NEW ORLEANS — Total retail sales of cannabis products—the sum of recreational and medical sales—are expected to hit $25 billion to $30 billion by 2023, said Chris Walsh, president of Denver-based Marijuana Business Daily, during his presentation and opening remarks at the MJBizConNEXT conference in New Orleans. Citing data from the 2019 Marijuana Business Factbook, he said this would be a massive jump, because that range currently sits between $11 billion and $14 billion for 2019.
But the cannabis industry is growing incredibly fast, and retailers and dispensaries must innovate to stay ahead of the competition, Walsh said.
“Companies are broadening their geographic footprint very quickly,” he said. “You’re no longer competing with a business down the street, but against companies with more resources and capital behind them.”
Here are eight insights from MJBizConNext, also known as the Marijuana Business Conference, which was held June 12-14 …
Flower is losing power
The amount of adults who use flower-based cannabis products is declining. While 62% of adult cannabis users in Colorado and Washington used these products in 2016, this number dropped to 58% in 2017 and fell to 49% in 2018, said Walsh, citing the 2019 Marijuana Business Factbook.
Consumers’ first cannabis experiences likely won’t be through flower but through edibles or oils, said JJ O’Brien, vice president of strategy for PAX Labs, San Francisco, a cannabis vape producer.
Managing growth is a top challenge
Nearly two-fifths (37%) of business operators who sell cannabis-infused products said managing growth and scalability is their biggest challenge, according to the 2019 Marijuana Business Factbook.
“Managing growth is a huge issue,” Walsh said. “Your business plan might change dramatically in six months, and if you’re not adjusting, this can harm your company in the long run.”
Other challenges include costs and complexity of compliance (31%), federal laws and intervention (26%), a lack of cannabis banking services (25%), licensed competitors (23%), taxation (23%), fundraising (15%), an insufficient number of vendors (15%), finding qualified staff (14%), black-market competitors (13%) and disagreement on the direction of the company (9%).
Cannabis is outpacing alcohol
Forty percent of 18- to 25-year-olds said having five drinks a week is risky to their health, while only 15% said the same for consuming cannabis once or twice a week, said Viven Azer, managing director and senior research analyst for Cowen, New York, a market research and investment banking firm, during her presentation. This is specifically affecting beer brands more than wine and spirits brands, because some of the largest beer companies—such as Anheuser-Busch and Heineken—have recently established ties with cannabis manufacturers, she said.
Repetition equals success
Despite its decline, alcohol has a leg up on cannabis-infused beverages: repetition and consistency, said Maikel van de Mortel, executive vice president of marketing for Lighthouse Strategies, San Diego, a management consulting firm. Every alcohol beverage sold in stores has the percentage of alcohol content labeled on the can or bottle, and this gives consumers a certain expectation before they drink it. For instance, if a beverage has 4% alcohol, they may get a light buzz. But if it has 10%, they may get intoxicated altogether.
This is something consumers are looking for in cannabis-infused beverages, van de Mortel said.
“If you’re drinking coffee or beer or soda, you already know what to expect and that the experience will be replicated time and time again,” he said. “That’s a tricky game to play with cannabis.”
CBD in food and beverages?
While hemp-infused oils, creams and tinctures have already hit retailers, ingestible cannabis—food and beverages—are far from doing so. Despite holding a combined 12% of share in the cannabis industry, food and beverages will not become common retail items until the industry knows the time of onset and the duration of these products, Azer said.
This applies especially to CBD—the nonpsychoactive component of cannabis—she said.
“The Food & Drug Administration needs to go to Congress and ask them to write permissible legislation,” she said. "For the time being, I don't see big [food and beverage] brands going into CBD."
CBD is due for a shakeout
Some experts believe the CBD industry will lose manufacturers down the road. Nancy Whiteman, founder and CEO of Wana Brands, Boulder, Colo., a producer of cannabis-infused gummies, foresees the bulk of CBD suppliers going out of business when the FDA scripts its guidelines, since these rules will likely interrupt manufacturers' production processes, she said.
“CBD has enormous potential, and there’s a huge shakeout coming—especially among retailers,” Whiteman said. “Top retailers won’t settle for untested products.”
Stock a variety of items
Retailers and dispensary owners should stock cannabis and CBD items in the same manner, and with a lot of variety, said Jourdan Kurtz, executive vice president of retail operations for Cresco Labs, Chicago, a CBD and cannabis producer.
“The number of cannabis SKUs you stock depends on who your consumer is and where you’re located,” he said. “But having 18 SKUs of a single one is not a great business model.”
A bright future
Sixty-four percent of U.S. consumers who live in the 10 states where recreational cannabis is legal said they have either consumed cannabis within the past six months or are willing to do so, said Roy Bingham, CEO of BDS Analytics, Boulder, Colo., a point-of-sale cannabis research firm. Also, 64% of consumers agree that cannabis has medical benefits, and 33% said they use cannabis for both medical and recreational purposes.
“With CBD crossing into retail, the cannabinoid market is projected to hit $45 billion by 2024 in the U.S.,” Bingham said. “We’ve carefully studied this space and which products are emerging in it. The CBD channel is going to be very big.”