CANNABIS BEVERAGES

A Cannabis Beverage Bubble?

Is the cannabis beverage bubble going to burst or will they continue to grow…

Cannabis beverages have been an emerging category in cannabis for many years, but some say they’ve risen to their maximum potential and are ready to slow down. 

The Data…

• Sales were up 40% last year.
• Cannabis beverage sales in legal U.S. cannabis industry were nearly 60% higher in Q1 2021 compared to Q1 2020.
• Anheuser-Busch InBev and Tilray joined forces in a $100 million joint venture to produce cannabis beverages in 2019.
• Valens GroWorks Corp, Canopy Growth, and Molson Coors Canada entered similar agreements through 2017 to 2019.

By all accounts, the category appears to be skyrocketing and poised for long-term growth. But, it’s a different story when you look closely at Canada’s numbers.

High Expectations… 

A 2018 Deloitte survey estimated the Canadian cannabis beverage market would one day be worth a whopping $416 million USD following Canada’s decision to federally legalize cannabis in 2018.

Nonetheless, cannabis beverage sales in the province of Ontario which is home to 40% of Canada’s 38 million people totaled just $3.8 million USD, or 2% of its total cannabis market in Q2 of 2021.

Why Are Sales Falling Short? 

Price is currently the biggest barrier holding consumers back.

Cannabis beverages are popular for social gatherings as a substitute to alcohol, but many consumers remain dissatisfied with the prohibitively expensive price points. 

For example, a single can of Houseplant, Seth Rogen’s cannabis brand that contains 2.5 mg of THC, has a suggested retail pricing of $4.99, but the company has seen them marked up to $6 in some cases. 

For consumers who are seeking to consume more than one unit, these prices are often enough to deter them from embracing this new form factor of cannabis.

Bioavailability is another reason people are turned off by cannabis beverages. 

The oral bioavailability rate of cannabinoids is between 4-20%, meaning you might only absorb 0.1 mg of THC on the low-end and 0.5 mg on the high-end of a 2.5 mg cannabis beverage such as Houseplant.

Most cannabis beverage brands are well aware of this problem and are taking steps to improve it through different formulation processes.

Regulations are a big factor in the Canadian cannabis market.

Canadian cannabis consumers cannot purchase a case of cannabis beverages as consumers would commonly purchase in the case of alcoholic beverages.

Who’s Winning…

Despite these constraints, two companies have risen to the top of this emerging category Canada and in the U.S.

• In California, Cann has so far claimed an estimated 24% of the cannabis beverage market in the State, according to BDS Analytics. 
• In Canada, Truss beverages is the clear market leader in beverages having claimed as much as 43% share in 2021.

As such it’s clear that companies can succeed in this category in a big way, however, the path to success is by no means easy.

Our Take

It does appear that this emerging category of cannabis has yet to live up to the high expectations analysts have for this category, however, cannabis beverages are not an unsuccessful category, by any means.

We believe cannabis beverages will see continued and well-deserved success in the coming years, but we don’t anticipate them replacing alcohol just yet. 

CANNABIS POLICIES

Medical Cannabis Licenses In Oklahoma

Why Oklahoma is looking to pause medical cannabis license applications…

Oklahoma lawmakers introduced a bill last week to pause medical cannabis licensing in the state. 

If you’re not familiar with Oklahoma’s medical cannabis program, you’d be surprised to hear the traditionally-Red state home to 3.95 million people has one of the most free cannabis markets in the nation. 

It’s often cited as an example of the ideal market among grassroots activists who support a less-corporatized cannabis industry across the United States. 

Oklahoma’s Medical Cannabis Market…

• Less than 40% of Oklahoma’s growers and processors have been inspected since 2018.

• There is no seed-to-sale tracking system in the state, making Oklahoma one of the only U.S. cannabis states without one.
• A 2021 lawsuit prevented the state from ever installing one, and there has been no further update on this issue since November.

The pause on licensing would give regulators sufficient time to assess current operations and see how well they’re maintaining compliance with state protocol. 

“Since 2018, Oklahoma has seen a huge number of commercial medical marijuana grows and facilities flooding into our communities,”

“In the initial rush to roll out a system for granting commercial licenses, we’ve failed to enforce their compliance with state law.

House Bill 3208 would temporarily pause the issuance of commercial licenses so that we can confirm current operations are complying with the law.” said State Rep. Rusty Cornwell.

Oklahoma’s Medical Cannabis Market

Oklahomans voted to legalize medical cannabis on June 26th, 2018, when 57% of voters said yes to State Question 788. Oklahoma then became the quickest state to implement a medical cannabis program after a vote. 

The health department began to accept patient, caregiver, and business applications just two months after the vote, which is entirely unheard of.

