Be Merry: Consumer Segmentation and Need States Audio Transcript

Hello, thank you everyone for joining us for the finale of our three part holiday webinar series. If you haven’t attended the past few, we’ve done one on edibles. The second was on beverages and today we’re going to be talking about consumer segmentation and need states. So eat, drink and be merry have been the three sessions. I have quite a few guests joining me today. So we’re going to kick off with a little bit of an insights presentation, I have one of our partners in crime at IRI, here to talk through segmentation as well. And then we have some panelists that we’ll pull in. So really quickly, just to ground everyone. My name is Jessica Lukas, I lead our commercial development team at BDSA. I’ve been here for over three and a half years now. So probably many of you have seen or talked to me previously. So let’s just go ahead and get started really quickly just to remind those who are unaware of BDSA, we are the go to for all things global cannabinoid market research, insights and analytics. We support our clients, which include retailers, brands, investors, as well as CPG, tobacco, beverage alcohol companies, and really driving better decisions utilizing data, understanding the marketplace, where it’s been historically, where is it today, and where is it going. And to do that, we have quite a few different data sets as we think about really providing a holistic view of the marketplace. So as I go through the slides today it’s really focused on consumer. But as a quick reminder, and as you likely saw, in the edibles webinar, as well as the beverage webinar, we do global market forecasts. So predicting where the market will be over the next five years by state by province by country down by category. We layer on top of that the consumer and non consumer sizing elements as well as attitudes, beliefs, behaviors, consumption, dynamics, purchasing, dynamics, and so on. And then the last piece is granular retail sales tracking. So for those of you familiar with CPG beverage alcohol, you might refer to that as scan data by tracking exactly what is selling where when, at what price point in the dispensary, or cannabis retail channel, covering both the largest legal markets in the US as well as Canada, so by state and by province. So with that, let’s get started a quick update on the marketplace.
Again, if you’ve been on the webinars leading up to this point, some of this is a little bit of a review. But really today we’re focused primarily on the consumer marketplace, how it’s evolved over time. Where is it today? And how do we think about the market and supporting our clients in product portfolio management, innovation management assortment for retailers, thinking about targeting the right people, making sure those segments are large enough, but also growing segments. So a quick refresher as we think about the marketplace today. As you can see here, adult use legalization is really driving legal sales in the US. It’s important to call out and consider the size of the US legal market compared to a fully legal country like Canada, and thinking about where the markets are going over the next five years. So thinking about the size of the adult use market, the medical market, also considering the size of the illicit market. And what we’re looking at here, again, is legal sales. And as you can see important to call out, we think about ranking the top markets by 2025. Number one is California. So it is and will continue to be the largest global legal cannabis market. Number two is Canada, then we have additional states coming into play Colorado, Florida and Illinois, because of the size of the US markets, in terms of legalization and opening up in terms of regulations. We do compare countries to states, as we think about ranking here. So again, California, currently the largest market and we anticipate that to stay true through 2025. So we think about the growth of the marketplace. Really important to consider a few things here. Yes, regular regulatory shifts the opening of the market, adult use becoming legal, medical markets becoming more mature and opening up in terms of the application for medical use. But we also have to consider the growth of the consumer marketplace. So as a quick recap again, today we’re going to focus predominantly on the consumer market. But as a quick recap, BDSA has been doing in depth, granular and trending consumer research now. For almost four years. We’ve done six rounds of this research in Canada, total country as well as by province. We also have done seven rounds of research in the US again total country down by stages of legalization down by regions within the US down to the state level and I like to show Colorado Just as one example, obviously, we could cut and slice this a million different ways. But as you think about consumer adoption, and as you saw the growth on the previous chart, yes, markets opening is a driver here. But even in your fully legal mature markets like a Colorado, if we rewind back to the beginning of 2017. So as a reminder, Colorado became adult use legal in 2014. Q1 2017, about 25% of adults in Colorado, were cannabis consumers. we fast forward to earlier 2020. That number is now at 41%. So a significant growth, even in mature markets in terms of the population open, willing and interested in consuming. So we get this question a lot. Is the growth of the market driven by more states or the opening of regulations? Or countries over provinces? The answer’s yes, that is a growth driver. But even in mature markets, we continue to see a growth and adoption and penetration, also driving the markets to become larger, a lot of factors here, but availability, so more retail locations, that meaning it’s more accessible, but also destigmatation, education, product assortment, the sophistication of the market, all of those factors, and people choosing to become consumers. So again, just really important to call out this evolution of the marketplace. And if we break this down a little bit further, just to kind of talk about a point in time here, both in the US and Canada. Um, so as we think about the population and the BDSA consumer research, we look at a census representative population of adults, we then identify who are current cannabis consumers, but also who are non consumers. And what is that evolution or trend over time, what does adoption look like. And so we break the market, the population down into consumers, acceptors, and rejecters. And if we were to add up both consumers and acceptors, which is what you’ll see here on this chart for both the US and Canada, you can see the percent of the population, the purple is the US and fully legal market. So those are fully adult use legal markets in aggregate. And the turquoise color is Canada. As