • Social: to facilitate and enjoy interactions with others
  • Experiential: to heighten experiences
  • Medicinal: to manage pain and treat health conditions
  • Holistic health: to reduce stress and promote personal wellness
  • Habit breaking: to quell addictions or habits

These are some of the same need states satisfied by other categories such as beer, wine, spirits, sleep aids, internal analgesics, tobacco, smoking cessation, skin care, herbs, supplements, teas, energy drinks and prescription medications. These categories are mainstays of the grocery, drug, mass and convenience channels. Customers use these categories for social, experiential, medicinal, holistic health, and habit breaking purposes — the same reasons they use cannabis. In many instances, cannabis not only offers a viable alternative to a CPG product, but does so with perceived additional benefits to the consumer, such as lower cost or fewer side effects. Whether it’s reducing caloric intake by shifting some beer purchases to cannabis, or a desire to treat a muscle ache with a natural product as opposed to an OTC pain reliever, CPG categories are facing a new, formidable competitor as cannabis enters the category mix of customers.

It’s not just an assumption that cannabis will impact CPG sales, it is already happening. However, the impact often goes unnoticed since only four states currently have established legal marketplaces for recreational use representing just 5% of the US population. But the warning signs are clearly there. As new adult-use states and particularly California come online, the impact will become more apparent and more substantial. Because cannabis impacts brands disproportionately, some products will be highly impacted while others will experience much less of an effect.

The challenge for CPG retailers is that cannabis changes the product assortment paradigm since it cannot legally be sold by a CPG retailer. That means tried and true solutions like bringing in new SKU’s or reallocating space are not viable ways to handle customer shifts to cannabis. Further complicating matters: many impacted categories drive store visits so the impact of a shift is not only about the loss of a single category sale but rather the loss of an entire basket.

The situation is concerning, but retailers are incredibly resourceful and extremely resilient. They already have established DSD operations, currently sell highly regulated products, and are experts in marketing, assortment, merchandising, CRM, and cultivating positive customer shopping experiences. They also have an established footprint in the marketplace with significant visit frequency that can be leveraged to compete. Whether through investment or acquisition, driving change in regulations, or offering new complementary products, CPG retailers are extremely well positioned to adapt to the risks and opportunities presented by the cannabis industry’s expansion.

The near-term focus should be on gaining a better understanding of the evolving cannabis marketplace and familiarization with customer attitudes and behaviors toward cannabis use. Armed with this knowledge, retailers will be better equipped to formulate effective strategies regardless of the nature or speed of consumer adoption.

Cannabis is Quickly Becoming a Go-To Sleep Aid

So long to counting sheep. Cannabiz Consumer Group’s CannaUse™ findings reveal that both internal analgesics (otc pain medications) and sleep aids are feeling the pain of substitution effect from legal cannabis more than other OTC categories, such as cold and flu medicines. Cannabiz Consumer Group (C2G) leveraged its highly successful CannaUse™ study to understand how legal cannabis impacts over-the-counter (OTC) medications.

The study found:

● Those expecting to consume legal cannabis were 25% more likely to be users of sleep aids as compared to their cannabis-uninterested counterparts;
● Half of likely cannabis consumers plan to reduce their purchases of sleep aids in the future;
● 86% of those who have used cannabis as a sleep aid stated that it worked better than their traditional OTC medication.

C2G estimates that 9.5% of OTC sleep aid sales will be cannibalized by legalized cannabis. In a national cannabis market, this would represent nearly $70MM dollars in lost sales.

“Unlike Beer, Wine, and Spirits categories in which consumers tend to switch between varieties and brands, OTC medications show less switching behavior”, states Rich Maturo, C2G’s Chief Innovation Officer. “Once an OTC product is shown to work for a consumer they tend to be loyal. As a completely new treatment regimen that offers the added benefit of mood enhancement, legal cannabis is a real threat to many OTC categories and brands and the retailers that sell them.”

About Cannabiz Consumer Group™

Cannabiz Consumer Group investigates cannabis legalization and its impact on consumer spending throughout the economy. Bringing together a diverse information set and a team with expertise in the tracking of emerging markets, data modeling, and analytics, Cannabiz Consumer Group provides insights and solutions for specific industries that must adapt to cannabis legalization. This includes over-the-counter medications, beer, wine, spirits, tobacco, other foods and beverages, retail, pharmaceuticals, healthcare and travel/tourism. Each will be impacted by consumer spending on cannabis as existing legal use markets continue evolve and new markets launch.

