15 February 2022 |
Is 2022 A Defining Year for Cannabis Brands?
By Kaitlin Domangue
Building Cannabis Brands
How important are brands in the cannabis industry in 2022?
Will 2022 be a defining year for cannabis brands?
It might seem elementary to suggest 2022 is going to be an important year for cannabis brands, after all, there are already hundreds, if not thousands of cannabis brands on the market today. However, change is on the horizon.
The cannabis industry is currently going through a major evolution as the industry moves away from cannabis simply being sold in Zip-locked bags, to brands building the very best consumer experiences possible.
As we will explore in the data we have sourced, cannabis brands have a long way to go before brands carry as much value as they do in other more mature industries. But, there’s a great deal of progress being made.
The Experimental Phase
We would define the current point in time as the experimental phase of the cannabis industry, whereby both brands and consumers alike are still working towards discovering what works best.
Eventually, this experimental phase will dramatically reduce as consumers will become more familiar with the cannabis products they like, and in turn brands in turn brands will become more in tune with the products they should produce to service this consumer demand.
This transition will likely take many years to complete, however, our perspective is consumers already with consumers are already beginning the discovery process to understand what works best for them.
As such, brands now have the opportunity to acquire customers who will display a much higher level of brand loyalty — should they have the means to produce the cannabis products consumers are seeking. Consumers will also become more educated about cannabis and expect brands to, ideally, supersede their cannabis knowledge.
Data Deep Dive
In the United States, a brand’s reputation is still not among the top-10 influencers in a cannabis consumer’s purchasing decision.
About 25% of U.S. cannabis consumers are more likely to choose a brand that’s familiar, meaning one they have used before. Approximately 20% of consumers are more likely to use one that has been recommended by a friend or family member.
Factors like THC content and price influence a purchase more than brands.
The Canadian cannabis market tells a similar story. 29% of existing cannabis customers in a Deloitte survey say they prefer strains they already know and like, and 37% of existing customers favor a combo of new & known strains.
71% of Canadian Millennial and Gen Z cannabis consumers currently buy multiple brands or try new ones, further confirming brand loyalty hasn’t hit the cannabis space like it already has in the traditional consumer packaged goods space.
Building Brand Loyalty
62% of US adults are loyal to at least one food or beverage brand as of January 2021, with 57% committed to an apparel brand and 44% to a personal electronics brand, however, cannabis brands aren’t seeing this level of loyalty just yet.
U.S. cannabis brands are unable to facilitate sales outside of the state where the cannabis was grown, and in addition, there’s an ever-increasing competition for retail shelf space.
Unfortunately, interstate commerce is a problem only the U.S federal government can solve, however, when it comes to shelf space – many brands are opting instead to implement DTC (direct-to-consumer) models to control the consumer experience from start to finish.
“Retailers have historically owned the relationship with the consumer based on limited shelf space and significant category duplicity.
With expanding distribution capabilities, more significant investment into brand marketing, and emerging DTC models, brands will gain ground to own the relationship with the consumer moving forward.” — MJBrand Insights.
Consumers are continuing to purchase based on the product’s THC content vs. the brand responsible for producing these products, which is a core problem cannabis companies must contend with.
Despite what the data says today, I personally don’t subscribe to the viewpoint that consumers will continue to purchase cannabis on the basis of a product’s THC content, as this would be the equivalent of purchasing alcoholic beverages solely on the basis of the products alcohol content.
This reflects both a problem & an opportunity from my standpoint.
The problem is the internal education problem in the cannabis industry today, whereby we continue to perpetuate this idea that High THC = High Quality Cannabis.
If this is not the best version of cannabis, which I personally don’t think it is, then brands have the opportunity to refuse to enter this “race to the bottom” of producing the highest THC products possible for the lowest prices possible, and instead focus on educating budtenders on the merits of the products they produce.
Cannabis is arguably the most difficult industry in the world to build a valuable brand in today, however, make no mistake many valuable brands are being built despite all of the needless constrains brands need to navigate to succeed in 2022.
Long term, I foresee the cannabis industry looking much more familiar to other more mature industries, however, the exact timeline it will take for the cannabis industry reach this point remains unclear today.