you can see here in the US, we’re almost at 70% of the population accepting meaning they currently consume or open to consuming cannabis. And interestingly, Canada, coming online more recently compared to some of those fully legal markets like Colorado, Oregon, Washington, California, but right there behind the US right there with us with about 65% of the population saying they currently consume or open to consuming cannabis. So as we think about the market evolving, and we think about where we are today, we continue to see growth of the consumer population, we continue to see the behaviors and the attitudes and the consumption dynamics and the purchasing dynamics evolve over time. So while we like to say this is mainstream, it’s worth caviar, adding those 35%. Here you see on the population consuming, that’s still very low, or at least relatively low, compared to mainstream consumer packaged good beverage, alcohol and tobacco. Were, for example, in beverage alcohol, you’re going to see that percent of the adult population consuming, you know, somewhere in the range of 60%, 65% to 75%. So still a ways to go. So while we talk about acceptance being mainstream, there still is a lot of growth potential here in terms of consumer adoption and penetration. So with that, quick reminder, and I think at this point, we’ve debunked the stoner stereotype over the last three and a half years. But a quick reminder, we’re talking about cannabis consumers across the board. They cross demographic breaks on socioeconomic statuses, need states, occasions, seeking different functional benefits, desiring different outcomes from products, very different motivations and attitudes. And this is where we start thinking about how people think, how they behave, what motivates them, to really start driving to understanding consumers, identifying segments, and being able to better appeal to those consumers, with your brands, with your products, with your store experience and so on. So with that, that was just a quick intro, I’m going to come back but I did want to give Carl, my partner in crime from IRI a chance to kind of inform everyone of how we think about consumer segmentation, kind of from the lens of a consumer packaged goods world. So, Carl, if you want to go ahead and join me, jumping in there we are working on audio.
Yeah, you’re all right. Thanks for joining us. I’m Carl. You can guide me and slide transitions. But thanks again for joining us.
Maybe give a little bit of background of your role at IRI. If you want to provide them some background of the BDSA relationship, feel free to do so as well.
Sure we’ll jump in with a little bit of both of those things. So Hi, everybody. I’m Carl Edstrom. I, lead the survey and segmentation team at IRI, for those of you who know IRI, you may not think of IRI as a place where survey work would be done. My career has basically been in the survey world that worked for a number of different survey research companies, mostly partnering with CPG clients around the world. And for the last 10 years, I’ve been leading this practice area at IRI. So typically when people think of IRI, they think of us for leveraging point of sale data in consumer packaged goods across retailers throughout the US. We also have a consumer panel of 100,000 households who regularly scan their purchases. So any product that has a UPC code on it, they scan it, we upload it into a database. So not only do we know what’s being purchased, and where, especially from our point of sale data, but because of we have the panel data we know who is making those purchases, where they’re purchasing, how frequently and so on. So we leverage both of those data sets to try to understand what’s happening, where and who our team gets involved with our clients, when we’re talking about the questions of why so anytime anybody has a question about the motivations that consumers have that underlie the behaviors that we’re measuring with our other services, our team gets involved. Now we’ve been partnering IRI in total has been partnering with PDSA for a few years now. Um, you know, partly because we’re talking about in to a large degree what’s happening in dispensaries with the marijuana, the cannabis industry. And we view dispensaries as a new channel to us, you know, we cover all the different retail grocery mass drug convenience and all those channels. But dispensary isn’t the channel for us. So BDSA obviously has the, you know, leads the market in that area with measuring cannabis purchasing in those channels. And what we’ve been doing is partnering to pull our databases together. So that over time, as there are CBD based products, for example, that are introduced in all of the other traditional retailers that IRI tracks, we’ve got a good handle on what’s going on there. And we can combine that with the resources that BDSA brings for the dispensary channel. So um, what Jessica asked me to do was to talk a little bit about segmentation and how we view it, we definitely have a point of view. And it starts with this this point right here, not to start off a presentation by stating the obvious, but this is a fact not everyone is your customer. So Jessica just showed us a slide a few minutes ago with a variety of different people’s faces, and talked about the fact that that in the cannabis space, the stoner stereotype is is not you know, it’s just that it is a stereotype. And there are there are many different people at all walks of life, who are using these products, and for a variety of different reasons. So the question is, you have a product, how do we identify the people who are in fact your customer, so we can move on to the next slide. So that’s what our goal is with a segmentation is to identify the different consumers who are out there in the marketplace who offer the best opportunities for you right now and then in the future to have the potential to help you truly grow your business. Now, there’s
