Euromonitor International cannabis experts Shane MacGuill (Global Lead Nicotine & Cannabis) and Spiros Malandrakis (Head of Alcoholic Drinks) recently sat down with leading German industry publication Cannavision’s Rebekka Nurkanovic to discuss opportunities and challenges within the sector, how they see momentum evolving, and why the industry needs to focus on targeting the consumer.
The below is a translation of the piece which was first published in Cannavision 01-2022 and is available at Cannavision.eu
CV: What interests you most about the cannabis industry?
MacGuill: I originally come from the tobacco industry and Spiros from the alcohol industry. About five years ago, we started to investigate the legalisation of cannabis, and we wanted to know what the impact would be on our respective industries. We quickly came to the conclusion that this product would grow very quickly and penetrate quite a few areas of people's lives. It met many of the consumer needs that we observed that were holding back our industries. When you look at the overarching consumer trends and the forces that are driving the 21st century consumer, such as personalisation, the desire for more authentic brand offerings, more nuanced design and formulation in terms of the products they use, cannabis products have the power and the ability to address all of these points.
Malandrakis: Most consumers, especially younger ones, are drinking less and less alcohol or trying non-alcoholic beverages. I have been looking into this and realised that cannabis can become an ideal epicentre of innovation through the opportunities to bundle health and wellness offerings with CBD and all the other minor cannabinoids. There is not enough discussion in the cannabis industry about consumer offerings, consumer locations, and consumer products themselves. I think that there is a big gap, and this is why we are approaching that gap based on our backgrounds in our respective industries.
CV: What opportunities and obstacles do you see for the industry?
MacGuill: As Spiros mentioned, there are a plethora of different needs and occasions that can be met with this product, and we believe that will be the case once you get past the different rates of growth in terms of regulatory development in different parts of the world.
The legalisation or wider liberalisation of cannabis is inevitable in most parts of the world in my opinion, but what concerns me in terms of growth is consumer acceptance. The industry should now be focusing much more on positioning its products. If we want consumers to accept the products and use them consistently, communication regarding the products and their quality needs to be strengthened.
Malandrakis: I once presented to a gathering of major German beer producers and explained that lifestyle associations and branding are essential tools for expanding target demographics. They looked at me and asked, "What are you talking about, Spiros? We only sell beer." They felt that beer in Germany just needed to be affordable and sold in big boxes so people could carry it more easily. If you have to explain to representatives of one of the largest beer markets on the planet the importance of lifestyle branding as part of the consumer journey, this is the problem holding them back, rather than any laws. This translates to the cannabis industry and illustrates my belief that we need to start discussing cannabis as a huge 21st century industry precisely because it can enable so many different products, from grooming products, to pet food, to beverages, and more. We miss this point in most conversations we have at conferences, for example. People mainly talk about investments or stumbling blocks, such as where the investment money comes from, but nobody really discusses products. The fact that these kinds of mistakes are also made in industries without legal problems shows that sometimes it is simply due to a lack of perspective.
CV: What perspective should companies take?
Malandrakis: Wellness and leisure are interesting perspectives. I have a personal aversion to people being afraid to mention the leisure aspect. With alcohol, people pride themselves on the fact that it is recreational, which is an essential part of the human experience. We have seen in recent years a sort of distinction between good and bad cannabis, which Shane can elaborate on. We do not agree with that, because it is all the same thing. So we should not be allowed to just talk about medicine and at the same time try to portray anything recreational or otherwise as something inherently dangerous or bad, because that is also doing a disservice to the industry. There is nothing bad about it. There is no shame in it!
MacGuill: The way I would describe it is that right now the industry sometimes segments when it should not and does not segment when it should. For example, there is a tendency to divide cannabis into different types. Medical cannabis is seen as a special kind of cannabis and its users inherently virtuous in a way in which other users are not. I have the impression that this attitude ultimately slows down progress in terms of legalisation and normalisation, because it divides cannabis into good and bad types of use.
