As it moves from infancy to early adulthood, the launch of cannabis in Canada is still going through its growing pains. With the recent introduction of a totally new consumer category that is worth billions in sales has come a mad dash to gain market share, and companies are attempting to overcome the complex set of regulations currently limiting their ability to build strong brands.
A key element in supporting long-term growth for cannabis retailers and brands is to become customer-centric and clearly understand the needs and aspirations of the given emerging target groups. At a very high level, the market is comprised of three distinct segments with each requiring us to understand their motivations and needs.
Cannabis Market Segmentation
On one side of the spectrum, you will find the habitual users of the product, consumers who enjoyed the benefits of cannabis products well before it was made recreationally legal. They represent both recreational and medicinal users who have sought the benefits of an alternative to alcohol and pain relievers and other medications. While this group may have the highest consumption rate of cannabis, they represent a smaller group of consumers.
On the opposite side, you will find the segment that is opposed to the use and legalization of cannabis. Often raising a concern over the perceived changes in social norms, this segment represents an equally small percent of the population. Cannabis retailers and brands realize that although growth will not come from this group, they do have a strong influence on the middle segment’s perceptions of the category.
The real market-shaping growth will come from educating the majority of customers in the center on the benefits of cannabis edibles and beverages for either medicinal or recreational use. This group can be subdivided into the “cannabis aware” and “cannabis non-users,” with each providing marketers unique opportunities to answer their needs.
The “cannabis aware” consumers consist of a disproportionally high percentage of baby boomers who in their teens socially experimented with cannabis. As this group moved from college to a career life, they abandoned the illegal substance and shifted to more socially acceptable products such as alcohol. It’s not that this group was opposed to cannabis, it was the growing social stigma, and—more importantly—the risk of a criminal record.
The second subgroup consists of consumers with very low understanding and awareness of cannabis products, having never consumed cannabis products—but they are not opposed to their use.
Branding and Retail Strategies
Cannabis retailers and marketers need to understand the unique needs of each of the three major segments and supporting sub-groups if they wish to drive growth for the industry while overcoming many of the stigmas associated with the category. To assist in the process, we have identified strategies companies should consider.
Habitual cannabis users. This group is comprised of heavy users of cannabis across most of available product formats. They are looking for brands to help them discover new options, not dissimilar to wine connoisseurs who are always on the hunt for that undiscovered bottle of wine. This is easy to understand, as this group had limited access to a range of products due to its previously illegal status. Now that the shackles have been removed, they are eager to explore a wider range of products. Variety and brand story play an important role in driving usage and moving this knowledgeable group to explore higher-priced products. Accessories and giftable items also provide retailers the opportunity to grow their basket size at each visit.
Cannabis avoiders. This group is the cautionary, opposing voice of the cannabis movement and must be respected, as their concerns can also be felt by those in the middle segment of our spectrum. Marketers and retailers need to reinforce the social good that their products offer, as studies continue to demonstrate the positive medical and wellness impacts that cannabis has had in the many markets where the product has been legalized. In addition, manufacturers and retailers of cannabis products will need to proactively initiate community outreach programs and adhere to the laws set forth by both local, state and/or federal governments. Strategies should include reinforcing the medicinal benefits of cannabis for a wide range of ailments, many of which affect older consumers.
Center cannabis dabblers. By far the largest group, marketers and retailers will need to provide members of the “dabblers” group assurance of privacy, product safety and social acceptance if they want to grow market share. There are many strategies marketers can consider when attempting to convert these consumers to cannabis consumption:
• Medicinal benefits. For non-users, a potential introduction to cannabidiol (CBD) medicinal brands could ease their minds and help eliminate some of the stigma surrounding cannabis. Ointments for muscle/pain relief is one easily accessible benefit of the category. Now that the product is legal and companies can invest publicly in research, expect additional benefits to be discovered and validated.
• Category knowledge. One of the biggest barriers to new user consumption is the low level of knowledge some consumers have of the category and proper usage. There is a hunger by consumers to better understand the various strains and varieties of cannabis products, as well as the different consumption options. With the introduction of new strains of cannabis plants, consumers who are interested in learning more will need to be properly educated through industry information and grassroots initiatives by both producers and retailers.
• Accessibility. As more cannabis stores open, this will allow a strong platform for trial among this group. The ability of a cannabis professional to help navigate the range of cannabis edible and beverage products and usage will help remove some of the complexity of choice often found in new emerging categories. Retailers such as mihi Cannabis, which we have worked with, have made outstanding customer service a cornerstone of their brand experience to ensure cannabis is accessible for those with low knowledge of the category. Retail stores also provide customers with in-person individual advice to help answer questions, overcome confusion and expand their knowledge of the category. As with many different industries, there will always be consumers who are more comfortable shopping in-person than online, and the number of retail stores and their accessibility is critical in attracting and engaging with this customer segment that lacks knowledge and confidence.
• Social responsibility. Raising social responsibility for cannabis edibles and beverages consumption is not limited to only those opposed to the category. The center segment is highly influenced on how society perceives the category and level of acceptance. Both product manufacturers and retailers will need to aggressively support and create awareness, online and in the media, of the acceptable forms of usage and behaviors. This is not dissimilar to how the beer and liquor industry has promoted responsible drinking during high consumption periods.
The cannabis industry will need to overcome existing stigmas, while also increasing the knowledge of the category and responsible consumption behaviors. Through a growing network of stores supported by knowledgeable staff, the cannabis industry will help drive growth by appealing to the central segment of the marketplace. New product categories will emerge and legalization will continue to expand. This journey is far from over, and is sure to have more twists and turns along the way.