if there’s a knock on segmentation, in in the world of marketing research, it’s that a segmentation often helps a client manufacturer or retailer to break down the marketplace, you know, you’ve got 100% of the universe out there. And you can say, look, there are six or seven different types of people who exist. those are those are the main types of consumers, and will give you some information about how much of the marketplace they make up will tell you something about their attitudes will tell you about their motivations. And the problem is that that once that’s done, there’s not always a way to activate against those segments. And so what we try to do is to take a segmentation that either we create or one of our clients will create somewhere else, and build it into our databases so that we can track behavior over time. But also so we can, we can help build activation plans, especially around media consumption, you know, we want we want our clients understand where these consumers not only who they are and what they think but where they live, where they shop, what media they consume. So they can create not only the messages, but know where to where to place those messages in media and really activate against them. So once that’s done, we also want to be able to measure the impact over time. So that we can go back, tweak the message and optimize the plan. And the way we do that is by taking a consumer segmentation, and then building it into our panel. So we might conduct a segmentation among, let’s say, 5000 consumers, and then tag the rest of our panel or as much of it as possible to identify what segments everybody else belongs to. So now, if you think about the fact that we have 100,000 people, and let’s say half of them are typed with the segmentation, we can watch their behavior over time, we can see how the segments grow, who shifts from one segment to another, and, and really keep that segmentation alive throughout the over the years, instead of just you know that one time with the segmentation is done. So if we move on to the next slide. Um, and the reason that we feel it’s important to actually leverage our panel whenever we can is that, you know, in typical segmentation studies, there will be questions that are asked only not only about attitudes, but are asked about claimed behavior. You know, what do you remember buying in this category, we’ve dealt with clients before who’ve said, we ask people how much they bought, how frequently how much they paid each time. The reality is, people don’t remember the details of their behaviors, even if they’re things that they do every single day that they’re habitual. So what we try to do is rely on the fact that we have this behavior already. The segmentation, accuracy and utility is elevated when we can combine the shopper behaviors with the motivations. So we won’t necessarily start with the behavior within our panel. But we’ll pull a demographically representative group of people from our panel, we’ll send them a survey to ask them questions about, their approach, in a particular category.
You know, what their perceptions are of different brands, how they use the products on in general, and then what are some of their motivations and barriers to purchasing. So we’ll take those insights and then connect them back with the actual behaviors that we have. So we know what these people bought, we know where they bought them, when how much what they paid. And it allows us if we go to the next slide, to quantify the behavior. So if we’ve identified in this case, five different segments, we can go back in and say, Look, from the segmentation itself, we can tell you that segment one accounts for 15% of the population, segment two is 18% of the population and so on. But we can also dive into the actual behavior that we have in the panel. And we can say, and here’s how much they spent in the past year, in this category, here’s how much they spent on your brand. Here’s how much they spent on a competitive brand. And we’ve also now got these attitudes about what they think about the brand. So you combine all that together. And it tells us it allows us to identify the right targets the size, you know, the number of people that they count for and how much value they bring to your brand or could potentially bring to your bank brand going forward. So it’s very valuable to be able to connect those pieces together. Um, the one thing that I know Jessica’s got a little plan for us in a second about how to introduce some segments that they’ve created. But what we want to do is what she’s doing leverages this idea, which is that we create these personas. So I just showed you five different segments. Basically we have a picture that we pick that that represents a person from this particular group. So this is someone we’ve named Alicia. She’s a flavorful foodie. She’s a big fan of this category. She has a foodie perspective and she aspires to more she’s always looking for something better. Alicia makes up 18% of the population. And then we go through and we create these personas that tell you something from a more of a qualitative feel based on the quantitative measures that we collected that talk about what’s most important to her, and what she’s looking for in the future. And it’s used as a starting point for creating the media vehicles for targeting her segment. So with that is just a little bit of a background about how we approach things. I’ll push this back over to you, Jessica.
Thank you, girl, I’ll call you back on for the panel. So for everyone, just a quick recap, BDSA does have a partnership with IRI, IRI a go to for all things insights market research as we think about the mainstream marketplace. So consumer packaged goods, beverage, alcohol, tobacco, you know, Food, Drug mass, convenience, retail channels. So, you know, IRI is sophistication in terms of the data and the maturity of the markets that they’re tracking is very different than where we are today in cannabis. So well, understanding kind of how this is brought to life and CPG is really valuable, we also have to consider the challenges that we face within the cannabis industry, which is why we’re going to have this panel conversation and which is why we have to be flexible, and how we think about, you know, sophisticated market research techniques, and applying those to the cannabis industry in a way that makes sense. So I’m going to run you through a little bit of high level insight into kind of where we’re going as we think about consumer segmentation, and actioning on consumer segmentations. So really quickly, you know, as we think about that action point, so it’s not just about having really good data, really good insights, or analytics. It’s really about what do you do with this show, regardless of kind of where you fall brand, manufacturer, retailer within the cannabis industry, but also, you know, if we have anyone on this call from beverage, alcohol or CPG really interesting to think about the cannabis consumer segments, and the growth of the marketplace and maybe how that might impact other industries as well. So retailers thinking about assortment planning on store segmentation pricing, who are you appealing to? Who is your shopper base? What shopper groups are growing or declining? And how do you set your assortment? How do you set the experience of your stores to meet those shopper needs? As we think about brands and manufacturers this could be portfolio planning portfolio maintenance, skew prioritization, innovation, ensuring its incremental meeting new consumer segments or new need states. So a lot of different applications here as we think about what is a consumer segmentation and how do you bring this to life.