The metrics in this report were sourced from C2G’s CannaUse™ study on the cannabis mindset and behaviors of more than 50K individual participants, the company’s warehouse of over 55MM cannabis purchase transactions, and CPG consumer panel and point-of-sale data sourced from IRI through an exclusive data and analytic share arrangement.

For more information contact sales@cannabizconsumergroup.com

Cannabis legalization a factor in beer sales

Glass of BeerCannabiz Consumer Group’s (C2G) research findings predict that legal marijuana will “canna-balize” 7.1% of revenues from the existing retail beer industry. Those purchases will take many forms, infused beverages among them. If cannabis were legalized nationally, the beer industry would lose more than $2 billion in retail sales, predicts C2G. Twenty-seven percent (27%) of beer drinkers state that they already have substituted cannabis for beer, or would substitute their beer retail purchases with cannabis in the future if legal. Other segments of the alcohol industry including wine and spirits and on-premise sales are also being impacted as are other CPG categories, brands, and retailers.

Current Market Size

There were 24.6 million legal cannabis consumers in the US in 2016.  Legalization has since extended to additional states, either through medicinal or recreational legislation or both. C2G’s projects that legal cannabis penetration will settle at a level comparable to that of beer and wine and that a fully mature market would create a new $50 billion industry.

The forecasts were generated using C2G’s CannaUse™ study on the cannabis mindset and behaviors of 40K individual participants, the company’s warehouse of over 55MM cannabis purchase transactions, and CPG consumer panel and point-of-sale data sourced from IRI through an exclusive data and analytic share arrangement.

Novelty impact not a factor for beer industry

In emerging markets a novelty impact often occurs as new users try a product simply for the experience but do not sustain its use, skewing early market predictions. Results suggest this will not be the case with legalized cannabis, as consumers tend to be more invested in the products that they are buying, including understanding the potency, strains, and formats available and uses for pain management, holistic health, and relaxation. C2G predicts the novelty impact will not be felt in the beer industry.

How to offset losses?

“Those at risk of losing sales to legalized cannabis can undertake a variety of actions to offset their losses,” according to Rich Maturo, Chief Innovation Officer.  “Consumers use cannabis to satisfy various need social, medical and experiential need states. By understanding these needs, those at risk of losing sales to cannabis can try to offset some of the losses by understanding and speaking to a consumer’s needs.  Unfortunately, there is no doubt that leakage will occur. Those companies that are gathering insights on cannabis and have the foresight to see it as presenting an opportunity in addition to a risk will fare much better than those who strictly take a defensive position.”

C2G Releases Huge Cannabis Consumer Study

The Study: CannaUse

CannaUse is the largest national consumer study on legal cannabis usage, market segmentation, and product substitution.

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This groundbreaking study of over 55,000 people sourced respondents from the National Consumer Panel. The results tell a story of the cannabis consumer that’s far different than the “stoner” stereotype often portrayed in television and film.

What are cannabis consumers thinking?

According to CannaUse results, about 1 in 10 US adults (or 29.5 mm) have legally purchased marijuana at some point since medicinal legalization first began in California in 1996. In addition, 40% of adults in states where there are no legal recreational markets indicate they would purchase marijuana if it were legal to do so. Put another way, there are more than 90 million US adults with serious interest in a product they can only legally obtain through travel or in some cases debilitating illness.

What CannaUse Offers Businesses

CannaUse Graphics
29.5 million people have legally purchased cannabis.

In addition to setting benchmarks for purchase interest outside of legal markets, the data also leads to the indisputable conclusion that legal cannabis will have a rapidly growing influence on existing industries. CannaUse data, combined with other data assets and proprietary analytic models, offers intelligence on changing consumer attitudes and behaviors that impact businesses outside of the cannabis industry.

“There is no question that businesses need to understand the financial implications of legalized cannabis markets. As a result of CannaUse, companies can, for the very first time, access information that allows them to understand the impact of legal cannabis on their buyers, brands, and categories,” said Rick Maturo, Co-Founder and Chief Product Officer.

For instance, C2G analysis shows dollars spent on over the counter medications are being lost as adult use cannabis markets swell. “We can tell you how legal cannabis changes spending of consumers that live within 5 minutes of your local pharmacy,” said Rick Maturo.

“CannaUse will become the standard predictive service used across industries to understand current and future implications of legal cannabis among key consumer groups,” said Leslie Townsend, CEO of Cannabiz Consumer Group. “The result is the ability to get ahead of the rapidly expanding cannabis market.”

