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The Learning Curve Exchange Rate: Canada, Cannabis and Commercialization

The visuals of this week are striking. The midnight store openings. The long queues wrapping around city blocks. And the maple leaf replaced by the marijuana leaf on the national flag. Canada’s first few days of recreational legalization have gone relatively hiccup free for such a large-scale legalization, and response appears to be mostly positive.

Despite being federally legal, cannabis is still confronted with a patchwork of province-by-province laws governing in-home grows, possession maximums, public consumption, etc. And that’s just for flower. When edibles and infusions come onto the market, we can and should expect similar mix-and-match style regulations governing those products as well.

While manufacturers and growers have limited-to-no control over those externalities, they should be preparing for the coming mature Canadian cannabis market.

Eventually, once all the products hit dispensary store shelves, customers will be faced with a mind-boggling number of considerations to take into account largely absent today—delivery form, THC vs CBD, duration, flavor, ingredients, manufacturer, price per piece/gram, etc. Eventually, the lines will die down as the novelty of legally buying cannabis wears off. And when that novelty wears off and the realities of the marketplace start to take shape, it’s important that cannabis players are able to pivot away from “this product gets you high” to “this product is great for when you are [fill in blank here].

Becoming Routine

It may sound like an unsexy concept, but nothing is better than being part of a consumer’s routine. To be something they instinctively gravitate toward on a regular, consistent basis. Entire consulting firms are dedicated to assisting companies looking to “disrupt” that routine, doing so with multi-day brainstorming sessions that wipe out an office’s supply of Post-It notes. The reason: Routine is hugely profitable and creates consistent buying patterns. Just consider how important that morning cup of coffee is to Starbucks!

Canadian cannabis firms will have that opportunity once this initial fervor dies down. But it requires dispensary staff and manufacturers understanding the routines of their customers and knowing how their products can fit into their lifestyle. The good news for cannabis is that larger, macro lifestyle trends largely sync with how consumers want to use cannabis.

A recent study from USC found that American adults spend approximately 24 hours per week on the internet. While some of this usage is work related, 18 of those hours are for “at home” usage, devoted to streaming shows, reading, or just browsing. These figures represent significant jumps from 2000, when internet usage was approximately 9.4 hours per week, with 3 hours spent for at home usage.

Faster connections, more content and an explosion of new services have allowed us to hole up in our homes. Instacart for grocery shopping. Uber Eats for food delivery. Blue Apron for “date night” cooking. Countless streaming shows for entertainment. And Amazon, for seemingly, everything else.

Our research at High Yield Insights shows that cannabis is ripe to take advantage of this shift toward in-home entertainment. More than three-quarters of recreational-usage respondents (80%) noted that their preferred occasion for cannabis usage was while “relaxing at home, watching TV/movies, reading, etc,” by far the leading occasion for usage. Interestingly, the second most cited occasion was “prior to bed” (53%), indicating that, much like internet streaming, cannabis usage is part of the evening wind down.

While both the internet and occasion use data are American based, it’s likely that with most of the Canadian population living within 100 miles of the U.S. border and with access to the same streaming services and many of the same lifestyle services, these trends hold.

Speaking to the Occasion

With lifestyles shifting toward matching the exact occasions consumers prefer for cannabis consumption, it would seem as though cannabis is easily served by the tailwinds of messaging. However, cannabis still has the opportunity to speak to these larger trends in consumer lifestyle and occasion usage.

For instance, in dispensaries, many conversations between staff and customers start and end with a focus on products, notably form and potency. Rarely does the question or some variation get asked, “what type of occasion will you want to be using this in.” And in marketing, brands have either gone fully into aspirational mode or product centric, missing the connection with usage occasions.

Certainly, education is necessary, with so many totally new and returning customers entering the market with a variety of usage needs, from recreational to therapeutic. But as cannabis matures, both in Canada and here, processors, manufacturers and dispensaries will have to engage customers in a way that drives repeatable, routine business, not just the once per year.

Preparing for Maturity

Canada, unlike the United States, will mostly hit a market maturation stage at the same time across all provinces. With federal legalization in the U.S. years away and with states continuing to march toward adult-use legalization, each state will hit its own market maturity separately. Certainly, each industry participant should be applying lessons from states like Colorado, Washington and California for potential new entrants like Illinois and Michigan.

In the interim, learning from your customers, either from direct conversations or via close relationships with dispensary associates should be part of any company’s marketing plan heading into 2019. The benefit of legalization is that everybody has access to the product; the drawback is that competition requires speaking beyond the product.

Eric GiandeloneEric Giandelone

Eric Giandelone

Eric Giandelone is the co-founder of High Yield Insights. High Yield Insights is a consumer-insights firm dedicated to the cannabis market, fostering constructive, fact-based discussions that lead to well-grounded strategic decisions. With deep roots in multiple consumer-facing industries, High Yield Insights brings decades of expertise to this dynamic, quickly evolving market.

Eric can be reached directly at [email protected]

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