US Insights

Here's Why the Marijuana Market Will Keep Blooming

Kate Senzamici

Senior Analyst

Retail 03.30.2018 / 09:00

pot plant

More states continue to evolve their thinking around medical and adult-use cannabis.

At Kantar Consulting we talk a lot about disruptors; macro effects, shopper trends, and industry innovations that evolve the retail landscape. But cannabis is one disruptor -- which crosses categories, industries, shopper segments, and applications -- that deserves more attention.

In spite of an administration that seemed eager to crack down on cannabis legalization, more states, red and blue alike, continue to move forward and evolve their thinking around medical and adult-use cannabis. Even following Attorney General Jeff Sessions’ repeal of the Cole Memorandum (an Obama-era initiative protecting cannabis laws in legal states from federal interference), industry support and advancement continue to spread across the U.S.

It’s highly likely that eight additional U.S. states will legalize marijuana this year, and 35 states are projected to be medical or adult-use legal by 2021. Canada still has its sights set on national legalization this summer, and Shoppers Drug Mart (the nation’s largest retail pharmacy, which applied for a cannabis dispensing license in 2016) has recently entered into three medical cannabis supplier agreements with Aphira, MedReleaf, and Aurora -- the latter of which plays in production, cultivation, and distribution across Canada and Europe.

In the U.S., the size of the legal cannabis industry is expected to drastically increase, reaching anywhere from $24 billion to $44 billion by 2020, depending on advances in legalization. Questioning whether  cannabis will impact conventional retail is no longer relevant or useful. Instead, industry players must question how they will react. One action you can take right now? Take cannabis seriously.

It’s certain that this emerging industry will have an impact on shopper share of wallet and discretionary spend (an angle that we explore in more detail here). A few more reasons why you still need to care about cannabis:

Public support is growing. The percentage of Americans in favor of cannabis legalization is at 61% -- its highest point ever and double what it was in 2000, according to a Pew poll from October 2017. Across generational cohorts, more than half of Boomers, Gen X-ers, and Millennials each support legalization. At 70% favorability, Millennials issue the most resounding support for cannabis reform. If your organization cares about Millennials, which is pretty likely, it’s worth paying attention to cannabis.

Midterm elections will turn the tide. It’s probable we’ll see a shift in Washington following the midterm elections in November. The same Pew poll shows that a majority (69%) of Democrats support marijuana legalization, especially those under the age of 40 (79%) and those between 40 and 64 (70%). More Democratic leaders voted into office, and an increase in younger officials, would likely result in the progression of marijuana policy. But really, (and lending to the legitimacy of cannabis), legalization is largely a bipartisan issue. Politicians from across party lines have been outspoken in their support of progressive cannabis reform following Sessions’ Cole Memo decision, and cannabis bills in Washington continue to acquire cosponsors from both parties. Cannabis legalization measures, which will be on the ballot in many states, should fare well based on what we know of public opinion across generations. 

Cannabis crosses categories and industries. This is what makes cannabis unique and disruptive. For retail, the introduction of cannabis into the mainstream would have implications across channels: it can be a purely recreational product, a wellness vehicle, or a health solution, and within each application there exist a slew of ancillary products and categories. Major players across alcohol, tobacco, healthcare/pharmacy, food/grocery, and even home and garden (e.g., Scotts Miracle-Gro) have begun to explore involvement in cannabis to varying degrees. Non-psychoactive cannabidiol-based products (or, CBD: a major, non-psychoactive compound found in cannabis and hemp plants) have moved further into the mainstream as of late, in the form of HBC indulgence, VMS ritual, sleep aid, or preventive and symptom-based healthcare product, to name a few.  

It all comes down to share of wallet. Increased adult use and medical marijuana legalization will directly result in both the reallocation of shopper dollars and a shift in shopping trips. In fact, it’s already happening in states where cannabis is legal in some form. Consider retail pharmacy -- in particular, the chain drug channel, where the pharmacy is the major trip driver: An Illinois-based study from Aclara Research shows that 62% of medical cannabis users surveyed reduced the number of prescription drugs they take and 30% stopped using prescription drugs entirely – eliminating a retail pharmacy trip driver. Combine this with the shopper demand for naturals, authenticity, and transparency (and their willingness to spend more for these types of products) and it’s evident that the introduction of cannabis into conventional retail will steal share of wallet. 

For a deeper dive into cannabis as a retail and share of wallet disruptor, click here.  

Source: Kantar Consulting

Editor's Notes

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