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New Customers Drive Innovation in Legal Marijuana Products

As marijuana moves from prohibition to a fragile but lucrative legal status it is attracting curious first time users interested in edibles but not bongs.

Opinions expressed by Entrepreneur contributors are their own.

There is much to question about euphoric predictions of a cannabis market of $20 billion-plus market for cannabis by 2020. For one thing, the number combines too many market lines and markets. For example, there’s no clear way to attribute sales in Frito-Lay’s Cheetos to marijuana usage or Scott’s Fertilizer sales to cannabis growing.

Miguel Rojo | Getty Images

It also seems naïve to assume there is any accurate accounting for volume and revenue in the sale of the black-market substances that will continue. And, there is, at this moment, just not the dense enough data to be truly predictive.

But, things are changing, and so are cannabis consumers. Enter edibles and baby boomers, and your new consumers are suddenly not who you might think. That was certainly the story at this past Marijuana Business Conference and Expo (#MjBizCon) where edibles and other alternative ingestion methods were proudly displayed. 

That's because new, older generations are embracing the bud, but aren't all that keen on rolling doobies. "More and more Americans age 55 and up are using more and more marijuana," CBS News reports.

Related: Marijuana Advocates Wait for Trump's Stance on Legalized Cannabis

Where there’s something trending there’s some truth to it.

So, the real value in the research of industry analyst resources like The ArcView Group, lies in their building the history and evolution of the cannabis consumer. As their data deepens, the markets and their respective economies will define themselves. The stoners and surfers who believe they “discovered” the psychoactive values in cannabis will continue to favor their resources rather than pay the retailers’ mark-up and taxes.

Consumers accustomed to buying on the sly are likely to continue to do so long as the price takes precedence over quality control. And, of course, there are the millions of users who have no immediate access to legalized usage.

Nonetheless, everything indicates that the legalized access to medical marijuana, the decriminalization of possession, the permits to prescribe CBD, and the expanding universe of legalized recreational use will attract the new consumer.

Related: Legal Advice for Cannabis Startups: First, Invest. Then, Stay out of Jail.

It’s the gentrification of cannabis.

Those willing and able to pay in the new cannabis industry marketplace form a new class of users with their own purchasing interests and style that providers must serve differently than suppliers in the past. “Popular culture is embracing legalization and as the whole image of cannabis becomes more mainstream -- so are the ways it is being packaged and consumed,” remarks Philippa Burgess of Red Thread Creative Group. Bong rips and smoking doobies are being replaced by sophisticated extracts that include oils, edibles, topicals, vape pens, dabs, pills, beverages and novel new ways to consume the herb.

Olivia L. Dubreuil, Esq. and Brett Giddings, writing for Cannabis Industry Journal, imagine the thoughts going through an audience of middle-aged men and women, young professionals, veterans, and others looking to solve chronic health conditions:

  • Does the product contain pesticides?

  • Has the product been cultivated in a way that minimizes negative environmental impacts?

  • How do we know that the supply chain quality controls are rigorous enough to ensure no one has tampered with the product?

  • Who is growing and picking this product and how are those people being treated?

Related: How to Grow a Cannabis Farming Business in the Blazing Marijuana Economy

For the price they pay and for the experience they imagine, these customers want brand, quality, security, flavor, color and packaging. "As the ever growing market expands, it's becoming a challenge to provide a consistent product to customers week after week,” remarks Peter Couture, founder of GrowLyfe. "Along with reducing the error-prone human factor, automation can deliver those results as well as return tangible metrics on how to improve processes."

“Cannabis testing, particularly genomic testing, will help consumers better identify which products work best for them, and will become mandatory,” Jake Brown, cannabis critic for The Denver Post, told me. “Old players like The Cannabis Cup will lose market share to science-based competitions like The Grow-Off.”

New York marketing analysts, Miner and Co. Studio, published a November 3, 2016 survey of 800 cannabis consumers. Respondents identify themselves as other than the traditional user. Rather, they self-identify as sophisticated, social and professional.

  • 30 years old on average

  • 65 percent male; 35 percent female

  • 65 percent have a household income of $75K or more

  • 84 percent employed full-time

  • 63 percent married or living with a significant other

  • 42 percent parents of children < 18

  • 49 percent Democrat; 45 percent Republican

They value the experience as high but still present and focused. They claim to have less interest in the escape. It seems less addictive and safer than alcohol and prescription drugs. They opt to consider use a socially acceptable way to socialize and an active part of their overall wellness strategy.

How does the industry market to the new consumer?

This thinking argues for a recognition of a “white-market” that is not self-destructive. As The Daily Beast observes, “If the government fails to cut businesses a break, legal marijuana could be sold on the black market to dodge taxes – just like cigarettes bought down South and sold in high-tax New York.” With cannabis still listed as FDA Class 1 and banks and investors restrained from 100 percent support, the business economics will keep prices high and skew those economic forecasts.

On the other hand, the industry can manage that perception by design towards the new consumers’ values. Packaging Digest suggests some key concerns of the new consumers that takes the supplier well beyond the old baggie delivery:

  • Labeling: Regulations call for clear and specific labeling on content, ingredients, risks, weight and other consumer information.

  • Appearance: Attractive packaging prompts buyers to select and spend up for handsome and unique shape and design.

  • Name: Like consumers of any product, users will look at products that seem attached directly or indirectly to brand names like Bob Marley, Snoop Dogg and Whoopi Goldberg.

  • Safety: New consumers have concerns about the safety and child-proofing of packaging.

  • Transparency: Opaque packaging hides contents and permits advertisers to design sophisticated adult images that do not lure children with bright colors or cartoon figures.

FastCompany notes that providers might imitate the product lines with similar appeal. For example, this consumer likes wines, chocolates, and organic foods. So, they opt for similar colors, typography, and images.

Edibles present a slightly different challenge in their size and purpose. A small candy or cookie can lead to overdosing because the digestive assimilation takes longer for edibles. So, while it might be convenient to pocket or purse a piece, it must be packaged with warnings on usage, dosage, adverse reaction and contra-indications.

What to watch?

There is a natural progression here. Every state and authority is wrestling with advertising requirements, and that confusion will last a while until it shakes out for something smart and consistently applicable. Advertising agencies are forming or regrouping to serve the emerging market, and in their ultimate interest in cutting their own costs, they will compromise on commonalities on labeling and packaging requirements and likely serve as advocates for standardizing certain approaches with compliance authorities.

Ad Age quoted Mac Tully of The Denver Post as saying, “Legal, recreational marijuana is ‘an evolving category.’ I don't think anyone understands how it's going to end up." They conjecture the most successful advertising campaigns and marketing opportunities will create an experience like Starbuck’s sells place, not coffee. Panera promotes healthy eating, rather than menu. And Trader Joe’s markets customer experience.

But, with the potential for rapid and lucrative growth, there will be fragmentation. Strategies to meet the medical marijuana user must differ from those approaching the social user, the student users from the young professionals, the senior citizens from the middle-aged.

And cannabis branding firms are lining up to be involved. Commenting on MjBizCon, Dylan Osborn, founder of Greenbox Grown observed, “There were maybe a dozen companies with booths who were offering branding and marketing services to marijuana companies.”

When the analytics are deep enough, you will see competitive ambiance in retail stores, more comfortable environments in clinical dispensaries, creative and focused advertising and packaging, and novel delivery methods.

The marketing eyes have been on Amsterdam, Colorado, Oregon, and Washington. California will follow the lead but add its own creative twists soon. Some other states are yet to ramp up for the laws they have recently passed. You will see some of this change in your neighborhood over the next few years, but some will take 10 years to settle down.