So as I mentioned earlier, BDSA has been doing trending granular retail, sorry, consumer research now for almost four years on because we have this robust data set, we are able to think about consumer segmentation very differently. So again, we’ve been doing this for years, every six months talking to about 20,000 consumers each round of research on full transparency, we as a company have been kind of stalling on doing a consumer segmentation. The second slide of data that I showed you showing you the growth trend of Colorado consumer is a great depiction of why we paused and held off doing this. As Carl mentioned, it’s very common in CPG, to do a consumer segmentation and let that live on for years. Because of the percent of the population consuming the maturity of the category. The regulations are not changing in frozen food or candy or carbonated soft drinks. cannabis is very different. So we’ve tracked our feet a little bit, we’ve now fully jumped in. And the nice thing here is because BDSA conducts its research every six months, we have a chance to validate it. So we will continue to adjust and kind of grow with the industry as we think about who these consumer targets are. If we go back three and a half years, when I first started here, the consumer base look very different, why people consumed what they consumed the products, the brands available to them, the number of retail locations very different than it is today. So we have to be flexible as we think about consumer segmentation compared to how kind of a mainstream consumer packaged goods retailer would think about this. So we take all of this research that BDSA has done over the years. We think about really how do you break this down. So we input lifestyle attitudes and attitudes around cannabis. So these are things like I am a very nurturing person. I’m willing to spend more for quality. I enjoy spending time with my family, cannabis attitudes, think about those as I believe marijuana could be addictive. Marijuana plays a central role in my personal care, I believe everyone should have access. So those are attitudinal statements. So the attitudes define the segments. So we do a complex cluster analysis, assess different factors solutions, and determine kind of what is the breakdown with the objective being to have a group of mutually exclusive consumer segments. So coming out of the all of the work we’ve done over the past Last years, but especially this year in 2020, again, attitudes define the segments and coming out of our census representative adult population, our analytics, both art and science, determine six mutually exclusive consumer segments and four mutually exclusive non consumer segments. Non consumers not typically an area that you would explore in CPG. But in cannabis, we have to because of the growth of the marketplace, so the attitudes define the segments, but demographics, behaviors, consumption, dynamics, purchasing, dynamics, and so on, are what we profile in use to describe these segments to really understand them deeply. So with that, I have a couple of friends getting ready to join me. So just want to introduce you to a couple of our consumer segments really quickly. So first up, I’m going to pull in Sammy, our better living loyalist CME. Do you want to jump on and give us a little background of who you are? Yeah, sure thing.
Hey, all
I’m Sammy. So yeah, I’m what we would refer to as a better living loyalist. So what does that mean? Typically, I’m young, liberal and live in urban areas. Myself currently living in Portland, Maine, but just spent a couple years in Austin, Texas as well. Definitely a big advocate for legalization and thinking I’ll provide really positive benefits to both individuals and communities. And I do think everyone should have access. So for myself, I suffer from anxiety and consume to manage stress, as well as recreationally in social settings. So I do purchase pretty frequently and tend to look for products with higher THC content. I’m usually kind of lean toward inhalable and edibles but generally open to trying new products, with taste in price often influencing my shopping habits. So I will definitely consume throughout the day using lower THC and CBD products in the morning and afternoon, and transitioning to those higher THC products at night. So outside of cannabis, I prioritize being physically active and eating right and spending time with loved ones. So definitely more to the story. But that’s a little bit about me. Thanks, Sammy. So as a recap, you know, what we’re going to show here on this slide are really the groups, the segments. There’s a lot of data behind this, but I can’t disclose all of that to you on this free webinar. So next up, we have RJ our cannabis advocate.
Hey everyone, my name is RJ and I’m a cannabis advocate. I was born and raised in Denver, Colorado, and I’ve always lived near the city in urban areas. I actively manage my health and cannabis plays an important role in my overall health in conjunction with other vitamins and supplements. I’m a regular consumer of cannabis products, and my typical routine includes a CBD tincture in the morning and the night from a local brand. So in the evenings I tend to consume more THC products such as concentrates, flour and edibles not tied to particular THC brand, but I’ll often find myself trying new products. I believe that quality is the most important factor in purchasing and I’ll pay more for products that utilize clean extraction methods and utilize healthy ingredients to formulate superior cannabis. Good.
Thank you RJ again, RJ cannabis advocate and Sammy are better living loyalist last step. I have Nick representing our recreationalists consumer segment.