About Cannabiz Consumer Group

Cannabiz Consumer Group investigates the impact of marijuana legalization on consumer spending throughout the economy. Bringing together a team with expertise in the tracking of emerging markets, data modeling, and predictive analytics, Cannabiz Consumer Group focuses on specific industries that must adapt quickly to cannabis legalization. This includes over-the-counter medications, beer, wine, spirits, tobacco, other foods and beverages, retail, pharmaceuticals, healthcare, and travel / tourism. Each are subject to shifts in consumer spending as existing legal use markets continue evolve and new markets launch.

For more information, contact sales@cannabizconsumergroup.com

For press inquiries, please contact: Leslie Townsend leslie@cannabizconsumergroup.com

Full Circle and Cannabiz Consumer Group Announce Partnership on Cannabis Consumer Omnibus Survey

Potomac, Maryland, December 6, 2016 – Full Circle Research Co. makes public today its partnership with Cannabiz Consumer Group (C2G), the research industry’s foremost experts on cannabis consumers and their ecosystems. This announcement comes on the heels of the organization’s support of C2G’s groundbreaking CannaUseTM study: the largest survey of legal cannabis consumption ever conducted in the entire United States and the first sample specifically segmented for cannabis.

The two companies will provide an omnibus, CannaBusTM, which will enable clients to ask custom questions or conduct micro-surveys to better understand issues and interests important to them without the cost of an entire custom research study.

CannaBus also delivers extensive usage segmentations for both medicinal and recreational marijuana. Full Circle’s consumer panel will be profiled for legal cannabis usage and attitudes applying C2G’s industry-standard segmentation scheme. The partnership will leverage Full Circle’s proprietary online research panel in combination with C2G’s cannabis industry and data analytics expertise. Full Circle and C2G see additional partnership offerings to be announced in the future.

“It’s an exciting time to be at the forefront of cannabis research,” said Adam Weinstein, co-CEO of Full Circle. “As acceptance continues to grow across the United States, the economic impact cannot be overstated—our clients will benefit greatly from this knowledge. Teaming with C2G was critical in understanding this population on a higher level.”

“CannaBusTM offers clients the ability to gain deep insights into how specific population groups relate to legal marijuana without conducting an extensive online study,” said Leslie Townsend, CEO of C2G. “Because Full Circle’s panelists are already profiled for marijuana attitudes and behaviors, CannaBusTM projects will field quickly while utilizing a rich data set based upon behaviors and attitudes as opposed to simple demographics.

The Full Circle and C2G partnership is uniquely positioned to provide this service.”

About Cannabiz Consumer Group

Cannabiz Consumer Group investigates the impact of marijuana legalization on consumer spending throughout the economy. Bringing together a team with expertise in the tracking of emerging markets, data modeling, and predictive analytics, Cannabiz Consumer Group focuses on specific industries that must adapt quickly to cannabis legalization. This includes over-the-counter medications, beer, wine, spirits, tobacco, other foods and beverages, retail, pharmaceuticals, healthcare and travel/tourism. Each is subject to shifts in consumer spending as existing legal use markets continue evolve and new markets launch. For more information about CannaUseTM, contact sales@cannabizconsumergroup.com.

About Full Circle Research Co.

Founded in 2013, Full Circle Research Co. is the first and only U.S.-based, online consumer sample provider to earn ISO 26362 certification and the only company to offer HoNoR (Holistic Next-level Research), a proven approach to quality. This unprecedented, automated marriage of advanced technology, flexible community strategies and industry-leading quality controls gives business decision-makers immediate access to the purest data in the industry. Full Circle prizes foresight, treasures agility, and pulls from 100 years of in-house research experience to deliver a deeply consultative, worthwhile experience. To learn more, visit iLoveFullCircle.com.full-circle-logo

Costs, Co-pays and Cannabis

 Cannabiz Consumer Group’s (C2G) recently released survey, CannaUse™ provides insights into legal medicinal cannabis consumers.

Cost is Key

C2G’s CannaUse™ study examined medicinal cannabis use among more than 55,000 respondents. Findings conclude that one of the major considerations in using cannabis for medicinal purposes is not just the level of relief it may provide but also the cost among treatment options for more chronic ailments.

Medicinal cannabis users less likely to have employer based health insurance, and more likely to perceive out of pocket healthcare costs as high. 

  • Medicinal patients are 26% less likely than the overall population to have health insurance from a current or former employer or trade union.
  • This means that they are also more likely to be paying for insurance out of their own pocket.  Even so, they are slightly more likely to currently be insured than the population as a whole, indicating that medicinal cannabis is likely to be a choice made on efficacy as well as cost.  
  • Medicinal cannabis patients are approximately three times more likely than the overall population to be on Medicaid. This is interesting considering that Medicaid patients have low incomes and access to low-copay or free prescription medications.
  • Medicinal cannabis patients are 20% more likely than the population at perceive that their out-of-pocket and co-pays are “somewhat” or “very expensive.”  