Most U.S. programs take at least one year to roll out and open applications. Sales began about a month after applications were submitted. 

• Oklahoma has more than 9,000 cultivation operations in the state. California has approximately 6,235 cultivation licenses.
• For perspective, California has a population of approximately 39 million people and Oklahoma has a population of approximately 3.95 million people. 
• Nearly 10% of Oklahoma’s population have enrolled in the medical cannabis program. 
• Over 342,000 patient cards have been issued since September 2020
• More than $14 million in revenue from licenses alone has been generated in Oklahoma since 2018
• A cannabis business license in Oklahoma costs just $2,500, compared to some states charging an upwards of $100,000.

Looking Forward… 

Oklahoma’s medical cannabis sales have already surpassed $1 billion USD.

After a two-month turnaround time to create the medical cannabis program, we have a hard time believing Oklahoma’s pause on accepting licenses is going to last long.

The medical cannabis program is a significant source of revenue for the state, with almost 13% of the state’s tax revenue going to the public school system. 

Our Take 

The state is overloaded with businesses and while it’s fantastic for a free cannabis market, there has to be a level of oversight when you’re involving medical patients.

We expect Oklahoma’s medical cannabis program to continue thriving, and eventually, process new business applications. 

The medical cannabis program in Oklahoma has too much value to remain on pause, however, keep in mind that current businesses wouldn’t be affected by this bill, except to undergo regulatory evaluations in the future.

CANNABIS RETAIL

The Cannabis Retention Problem

Breaking down the cannabis industry retention problem and how to prevent it…

Your staff makes or breaks your cannabis retail store. There’s no way around it. 

28% of dispensary customers in adult-consumption states say a professional staff is the main influencer on their store choice.

23% of shoppers say budtenders who make reliable recommendations is a main factor influencing where they shop. 

Your Staff Reflects Your Ethos

Is your company knowledgeable about cannabis? Do you want to help people try new products? Do you want people to feel welcome when they walk into your store?

These might all seem like obvious questions, but your budtenders must reflect your ethos at all times to ensure a customer doesn’t get an inaccurate representation of your brand.

The Employee Retention Problem…

As if hiring in cannabis isn’t hard enough, the cannabis industry has a notoriously high turnover rate per Headset: 

•  44% of all of Colorado’s budtenders hired in 2019 left within the same year.
• Only 15% of employees that were with a company at the beginning of the year stayed until the next year.
• 60% of entry-level employees in cannabis leave within two months of starting.

The next question to ask, why is the cannabis industry’s turnover rate so high? Why do employees leave? Not all employees leave for the same reasons, of course, but here’s a few explanations: 

• The cannabis industry’s traditionally low pay, budtenders make an average of $16/hour.
• Poor management is a core contributor to high turnover.
• Burnout, contributed both by the cannabis industry’s fast-moving demands and lack of clear direction/diversification of tasks 

Attracting & Retaining Talent…

It all starts & ends with the employer.

If you want a consistent, productive staff member with the above-mentioned skills: you’ll have to pay well, create a fantastic company culture, and earn your employee’s retention.

Take a look at TerraVida, for example.

TerraVida, a medical cannabis retail store based in Philadelphia managed to keep a 100% employee retention rate since opening in 2018, as of a 2019 interview. 

Considering 60% of entry-level employees leave within two months, TerraVida’s accomplishment is nothing to balk at.

Here’s a few reasons why TerraVida’s turnover rate is minimal:

• A focus on internal promotions.
• No employee makes under $15/hour.
• Dispensary staff includes multiple shifts of medical professionals, licensed pharmacists, patient care coordinators, and project specialists.
• TerraVida had 3 remote phone operators on staff in 2019, there’s possibly more now, who take patient calls throughout the day.
• Full-time employees get health insurance, six weeks paid maternity leave, and an option for life insurance.

Education Programs…

Providing education programs is another key factor in this conversation.

An estimated 7,000 Americans try cannabis for the first time each day.

As such, having staff who are able to break down all of the complexity of cannabis into simple digestible chunks of information is an essential component for any cannabis retailer to succeed.

Only 55% of dispensary staff reported some formal training for their dispensary, but 94% indicated they provide cannabis product advice to patients with a severe condition like Parkinson’s disease and Tourrette’s syndrome.

The respondents in the linked study make an average of $15/hour. 

Our Take

Providing staff an appropriate wage, offering tangible benefits like health insurance and PTO, and creating a work environment that supports every employee and their growth goes a long way in the cannabis industry.

Beyond benefits, setting your staff up for success by clearly communicating expectations is a critical component of retaining talent & avoiding employee burnout — something which benefits neither employees or employers.