Thanks so much just sighs just mentioned my name is Nick. I currently reside just outside of Chicago in Illinois where I was born and raised. Um, I do believe that marijuana should be fully legal and reclassify myself as a recreational is for a few different reasons. I’m the majority of my consumption is done in a social setting with friends. And because of that social nature I do prefer to I tend to lean towards inhalable specifically leaning more towards flower, which is just a better fit for those social gatherings. Well, I do have access to dispensaries, I do tend to obtain more so from family and friends, rather than through some of those more traditional retail locations. I also purchase in large quantities, which makes how often I need to purchase less. But I always do keep that stockpile handy. I’m typically I’m looking for higher THC content as my number one influencer on my also. And I also put some weight on desired taste and aroma as well. So being a recreational, I’m always sensitive to price, and I’m constantly going to keep my eyes out looking to get the best deals. Thanks so much. Just back to you.
Thanks, Nick. So just wanted to give you all a little bit of a qualitative perspective on this, again, is a very complex quantitative assessment to create these consumer segments, identify them and ensure they’re mutually exclusive. But once we identify them, the fun starts in really understanding their motivations, their attitudes, their beliefs, their behaviors, as well as their demographic competence. So hopefully it was a good insight into some of the BDS a consumer segments. And again, a lot of data behind this as you think about really understanding and profiling them understanding the size of these segments. So I’m showing really quickly, the numbers pulled out. But generally, you can see comparatively in the US across the total US versus Canada, the size of these different consumer segments, also tracking them over time ensuring that you’re reaching and targeting a large enough consumer segment, as well as ensuring that they are growing or on trend, and tracking the evolution of these people as they evolve through the different consumer segments. Somebody could very well enter into cannabis as a socializer or recreationalists. And over time, through adoption becomes somebody that’s closer to a cannabis advocate or a better living loyalist. So a lot to unpack here, as you understand these segments and the transition from one to the other. Further, I’m not going to get into too much detail, but really important, as I said earlier, to not just understand the groups within the cannabis consumers as they exist today, but also the non consumers and understanding why do they not consume? Is it a true belief that they are an outright rejecter? And will never consume? Or are they open to it and just don’t have access to it? So we have to also consider these four segments again in that evolution over time. So thinking about who are your consumers? Who are your acceptors who don’t currently consume but are open to it, and then your outright rejecters? The last thing I’ll call out is yes, consumer segments matter understanding them demographically, psychographically attitudinally, behaviorally, consumption dynamics, you know, what are they consuming? topicals ingestibles. inhalable is where, when and why? And what does that point of purchase look like? What are the attributes or product features that matter? When they make a choice? How much do they want to interact with a budtender? Who did they go to for recommendations, all of those things matter? Further, just because we have all of these different consumer segments does not mean a single consumer behaves the same way in every occasion. So then, an added layer of complexity here is kind of these need states or occasions. So we think about our six consumer segments on this slide. And then we identify occasion based I narrowed it down here to four key kind of needs, dates, occasions, get high party relax, unwind, dealing with mild symptoms are truly medicine. And we unpack by consumer, how often are they in these different occasions or need states? And in those occasions, what do they seek? What are the benefits? What are the functional needs that they have, and all of a sudden that’s gets really detailed, really granular and very actionable, again, as you think about targeting, messaging, innovating, product portfolio, as well as assortment. Um, so with that, let’s jump in to a little bit of a discussion. So I want to invite my special guests to go ahead and share their video. So I have Carl, which you guys already know. We have Valda, the CMO of truly and we have a DAG director of innovation at Kiva. Do I have Dag, there you are. Alright, so I’m going to go ahead and stop sharing my screen. And we will go ahead and jump in. So first off, I’ll kick off with Dag want to do a quick introduction on kind of your background, where you are right now kind of what your key focus is, before we start jumping in.
Sounds good? Yep. Okay. Hello, everybody.
Good to meet you. I’m Dag. I am a director of innovation at Kiva joined Kiva about a year ago coming from CPG. It’s been eight years with Clorox, helping with innovation on the cleaning side, as well as in the health and wellness space. And I also did quite a bit of spend a bit of time doing mergers and acquisitions, looking for new opportunities through acquisitions for Clorox, and prior to Clorox, I spend about 12 years in a consumer tech industry. So I was at Logitech and Gartner group helping to build new products and bring new, new ideas to market.
Awesome. And Val, how about a quick intro?
Hello. I started my career at Colgate Palmolive. So similar to my artistic background with Clorox right, you get that good CPG training. And then from there, I went on and I spent some years in the beauty industry and also in beer, wine and spirits before transitioning to smaller, more high growth companies when I’m floored In fact, most recently, I love to mention this because there is a connection to cannabis but I did some Agricultural Marketing working on mangoes, my favorite fruit and so myrcene of course is a terpene that is found in mangoes but also in cannabis. So I love mentioning that I who would have thought right mangoes would have led me to cannabis
Carl, you already entered yourself. So we’re gonna go ahead. Yeah,
man ready? Let’s move on. Yeah.