Health insurance does not cover medicinal marijuana, even when prescribed by a physician, used to treat a chronic condition or for end-of-life care. Thus, medicinal cannabis users must be willing to pay for it out of pocket, and frequently must seek out physicians or others who are advocates in order to obtain a prescription.

Health Insurance and Out of Pocket Costs
Medicinal Marijuana Users vs. Overall Respondent Base

Obtain insurance through … All
Respondents
Medicinal
Respondents
Medicinal
Index Relative to Total
Current or former employer or union 52% 38% 74
Directly from an insurance company or health marketplace (e.g., ObamaCare) 8% 9% 120
Medicare WITH Part D (prescription drug plan) 12% 14% 116
Medicare WITHOUT Part D (Prescription Drug Plan) 5% 3% 65
Medicare Advantage Plan (Private Medicare Plan) 5% 6% 109
Medicaid or other public health insurance with eligibility requirement 6% 18% 286
Veteran’s Administration 2% 3% 163
Have TRICARE or other military health care 3% Neg. 19
Indian Health Services Neg. Neg. 244
Use any other type of health insurance or health coverage plan 3% 4% 139
Are uninsured 5% 4% 86
Perceive out of pocket costs as … All
Respondents
Medicinal
Respondents
Medicinal
Index Relative to Total
Very Expensive 11% 14% 136
Somewhat Expensive 18% 20% 110
Slightly Expensive 22% 17% 76
Slightly Inexpensive 15% 11% 71
Somewhat Inexpensive 14% 12% 84
Very Inexpensive 21% 27% 131

Source:  CannaUse™, 2016.  All rights reserved.

About Cannabiz Consumer GroupTM

Cannabiz Consumer Group investigates the impact of marijuana legalization on consumer spending throughout the economy.

Bringing together a team with expertise in the tracking of emerging markets, data modeling, and predictive analytics, Cannabiz Consumer GroupTM focuses on specific industries that must adapt quickly to cannabis legalization.  This includes over-the-counter medications, beer, wine, spirits, tobacco, other foods and beverages, retail, pharmaceuticals, healthcare, and travel / tourism. Each are subject to shifts in consumer spending as existing legal use markets continue evolve and new markets launch.  

For more information about CannaUse™, contact sales@cannabizconsumergroup.com or visit www.cannabizconsumergroup.com

Shattering Cannabis Stigma and Stereotypes: Mary Jane Comes Out of the Shadows

Sharing cannabis stories

One of the most  interesting aspects of launching C2G is that every meeting begins with someone’s cannabis story – a sort of confessional that we don’t seek but is instead volunteered.  Everyone knows someone who is using cannabis for managing pain or another medical need, if not doing so themselves.  If we have learned anything during the launch of C2G, it is that marijuana usage is commonplace and judged very differently than even a decade ago, and even among casual acquaintances, people do not mind voicing their cannabis usage or opinions.

Stomping out Stoner Stereotypes

So, we begin with dispelling the myths. The stoner stereotype remains pervasive.  A perfect example of the happy stoners is presented in the Harold and Kumar series – a pair of irresponsible party-goers in their early twenties who are rendered vapid by its usage and go to extreme lengths to satisfy their junk food craving.

In fact, nothing could be further from the truth. C2G just completed fielding CannaUse™, the largest study ever conducted on legal marijuana use in the US, conducted among 55,000 households in the US and fielded among members of the IRI / Nielsen National Consumer Panel.  In self-reporting, a majority of Americans (52%) indicated that they had some prior usage of cannabis, translating into 142 million individuals.  Of these, 9% or 25 million have already purchased cannabis legally.  This legal purchase could have occurred at any of the medicinal outlets that are legal in 25 states plus the District of Columbia, or any of the four states that allow recreational usage.

Cannabis is Medicine

Among today’s users, the most common type of cannabis usage in the US is for medicinal purposes and not for “getting high.”  Medicinal cannabis is widely used for pain relief and is viewed as part of a holistic health regimen that includes treatment for ailments such as anxiety, sleep disorders, and relaxation.  It is seen by many as “safer” that addictive opioids and even over-the-counter medications.  From our latest CannaUse™ data, an overwhelming 78% or 215 million Americans favor legalization of cannabis either for medicinal use, recreational use, or both.

