Legal cannabis is here. Now, will people buy it? With companies experiencing sky-high price-to-earnings ratios and hiring benders, optimism is high. But there may be cause for concern. The industry’s most valuable customers appear to be the least excited.
Of the 1-in-5 Canadians who consumed cannabis in the past year, 29% (or 6% of Canadians) consume daily. In fact, 35% of those heavy users consume at least 5 times per day. They purchase an average of 0.84 grams per day and account for nearly 60% of product purchased. Data is taken from Dig’s annual cannabis tracking study.
Now, here’s three reasons why licensed producers may struggle to convert them.
They’re the happiest with their current purchase avenue
When it comes to purchasing cannabis, many daily consumers feel they have it all worked out. Over 3-in-4 are satisfied with how they currently purchase and most feel safe and have little to no fear of police intervention.
In fact, over half of daily consumers actually feel sympathy for local dealers. This could give a whole new meaning to “buy local”.
Two-thirds plan to continue to purchase from their current source post-legalization
With satisfaction so high, it shouldn’t be surprising that daily consumers don’t expect to change their purchase habits: 68% said they will continue to buy from their current source compared to 51% of Moderate and Light users. Losing 68% of daily users to the black market means losing 40% of all product purchased.
While many potential consumers see not knowing how to get it as a key pre-legalization barrier, Daily consumers don’t share this problem. They have their dealer, friend or illegal dispensary and many don’t see a reason to change.
Daily consumers pay less on average per gram
They currently pay $8.57 per gram on average compared to $10.00 for moderate and light consumers. This means that to be price-competitive (for 60% of the market), prices may need to be lowered.
This is important as cannabis consumers are a price-sensitive bunch. Even a dollar difference between legal and illegal cannabis could cause many to keep their current source.
Health and Wellness could be an entry point for cannabis brands
Although daily consumers appear satisfied and unlikely to change, they’re also the most likely to state that they use cannabis for heath and wellness.
Over half are using cannabis as a sleep aid and nearly half are using it to reduce physical pain. If Licensed Producers can introduce products that better address these problems, this may entice daily consumers to switch. That said, they’ll be fighting ingrained habits.
Changing market environment may trigger changing behaviour
Much of this claimed future behaviour is based on the assumption that the current black-market structure will remain. But that is unlikely. We anticipate stronger enforcement of regulations to close black market channels, as well as increasingly attractive legal channels. After the prohibition of alcohol, some drinkers may have kept buying their hooch from a guy down the street who made moonshine in his bathtub, but for how long did that remain viable? The same could be true of cannabis and it remains to be seen how much of the market legal avenues will capture as supply grows. But it is clear there will be a temporarily uphill battle to convert the heaviest, most valuable, consumers.