Awesome. So let’s just really jump in with one quick icebreaker. Before we get to the more complex questions. I had a few. But Carl and I both talked for too long. So one quick icebreaker. And I know I just flashed them up very briefly. But if you guys had to identify with a BSA cannabis consumer segment, who would it be?
Oh, whoa, okay.
I’ll start I’m a kind of a mix of a recreationalists and a cannabis advocate. So obviously, we won’t go into too much detail, but not sure Dag if you have a thought you guys don’t all have to answer this. Yeah,
I feel like I fit mostly in the socializer segment. But there’s definitely the working mom with kids sort of story that I that I don’t necessarily, I’m not sure which one that really fits into.
I’d say I’m a cat more, more or less a cannabis advocate.
Carl, I won’t put you on the spot unless you want to.
I like mangoes.
Carl’s in Illinois, he has full access now. So Alright, so let’s jump in. I’m going to start all the Dag with you guys. I think you’re both like exactly one year into this. Is that correct? Yes. So I’m sure there were a lot of assumptions when you entered. And then as happens for most people on they get in and they realize that everything in this industry is a little bit harder than maybe you assumed to start with. So thinking about that, you know, how do you think about targeting or segmenting consumers or stores or brands different in cannabis than your experience in CPG? And I think specifically, like, what are the challenges that you’re up against? When you think about communication and targeting elements and kind of understanding and unpacking different consumer segments? Whichever one of you wants to go first? That’s fine.
Well, I can go. Um, so for us, I think the big challenge and the big question on the table that came up right away is whether or not we want to be looking at consumers at the national level, at the legal state level, or at the California level. And I feel like I’ve thought about it for quite some time. And I feel like given the size of the California market and the maturity of each state, being in a different maturity phase, we’ve landed on really wanting to study the California consumer first, and really getting to know the California consumer and make sure their portfolio maps well to the needs of that consumer and that I we identify the gaps that may exist, and then we develop products and solutions for that consumer. And I think the other big surprise has been a lot of variability in the retail channel environment. So in in the CPG world where you have a target and Walmart and a few key other players, you kind of know the assortment that they carry, you know everything about the aisle you know about the competitors, you can imagine the consumer experience store to store there’s not that much variation, we’re here in the cannabis space, there exists a lot of variation and how the products are available. Some stores you can come in and pull products off the shelf, other stores, the products are behind the glass, or you don’t even see the products you have to interface with the person. And so the way that consumers make choices are very different in this space, it’s less, less self LED, maybe in some instances, and it’s very much, you know, connected to the experience of the environment that they’re shopping in.
Yeah, and I think some maybe some similarities there. Because we are an MSO. Right, but we started in Florida. And there is not only a different regulatory environment by state, but also the I guess what’s allowable from a business model standpoint as well. So when you’re vertically integrated in Florida, right, everyone that operates is that does lead to certain options available to consumers in that market versus somewhere else where you know, you know, grower shippers can partner right? and distributors can partner with people who only do retail etc. So, for me, I think the complexity of the category I did not fully appreciate and that complexity of both business models regulatory environment that affects the choice is and what consumers actually see that they can purchase. Makes, you know, the challenge of marketing that much harder. The other thing I would say, too, is that people absolutely should not assume that because for example, Florida is met only that the segmentation does not in that the people who are actually registered right, are in it purely for medical reasons. I think there’s sort of an interesting consumer reality out there, right of, yes, I may have anxiety, yes, I may, you know, certain disorders that are, or conditions rather, that are listed in the regulations that would allow you to get a card. But human beings are complex, right? So there’s, there’s more layers to it.
Yeah. And I think you’re spot on it. And I tried to bring it up on that last slide. But thinking about even if you are medically focused, and a license holder doesn’t mean you don’t have days of the week or times of the day in which your consumption is more social, and recreational. And obviously, we see the flip, right, and the adult use marketplace, many of those people are also using it for social, recreational and medicine. So it goes both ways. Actually, that’s a good segue to one of my next questions, which I think applies across markets. But as we look at kind of our research and identify, as I mentioned earlier, you know, about 30, to 40%, of the adult population consuming, that’s very different than some of the categories that you guys worked on previously. And so we and kind of me and my team, specifically are constantly kind of having to check ourselves and getting too sophisticated in this process yet, because you can’t go after a 2% segment of the population. So how do you guys really think about the right size of who you’re going after? Whether that be a consumer segment or consumer target or even an occasion? And how do you kind of bring that into kind of product portfolio management?