Use of Cannabis to Change

Further legalization is on the ballot in several states this election cycle.  Ballot initiatives in California and Nevada are widely expected to pass.  The acceptance (and usage) of cannabis is expected, by C2G at least, to change significantly as legalization continues.  An additional 38% of those polled (105 million Americans) indicated that they would purchase cannabis if it were legal in their state.  We’re a very big country, so the numbers are very large, and the stakes high.

Cannabis Legalization not far behind abortion and climate change as a key 2016 election issue

Candidates and voters take note. From the growth of the economy to the de-institutionalization of our prison system, the issue of cannabis legalization is far reaching, whether or not someone is a potential consumer.

Currently, data from C2G’s 2015 CannaUse study shows that approximately 52% of the adult population over age 21 have used cannabis in their lifetime. That’s 142 million people with first hand experience with cannabis, according to our 2015 CannaUse Study. Approximately 105 million people would be likely purchasers across the United States were there a national market.

31.9% of Americans say they know very much or are an expert on the topic of recreational marijuana legalization.

39.2% say they would be likely to purchase cannabis assuming there were legal retailers in their state of residence.

Pew research has looked at top voter priorities in the upcoming election. 71% see abortion as important. 82% see the environment as important. But what the polls and researchers aren’t looking at is the issue of Cannabis legalization.

According to our CannaUse survey, 56.5% view the issue of cannabis legalization in the US as important to them in the upcoming presidential election.

As our country recovers from a recession, poor job prospects, international unrest, and is increasingly polarized by social issues, one issue stands out as one about growth. Pun intended.

The issue of marijuana legalization, both recreational and medicinal, is one of substantial scope from a medical, business and political perspective. Top voter priorities this year include the economy as number 1, and healthcare as number 4. Cannabis legalization should not be ignored, as it has serious implications for policy issues topping the list. Check out Marijuana Policy Project’s presidential candidate review to see where candidates stand on the issue.

Cannabis legalization is a more important issue than the media or the candidates, or the majority of the population may realize because it is given only quiet attention. It impacts tax burdens, jobs, medical costs, and prison populations, and it should be debated on any “next-gen” platform.

Online MR Double Feature: Metrics for a New Industry & How Marijuana Changes Travel & Tourism

Chief Product Officer Rich Maturo, and Chief Executive Officer Leslie Townsend featured in this month’s Online MR magazine. Leslie Townsend talks about why the marijuana industry needs its own market research company in her interview. “It is going to be a very disruptive industry, impacting everything from agricultural land use to prison reform.”

Rich Maturo writes about how travel and tourism in the US has changed as a result of legalization. “Legalized recreational markets are realizing economic growth of 14 billion per year from visitors traveling specifically for consumption of recreational cannabis.” Read it for yourself: http://joom.ag/P4uQ .

DEA Takes Baby Steps, but Cannabis Industry is Ready to Walk.

Since we launched C2G, several momentous events have occurred in the industry as we enter the election cycle. First and foremost, the DEA released a long-awaited decision whether or not it would reclassify marijuana (MJ) from a Schedule 1 narcotic, meaning they consider it as dangerous as heroin and more dangerous than the Schedule 2 crystal meth.

As in the past, it failed to lower MJ’s classification. A lower classification would have been a logical next step in a process of decriminalization and legalization, since 25 states plus the District of Columbia have already approved the use of medicinal marijuana. In its decision, the DEA stated that marijuana has “no accepted medical use.” At last count, MJ is being used to treat more than 120 ailments, in some instances more effectively, with fewer side effects, less risk of addiction, or at lower cost than other medications. WebMD, the most popular consumer site for medical research, also cites MJ as treatment for many ailments. And clearly, half of the United States already disagrees with the DEA, moving forward on their own.

Since launching cannabiz, it is remarkable how many in the industry have called to tell us of friends or family members who are being treated with cannabis. But what does the DEA’s ruling mean for C2G? In our opinion, it has little bearing on the medicinal marijuana market in the short term. States can and will proceed on their own. Our research shows that 90% of US adults favor legalization of medicinal marijuana.

And meanwhile, the DEA will allow researchers to obtain MJ through legitimate commercial establishments, ending the longstanding monopoly that the State of Mississippi has on supply of cannabis for medical research. The DEA is allowing research to accelerate …. Clearly this is an industry that is going to take baby steps until someone has the political courage to show it how to walk.

Meanwhile, Marijuana Business Daily reports that three companies have already made the Inc. 500 list, themselves among them. Investment in the industry is only accelerating with many high-profile and celebrity investors entering the market. Baby steps indeed.