Luxury vs. Value: What Type Of Weed Do Your Consumers Want Most?

As cannabis sales spike due to the coronavirus pandemic, consumers appear to be seeking value over luxury, forcing some high-end producers to look at different marketing tactics
Luxury vs. Value: What Type Of Weed Do Your Consumers Want Most?
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This story originally appeared on Marijuana Venture

In mid-March, the weekend before COVID-19 shelter-in-place orders took effect, cannabis consumers across the West Coast felt the need to stock up.

According to Marijuana Business Daily, on March 16, California cannabis retailers saw a 159% increase in same-day sales versus 2019, while sales in Washington state increased by 100% and sales In Colorado increased by 46%. Predictably, after the initial rush, sales figures fell back down to earth, but still remain higher in most legal markets than a year ago.

But the question is not just one of how much cannabis customers are buying from retail and delivery, but what types of products.

RELATED: Is Low-THC Cannabis Possibly The Next Big Trend in Cannabis?

Interviews that weekend with dispensary customers in Los Angeles showed many were looking for the “best deals” and buying in bulk.

“When I thought dispensaries might shut down or maybe I couldn’t leave the house, I looked to buying brands I knew and trying to get the best deals possible,” one customer said.

For companies betting that sales of niche or luxury cannabis goods will increase, this trend could spell trouble.

Luxury items were due for a big year before COVID-19 derailed the growth plans of many businesses. Euromonitor, a global trade data group, estimated that between 2020 and 2022 consumable luxury goods — such as bottles of Dom Perignon or THC-infused truffles from Coda Signature — were expected to be one of the fastest growing sectors of luxury goods, with an estimated 5% compound annual growth rate. While these growth projections may now be completely divorced from the reality of the current and future markets for luxury goods, there is reason for optimism about future market opportunities for consumable or personal luxury cannabis goods.

Consumers understand that during an economic contraction, spending top dollar on nonessential personal items can be unwise or seen as being in poor taste. Brands can circumvent this perception by making a strong pivot to gifting, turning their products into something people buy for somebody else, rather than themselves.

This has been a strategy of luxury consumable and personal products in the past, especially during the predictable splurging of the winter holiday season. Both consumable and non-consumable cannabis luxury products can carve out a niche for themselves with the right appeal.

RELATED: Cannabis Consumers' Buying Patterns Sure Are Changing During The Pandemic

According to a February 2019 survey of 1,000 cannabis consumers conducted by research firm SoapBoxSample, 64% of cannabis consumers have given cannabis as a gift. Birthdays are the most common occasion for cannabis gifting. This is good news for cannabis luxury brands as it removes the seasonality of gift-giving that takes place in the winter. Valentine’s Day is emerging as another popular day for gifting cannabis. Among cannabis consumers who planned to give cannabis gifts for Valentine’s Day this year, infused chocolates were the most popular choice (53%). Also, 4/20 has become an occasion for cannabis gift-giving, which can raise sales out of the post-holiday slump.

For shoppers buying cannabis products as gifts, packaging and branding matter a great deal, as people want to give something that feels upmarket and expensive.

Many cannabis products marketed as luxury items will have that feeling, without the extraordinarily high price tag associated with other types of luxury goods. Gifting also drives the emotional connection to luxury brands that companies rely on, for both the gifter and the giftee. Since the outbreak of the coronavirus, with more gift-giving taking place without face-to-face interaction, the packaging and presentation becomes even more important.

Another strategy for luxury cannabis brands is to focus on wellbeing. With the emergence of COVID-19, we saw a dramatic shift in the emotional drivers of cannabis consumption. Results from SoapBoxSample’s nationwide survey of 1,000 cannabis consumers from November 2018 showed that 83% of cannabis consumers said they consume for recreational or social reasons. A poll from March 2020 showed that a significant portion of cannabis consumers are now turning to cannabis products for wellness reasons. Among those who reported consuming more cannabis since the COVID-19 outbreak, 60% said they were doing so to relieve stress, 57% to ease anxiety and 34% were consuming to combat cabin fever.

Aside from giving their marketing strategy an overhaul, some luxury brands have considered delaying a new product launch. Others are launching a sub-brand with a greater focus on value, like Lord Jones’ “accessible” CBD line, Happy Dance, a more affordable brand to complement the renowned parent company.

For both luxury and standard cannabis products, COVID-19 also put into question the integrity of supply chains, as workforce and inputs could both be subject to slow-downs. Solid and lasting partnerships with suppliers and distributors will be more important than ever. Any weak or uncertain link may be more detrimental than before.

For example, while cannabis retail and cultivation were deemed an “essential” industry in most states with legal cannabis, some labeling, distribution, processing and extraction labs were in legal limbo while they waited for clarification on their status. Even a few days lost due to a lack of workforce or questions about the legality of their operations will have ripple effects to the end product. While production and distribution delays are major hurdles for any cannabis brand, for those whose marketing and branding plans revolve around seasonal holidays, missing a deadline can be catastrophic.

Cannabis stands out from other, more established luxury markets due to its relative newness and small market size. In most states, those shopping in licensed dispensaries rather than the black market are already accustomed to paying higher prices and generally walk in with an open mind and willingness to try new products.

RELATED: The Post Pandemic Cannabis Industry Will Continue To Bloom

The current volatility in the market makes it difficult to make predictions or to offer advice for brands. What is known is that consumers’ needs and desires are changing at an unprecedented rate. At a time when the social and cultural norms around cannabis consumption in the United States are still developing, the entire playbook now has to be rewritten to with COVID-19 in mind.

What will remain constant is the need to connect with others, whether through the custom of gift-giving or a shared experience involving cannabis. Compared to other categories of consumer goods, cannabis brands are uniquely positioned to provide an emotional value proposition to their customers and potential customers. Cannabis products can offer us a way to take better care of ourselves and others, or just to “feel normal” again. The ones who use this tactic smartly in their marketing strategies may be able to gain a competitive advantage during the upcoming winter holiday season and beyond.

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