Whoever wants to go for
I can go again, it’s a challenging question, because the answer just vary so much. So I do think that you can make a business. And in a category where you have two to 3% household penetration. For example, Britta, which is one of businesses owned by Clorox is about 6% household penetration nationally. And it’s a pretty sizable business. So it really is about the dynamics and, and uniqueness of a neat state and how your brand can come in and offer something that potentially is relevant to that consumer group. And I feel like when we talk about innovation, it’s both product innovation. But I think there’s also a component of marketing innovation, you have to think about new and unique ways to engage that consumer. And it’s not sort of this standard playbook of we’ll get the product on shelf will put up posts on social media, and hopefully it’s going to sell. So I think you have to think about the total lifecycle of is this segment. Is this segment going to I think you mentioned the growth of the segment is where is it today? What’s the opportunity for growth? And does it is there any kind of analogous products that are being used by this segment that would allow me to estimate the size of the segment and potential of that segment? And then if I’m going to deliver certain types of solutions for a particular segment? How do I create a meaningful connection with my brand? And how do I develop a unique marketing approach that will allow me to get my message out to that segment, because as you mentioned, and they even in the segments that you have, that are non users today, the whole 39% of consumers who are interested, I don’t feel like anybody has cracked the code yet on how to bring those consumers in. And a lot more insights is going to be needed to really unlock it not just from a product form perspective, but the innovation that will have to drive the marketing that comes with it.
Yeah, that makes a lot of sense. Valda I’m gonna come back to you but really quickly, Carl, as you think about CPG Are there any? I think the answer’s no, but I’m gonna throw it out to you anyway. Are there any like categories that you would say have some of the weird dynamics that the cannabinoid industry in the cannabis industry is facing or, you know, are there any like rules of thumb that we could learn or think about as a comparison or a company of industry or market,
you know, it’s, I don’t want to go narrow, I want to go a little bit wider with it, because there’s so many parallels that I’ve seen. And you and I’ve talked about this quite a bit between this and like the growth of natural and organic products, where if you think about it, years ago, the only places you could find something that was organic was in a health food store. And so I kind of see the that is the, it’s like, the, analogous to the dispensary channel, you know, it’s the little mom and pop kind of places that would spring up, and they would sell and it’s local producers, and, you know, no national distribution. So you have it was it there’s a complexity, because of all the same things that then Val, then we’re just, we’re just talking about earlier? Um, and, and also difficult to track, right. The other thing that we’ve talked about with this category as well. And so it’s, it’s identifying the people who are who really you find are these products appeal to? And how do you reach them? And I just think that there’s so many parallels, you could follow with how that all worked and develop that that could be a good learning for this space?
Yeah. And you said, How do you reach them? So I’m going to shoot that to valda. Like, we are challenged with the fact that you don’t have as many marketing and advertising vehicles and tactics available? Again, going back to the original question around size of segments, but also how once you identify them, how do you reach them? So how do you kind of overcome some of those hurdles?
Yeah, and I think, you know, it’s, it’s helpful, I think, to look at cannabis also is just something that, although it may still be taboo, it’s still intriguing to people. Right? So there is this curiosity factor. And when you think about when someone is curious, how do they behave? How do they get information? Right? I think you tap into that. So some, you know, typical marketing vehicles would be search engine optimization, right? So SEO, obviously, people go into Google, we can’t spend money there. But if you designed your website, and you know, content, and so forth in such a way that your that people can find you right, then that’s an aspect. There is some advertising that’s allowed, again, all regulations vary by state. And you certainly have to get approval at the state level for certain content. But I find that digital and mobile, in particular, also is helpful with some of those tools. I want to go back, though, you mentioned a question about the right size, right. You know, I worked at Avon after I left Colgate and it’s pretty I bring that up because I when people saw me leap from sort of food drug mass club, right? To a direct selling channel. They were like, what, like, well, how is it you know, my Colgate friends and my traditional CPG. And the reason was, because in direct selling, it also was not easy to read. Right? The companies themselves, it’s not scanned, right through Nielsen or IRI, but yet this huge volume of product is being purchased and consumed and used and so forth. So I kind of borrowed I think some of the learnings from that time, right? have these huge, you know, consumer bases and purchase opportunities that are not obvious, right? And how do people influence one another, to either try or repeat purchase? And I think so for me, that’s a lot of the thinking that kind of, you know, you really do have to be creative. And I liked how Dagmara was talking about being innovative in your marketing as well. But really, you’re borrowing maybe even from I don’t know, think about how political campaigns, right people in a very short span of time, convince people to go in one direction or the other or to vote for them. I think in a lot of ways, that’s actually what’s happening within cannabis. There’s a very large, illicit market that’s still out there. You know, and some of those folks are purchasing, but they’re not registered with the state, right as user. So how do you tap into and reach those audience? What do they look like? How do they behave? You know, all of those things actually are quite important. And I think the last thing I’ll add is, although the penetration may not be high, what also has been astounding to me, is the volume of product that’s purchased and consumed. Yep. I mean, you see the dollars taking Right. So it is it is not even at 50% or 60% penetration, but my God. So, you know, the usage rate, for example of average consumption means that people are coming back multiple times a week, you know, so there’s quite a sizable business that you can build off of that.