We think the arguments they should make are more holistic. The overarching argument is that cannabis can be used for a number of different things. The emphasis should be on the essential humanity of the plant, which corresponds to the many different dimensions that we have as a society and as individuals. Humans can be both good and evil. That, in my view, is also the key characteristic of the cannabis plant. I do not think that message is getting across enough.
On the flip side, however, is a lack of segmentation. If you look at the way the industry sells its products in North America, every pharmacy now looks like an Apple store, whether it is on the East Coast or the West Coast. We think you need to go back to the consumer and look at their different needs so you can understand how to attract different consumers. This is where greater segmentation would be useful, focusing a little bit more on the end consumer of the product and creating offers.
CV: How can you imagine successful or unsuccessful segmentation?
MacGuill: A product from the US for dog walkers is a wonderful example of successful segmentation. Dog walking is an occasion where people seek stimulation, and it is an occasion where they unobtrusively but intensely act out the emotional connection with their pet. Cannabis is able to fulfil that moment for the consumer in a way that other types of products cannot. This is a good example of a company segmenting a customer need in a very creative way and using cannabinoids to respond to and serve it.
We believe that the industry should segment across different occasions. This type of segmentation may seem surprising for the cannabis industry. But ultimately, all industries work this way. You do not create cookies for all cookie-loving people. You create cookies for specific demographics. An example from the CBD space of insufficient segmentation or profiling is the idea of using marijuana leaves on CBD products. We think that the way you position these products for long-term consumer use is really retro. When you talk about CBD, I do not think it should be associated with traditional cannabis iconography. That is not to say that CBD producers should be ashamed of its origins. It is just about using the right kind of positioning, the right symbolism for consumers.
Malandrakis: Exactly, consumers see the leaves on the package, they do not understand much about cannabinoid breakdowns, and they think they are getting a similar or comparable experience to the cannabis product from the illicit trade. They buy this product, try it, and then nothing amazing happens. So they start turning away from CBD or cannabis altogether, which is bad for the industry as a whole. This is why packaging like this is misleading, and why it is important to educate consumers.
CV: What can accelerate the development of the industry?
Malandrakis: Things are moving much slower than we expected, but once full federal legalisation in the US or legalisation in Germany occurs, it will act as a catalyst and greatly accelerate development.
MacGuill: Yes - and in a way, it does not matter exactly when it will be. The industry should now be thinking about how to get consumers to accept the industry and its products.
For me, consumer education is a key element. There is also a need to create a brand offer. This will depend to some extent on the right environment, but there is also a tension here between the local brands that cater to local cannabis cultures and the global brands. Personally, I am more interested in the more mainstream and established cannabis brands. It would be a real sign of success and normalisation in the industry to me if there are global cannabis brands that everyone hates.
Malandrakis: When that happens, you inevitably start to see the challenges of brands. The generic behemoths, as Shane describes them, are there to pave the way for everything else. People get so used to the product, they consume it once or twice, and then they want to add value to what they are doing, or support local suppliers, or find an unusual offer. But to do that, you have to start with the big players.
CV: Would you have any more advice on the steps that should be taken?
Malandrakis: There is one main problem that we know from Canada, for example. One reason why a lot of the big companies are slumping, both in stock prices and in sales, is that they have tried to be general cannabis companies, so they have not specialised in anything. They have tried to innovate and develop products in every single line of business, even the fringe ones. But when someone does everything at the same time, they do not end up doing anything right.
So, pick your side, pick your demographic. Pick the problem you want to solve and solve it. Do not try to be everything to everybody at the same time, because I have never seen anybody really happy with the results like that at the end.
MacGuill: It is about thinking about the consumer problem that you are trying to solve, the need you are trying to fill, and considering the kind of cannabinoid product that can achieve this. Only then do you think about what form factor can achieve this. So you have to think about the consumer profile. The difference between this and other industries is that you have a wider spectrum - of consumer needs and of problems that you can solve. So in some ways, it should be easier for the cannabis industry because there are more options.
CV: Thank you very much for the interview.
For further insight read our report, World Market for Cannabis