Cannabis retailing is poised to be a major industry sector: a majority (56%) of U.S. consumers would try cannabis if it were legal, according to a survey by A.T. Kearney. With cannabis already available for medical use in 33 states and recreational use in 10, it’s not too early for retailers to position themselves for this market’s growth.
“I think it’s still a little bit of ‘proceed with caution’ in the U.S. right now in terms of stocking this stuff, but it’s a space that’s changing quickly,” said Randy Burt, Partner in the Consumer and Retail practice of A.T. Kearney in an interview with Retail TouchPoints. “It’s also a space where regulations are loosening, and I think that’s going to continue. Understanding how it plays with the rest of your product marketing strategy is important, because retailers don’t have cannabis well-understood at this point.”
The popular acceptance of cannabis is growing: 52% of U.S. consumers said medical cannabis should be legal, while 23% said both medical and recreational cannabis should be legalized. Additionally, the downside for retailers carrying such products is low: 36% of shoppers said their perception of a brand would improve if it launched a product with cannabis, while 50% reported no change.
Cannabis products aren’t found on traditional retailers’ shelves yet, even in states where they have been legalized. However, retailers can still take steps to prepare themselves for the time when cannabis truly hits the mainstream by learning more about:
- The non-recreational benefits shoppers may seek from cannabis products, such as pain relief and anxiety reduction;
- How tailoring products to the audience will play an important role in cannabis retailing; and
- The way retailers can prepare for the industry’s arrival, by monitoring state regulations, studying how the Canadian market is developing and assessing the reputation of different product suppliers.
Cannabis Offers More Than Recreational Opportunities
Even retailers that don’t plan to carry recreational cannabis products that are high in tetrahydrocannabinol (THC), the ingredient that creates the cannabis “high,” should be aware of other uses that may spring up following legalization. The non-intoxicating compound cannabidiol (CBD) is piquing the interest of consumers, and products touting this chemical may boast an even greater sales potential than for THC products.
“Our survey found that 82% of U.S. consumers are aware of the health and wellness benefits of CBD, which is a really staggering number,” said Burt. “Additionally, 78% suggested they would try products with CBD. Those products could be functional foods and beverages, or they could be in personal care products. Based on that, I think consumer acceptance is higher than those that say they would try medicinal or recreational marijuana.”
Some of the benefits shoppers seek from CBD include pain relief, anxiety reduction and even the drug’s cancer-fighting properties. The entry points to these uses are not limited to medical marijuana users: retailers that are health- and wellness-focused, such as beauty and natural food stores, may become natural homes for CBD-infused products.
Stock The Right Product For Your Customers
Different shoppers are interested in cannabis for different reasons, and the methods of intake are just as varied. Shoppers showed interest in cannabis products including:
- Smoking (39%);
- Vaping (21%);
- Food (41%);
- Nonalcoholic beverages (21%);
- Alcoholic beverages (14%); and
- Skincare and cosmetics (24%).
While cannabis products that can be eaten or smoked will likely appeal to recreational users, shoppers interested in CBD’s health benefits may prefer cosmetics. Retailers will need to gain an understanding of which kinds of products will appeal to their customers.
“The more you know about what a consumer’s needs are, the better off you’re going to be,” said Burt. “There’s a lot of diversity in why people would choose to use cannabis, so showing the right facet of a product to the right consumer is going to be essential to success. This is going to be something that a lot of companies crowd into, and there’s going to be competition. Like the rest of the consumer products industry, it’s going to be a fight for share.”
The Time To Understand The Industry Is Now
While cannabis isn’t yet found on store shelves (outside of a few CBD-based exceptions), it’s not too early for interested retailers to position themselves for the future. Assigning a team to follow the advance of government regulations and development of existing markets can help companies understand where the industry is headed.
Watching trends as they develop in individual states makes for a good starting point, and Canada’s nationwide legalization will likely represent a microcosm of what cannabis legalization would look like in the U.S., according to Burt. Many large U.S. retailers already have a presence in the country, making Canada a potential testing ground for the impact cannabis will have on the domestic retail industry.
Retailers also should start learning about the reputation of cannabis producers: 44% of shoppers believe the brand is very important in assessing the quality and safety of cannabis products, and another 29% believe it is somewhat important. By partnering with well-known producers, retailers can give themselves a head start when it becomes legal and viable to start stocking cannabis products.
While these items won’t make their way onto every retailer’s shelves, they represent a significant growth driver for companies where they fit. By understanding the appeal of these products as well as the regulations governing them, retailers can get a leg up on the competition when cannabis becomes more widely available.