Yeah, I love that. You mentioned that. And I don’t mean this, but we talk to a lot of kind of mainstream companies, and sometimes we start talking about Canvas consumers. And they’re like, 40%, that seems pretty high. How often do they actually consume and I love opening our consumer dashboards and showing the percent of inhalable consumers that consume at least daily is 660 5% of inhaled will consumers consume at least daily, most of them all day, every day. And that is like all we have to show I hate to say it, because they’re probably on a call on this call. But like, all you have to show an alcohol company to be like, this is different. This is not beverage alcohol, this is very different in occasions and needs dates in person purchasing. So I’m really glad you mentioned that. Also, one thing to call out on the kind of social aspect of this, I mean, we see time and time again, you know, a top driver of products that people consume is it’s something they’ve consumed before. So familiarity, or something, somebody they trust recommended, in some cases, family, or it’s a budtender. And so now all of a sudden, you’re like, those two are top five drivers of product choice. So no sticking with them being a strong brand and providing a good experience definitely important. One question before we close out and Dad, I’m gonna throw this at you. First of all, you’re not a different perspective, I think, given the markets you’re in, and the fact that you are a vertical MSO. But, you know, as you guys get more and more sophisticated at Kiva and thinking through all of this and actioning on it. You mentioned it briefly, but any other insight into like, Where are retailers? In this kind of evolution? And this understanding? Are you are your teams? Or are you having conversations that would be more similar to like, a category buyer, you know, category management style conversation? Are you talking incrementality?
And kind of
product portfolio and assortment? Or are we still a ways from that?
And we’re beginning to have those conversations, we’re certainly have them internally. And I often try to convince my founder, Scott, that we should be looking at our products through the lens of the consumer, the need, and the sermon that we have relative to competition. And so we’re starting to have these conversations internally. But certainly, when we go to pitch of a new innovation to dispensary’s, they’re starting to ask similar questions. Who is this for? How is it different from whatever event everything else that I’m offering? And why should I make space on the shelf that’s already really crowded for this idea? And so I don’t think there is this level of sophistication as like CPG world has in terms of assortment optimization and looking at top performing skews and top performing brands. And really, the practice around understanding velocities and optimizing for the best sellers. I don’t think that exists in the CPG space yet. But I think that obviously, dispensers are business savvy. And so they may not be using the same buzzwords, but they’re certainly wanting to have the highest amount of dollars going through their stores. And they’re going to be looking at them at the products that they carry and trying to figure out Where’s what do I need to have on shelf to generate the highest amount of dollars
and bother for more kind of retail and brand side of things? Obviously, you guys are kind of pushing the envelope on sophistication, but any additional thoughts you have there?
Um, yeah, I think that, you know, as the offerings become broader, right, so we now just, were allowed to sell edibles, right and once you introduce edibles, it’s like oh my god, there’s you know, how many types of candy are there chocolates, you know, brownies, etc. and you add that to more, you know, tinctures and capsules and more traditional sort of medical forms. You do have to category manage, right. There are things you know, on our shelves that have to earn their keep their space. When we go to other markets, we will be wholesaling. And so I do think that that category, sophistication is going to be important because retailers there in those markets will have a choice whether they take our brands versus others or what is the best mix based on that consumer the profile of the consumers To that geography, right. So I think very quickly, we’re going to start seeing a lot of the stuff that, you know, we see we have seen in traditional CPG are also going to be applied. But again, it all is as good as the tools that we have, right. So, you know, BDS analytics, of course, has some tools that we can use. But you know, how committed are companies also to doing their own primary research? How well do they know the consumers? All of those things will come into play? So I think you’ll see increasing sophistication pretty quickly. No, I
completely agree. It’s, it’s interesting as you think about, I’m sure you guys still get asked questions from your previous peers at other companies as I do that are like oh my gosh, that cannabis must be insane. And you’re like, Yeah, but when you when you narrow it down, the questions that I get from you guys, are very similar to the questions I got from a Nestle, PepsiCo and Kroger, you know, and within CPG, it’s the same business questions. And so, you know, I like how you said they might not use the same buzzwords, but you know, it’s, it’s all about getting one more shopper in your store to buy one more product and that doesn’t change. So with that, you guys, thank you so much for joining for the audience. Thanks for joining us on a Friday afternoon before the holiday. Apologies for the ugly sweater. We’re having a little bit of a zoom party. I keep joking that if any cannabis company wants to start making ugly sweaters, it can replace my brewery sweater from Colorado. With that just really quickly. We are offering a little bit of a holiday gift so if you guys out there are interested in learning more, getting a little bit of a BDS a discount on some consumer work, let us know. Otherwise, all of this content will be available recorded and downloadable. So thanks again for your time and happy holidays.
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