By Michael Klein, CEO of cannabisMD
I’ve been a cannabis executive for five years. I’m not a “stoner,” yet I find myself dazed and confused by the business itself. It’s time to finally discuss how to navigate the clutter and confusion of the cannabis industry.
How It Started vs. How It’s Going
When legislation to legalize cannabis was introduced in 2012, it was still a binary market, the foundation of which were two lucrative consumer segments that were viewed simplistically and through a 100% Boomer lens:
(1) Recreational cannabis users (“Stoners”): Attracting them would mean a reduction in the illicit market
(2) Medical cannabis users (end-of-life care): With medical cannabis already legal at the time in a handful of regions, attracting users would be about legitimizing and recognizing them but relying on third-party knowledge and referrals (i.e., doctors writing prescriptions)
These two segments were effectively 100 percent of the market opportunity. A decade later, to say the consumer landscape has evolved would be one of the understatements of the decade, due to:
- the warp-speed acceleration and mainstreaming of health & wellness concerns, especially among older, affluent people
- the rise of “brand purpose” as a driver of overall brand opinion and corporate reputation—and, therefore, a key way for consumers to align and self-identify
- the power of Millennials, whose size (1.8X the size of Gen X) and self-awareness have made them the driving force in the economy, with the “rules” being rewritten around them—and zero stigma associated with cannabis
- right behind them, the coming-of-age of Gen Z are digitally native since birth, raised by helicopter and snowplow parenting, and hyper-globally aware
- the elevation of environmentalism to an existential threat to the planet, the emergence of the first true global pandemic, the opioid crisis, and distrust of big pharma everywhere
The Market is Hotter than Ever. And Flaming Out.
Estimates put U.S. revenue at over $45B in 2024. Globally, it could reach over $148B. That’s a lot of job growth from such a nascent industry. But there is a problem.
Most cannabis companies are fishing in the same pond, trying to attract an adult consumption consumer motivated by price. Rather than broadening the consumer base, it has become a fight to the finish for the cheapest product. Low margins and undifferentiated retail stores' saturation have caused sales growth to slow much faster than anticipated in the North American market.
This adds to the enormous headwinds the industry has been enduring over the past few years. Capital markets have all but collapsed, and the regulatory environment is unlikely to improve soon. We will unlikely see SAFE+ banking, rescheduling or descheduling of cannabis, or any 280E tax liability relief in 2023. And the FDA’s lack of guidance on CBD products continues to allow bad actors to pollute the market. A record number of cannabis companies will fail this year, which is not good for the industry or consumers.
Cannabis Is Not One-Size-Fits-All
The key to turning this around and building a sustainable industry is broadening the aperture and appealing to a more extensive consumer base. Continuing legalization for medical and adult consumption across the U.S. gives consumers permission to consider exploring cannabis. It’s the only way to see those revenue estimates come to fruition.
Cannabis is integral to personal wellness beyond a rigid interpretation of medical consumption, and it includes a holistic approach to health, psychological well-being, and self-care. Naysayers need to recognize once and for all that consumers describe cannabis as a tool for mindfulness, relaxation, improved sleep, social connection, and engagement through physical activities.
The choice to explore cannabis’ potential benefits is an emotional one; consumers are seeking relief for themselves and/or a loved one. Once a person finds something that works, it becomes social currency to share with a community. It is proven repeatedly that they will come back because once you solve sleep deprivation or avoid a hangover, the intelligent consumer finds a way to introduce cannabis into their lifestyle.
This has led to an enormous new mindset, populated chiefly by women and younger customers. The so-called “cannabis curious” comprise a full 80% of the adult population who are genuinely open to what cannabis can support but are not actively consuming because they haven’t got a clue where to start!
This Industry Needs to Be Tons More Inclusive
The states want the taxes, the people want the relief, and the politicians want their say—and yet we continue to raise obstacles and miss the opportunity to make this a sustainable industry. My field is, therefore, a mass of contradictions. Smart people everywhere know there can be benefits to cannabis and CBD, yet there is language everywhere that creates barriers to entry that limits cannabis and needs to cease being used.
These words—weed, marijuana, toking, or anything emoting “420”—need to be gone. The media needs to learn a new language and be consistent with it. And retailers also need to adapt and understand how to meet the needs of a new audience.
This is not a judgment on the adult consumption market that loves cannabis and the OG lifestyle. We wouldn’t be having this conversation without them. As with any industry, there are many lanes one can travel down. I’m suggesting we expand the highway.
Michael Klein is CEO of cannabisMD, a non-advocacy site for the cannabis curious consumer. Klein possesses deep knowledge and experience in ID-ing and scaling new audiences, using the most nascent technology and storytelling across a multitude of platforms. Klein most recently served as MTV’s EVP of Original Content, where he oversaw original content across all platforms.
He was also previously EVP of Programming and Content Strategy for Condé Nast Entertainment; there he launched the company’s large portfolio of digital channels,such as Vogue, Vanity Fair, Wired, GQ and The New Yorker. Klein led original programming for TLC, Discovery, Travel Channel and SundanceTV.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.