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Just nine years ago, the cannabis industry was comprised of a handful of medical markets and the majority of sales were for flower — either sold by weight or rolled into joints.
What a difference a decade makes.
Looking today at the total number of legal states, available products and categories, and the demographic and psychographic make-up of the cannabis consumer, 2019 looks nothing like the past.
Today, cannabis is the fastest-growing industry in the United States with sales reaching nearly $11 billion in 2018, and a forecast of $23 billion by 2020, according to Arcview Market Research.
One area of expanding commercial activity revolves around branded products — specifically edibles, concentrates and topicals. While flower dwarfed these products just five years ago, by the end of 2018, branded products amounted to roughly half of all cannabis sales.
Branded products include everything from salves designed to relieve aches to vape pens, pills, chocolate bars and lemonade. But for those deciding to enter the dynamic branded product market, they first must answer — with confidence — one basic question:
What shall we make?
Vape pens receive most of the mainstream attention for good reason: They represent most of the growth in concentrates. But concentrates products are considerably more varied: shatter, wax, live resin, caviar and other options line dispensary shelves.
What you need to know
• Your sales team will be essential. Vapes flood the market so you’ll need dispensaries — the choke point of all cannabis sales — on your side. This requires relationship building at point-of-sale to ensure solid store placement and sales associates that will advocate for your products.
• Do your market research. For years, vape pens revolved around almost-generic cannabis oils with minimal product differentiation. But brands are increasingly trumpeting things like strains, cannabinoids and terpenes in their pens. It is important to perform market research to understand how consumer preferences are trending before adding yet another vape to the market. Customizing vapes for effects, like energy and sleep, is worth exploring. The trend started to take shape in 2018, and in 2019 it will be a core focus for companies and consumers.
• Think different. The diversity of concentrates products like shatter and wax offers extensive opportunity because some consumers are enthusiastic about flavor profiles and aroma. The volume of sales for boutique concentrates likely will not mirror that for popular vape pen brands, but margins should be higher, and well-crafted concentrates with smart pricing and branding can build customer loyalty.
No slice of the cannabis pie is as peppered with diversity as edibles. Brownies, sublinguals, water-soluble powders for drinks and food, pills and many of the packaged goods we find in supermarkets are appearing in dispensaries. However, due to this popularity competition is increasingly intense.
What you need to know
• Market research is vital. For example, chocolate bars may sound like a no-brainer until the data is scrutinized. In some markets, sales of bars have been declining for years because more obscure products like tinctures – which are often high in CBD – are performing well, and the competition is light in comparison to the many competing chocolate brands. So maybe in this instance, a high-CBD tincture is a smart move. With product development must come robust data analysis.
• Strong relationships are key. Manufacturing edibles often involve myriad ingredients like chocolate, flour and sugar, as well as industrial-kitchen equipment (which often demands the expertise of technicians when things break down). Dispensary shelf-space is paramount. From the people who fix your ovens to dispensary managers, you need reliable allies across the board.
• Focus on the price-value proposition. I spent decades launching brands within the nutraceuticals industry, where we spent hundreds of hours buying competitors’ products and working to make sure ours were better and cheaper. Faced with a superior and product at a friendlier price, retail buyers are hard-pressed to deny you shelf space.
While concentrates and edibles are psychoactive in nature, topicals generally don’t get people high. Instead, people use them for more medical pursuits like pain-relief. Health and wellness consumer motivations stand front and center with topicals.
What you need to know
• Invest in education. Many topicals consumers have never tried cannabis so if they seek help with aching joints, they will want to understand how a cannabis topical might help them. Among other things, making sure budtenders understand your products’ health benefits should stand as a priority.
• Science matters. Topicals products aren’t simple. It requires you to create products that have pleasing textures, and are effective at introducing cannabinoids into the bloodstream through the skin. This demands the attention of people steeped in the appropriate sciences, as well as equipment.
Branded cannabis has been on the rise for several years, and it likely will dominate sales as the marketplace matures. It offers excellent opportunities and complex risks. Those who will succeed in launching new products into the marketplace need to plan accordingly –and hope for a consumer spark along the way.
These insights and more are featured in the recently released white paper: What Should a Cannabis Business Create? – written by Roy Bingham, Co-Founder & CEO of BDS Analytics. Visit bdsanalytics.com to download the free white paper today.
January 9, 2019 at 02:14PM