The Cannabis Book of Data – #002 by Nima Veiseh
For this week’s insight, I will introduce you to the Demand side of “Supply and Demand” equation in the hemp and cannabis market. While many in the industry are excited for the rising demand, I want to give you the heads up of what to watch out for as markets open overnight. Cannabis is not the only market to have ever become legalized overnight, but it is still one of the largest we have seen in recent history. We can learn from the past to guide the future. Starting now through the next decades, we must be aware of some the big pricing themes that will affect the market as it matures from legalized infancy to a trillion-dollar industry.
Key Takeaway: Expect volumes to rise, but mainly in selected market segments to watch for.
Revenue overall will increase, but not everywhere, so understanding where revenue increases are happening is important. Although it seems hard to believe, we expect revenue per user to decrease for those who are already full participants in the market (i.e. “Saturated Frequent Users” or “SFUs”). Frequent Users are not inhibited by current legal frameworks, and are going to keep buying about as much as they would usually consume. This means that legalization would enable them a more convenient way to purchasing, which explains the small increase in volume. This small increase in volume combined with a decrease in price, means that revenue per current Frequent user will be roughly the same.
However, the market segment to watch for are the “Less Frequent Users” (LFUs), because revenue per LFU is going to increase substantially. LFUs are people who may appreciate cannabis products, but have been deterred because of the black market premium, public opinion or the risks of legal issues. LFUs are now going to more fully participate and purchase, and strategists at all levels should be thinking about how to greet these participants in the market as they start to spend more money with their increased confidence in the market, and less fear in legal and social prosecution. They may also be looking at alternative consumption methods like drinks, foods, oils and other non-traditional from purchasing the leaf. Each of these is a major business opportunity for a market we expect to grow and diversity quickly.
So what’s the conclusion? If you want to make money, talk to your new clients, not just those who already give you revenue. Your revenue growth is going to rise by acquiring customers who are demanding new products they don’t know may exist yet. If you study and respond to evolving consumer demands and diversify your product line, you will stabilize your revenue stream and keep it growing with each new loyal customer.
Kim Christmas, CannabisBPO, VP of Human Resources and CCO
firstname.lastname@example.org • 678.671.2019