With more state legalization, the U.S. cannabis industry continues to rapidly expand. According to Grand View Research, the U.S. market was worth $6.3 billion in 2020 and $9.2 billion in 2021, and will increase by 15.3% CAGR between now and 2030.
So what are advertisers and marketers doing to help their cannabis clients? What are the most successful days of the year for cannabis sellers? How can brands and dispensaries utilize media channels, some of which are still strictly against cannabis-centric ads?
We talked with Michael Blanche, co-founder of the cannabis-focused customer acquisition platform Surfside, who provided insights on current cannabis-industry trends.
MediaPost: How did Surfside start? And what set it aside from other cannabis-focused platforms?
Michael Blanche: In an industry focused mainly on market-level trends, we saw a real opportunity to focus on consumers. Like, 'We know that two tons of flower is moving in the California market, but who are the consumers who are buying what kind of subsets of those products?' That's how we initially started the business.
Jon, my co-founder, and I came from the advertising space. We understood the value of being able to connect transaction and product-level data to actionable identifiers.
MP: What data is your new report–The 4/20 Grow Book–based on?
MB: A big part of what we do is to go more granular. We record the demographic profiles of people who are purchasing a specific product. What's their life stage? What are their day-to-day behaviors? We bring that type of data in.
People who are purchasing Canned beverage products, we know where they shop, how many times they visit the dispensary, their average lifetime value as a customer, as opposed to just saying, 'In Massachusetts we saw gross volume of beverage-related products.'
MP: Did any results from the report surprise you?
MB: It's interesting when you get compounding dates. For example, Father's Day falls around Juneteenth this year, but a similar thing happened when 4/20 compounds with Easter this year.
Generally we see a spike in traffic before Easter, with people buying more because they're going home or spending time with family -- it's a celebratory weekend. That was only compounded by 4/20.
So people were buying for 4/20 in the lead-up to Easter and we saw a little bit more of spike than we usually see around the 15th/16th of the month, when generally for 4/20 we might see that spike during the 18th/19th and then 4/20.
MP: What findings stood out most?
MB: There was a shift to ecommerce, which surprised us because I thought this might be the first year we'd be almost clear of COVID and that everybody would be pushing for more retail experience -- especially for 4/20, just because it's such a holiday for the cannabis industry."
4/20 wasn't quite the retail extravaganza that I was expecting it to be, though we definitely saw more interesting online activations in the lead-up to it.
Even if they're not buying on the ecomm platforms, in the lead-up they're still perusing the menus –– informing their purchase decisions via ecomm, which is cool because I think it's a big opportunity for brands to get their products in front of consumers and be smart about how they do that.
We also saw that companies doing a digital activation for 4/20 did better than those having a band out in front of the dispensary in trying to make it a retail event. Those able to build experiences online have done really well."
MP: The report calls 4/20 the cannabis industry's Black Friday. Are there the same type of deals at dispensaries as stores on Black Friday?
MB: There are deals and incentives, but it varies a lot more with state-by-state restrictions. For example, in Massachusetts, dispensaries are not allowed to discount recreational products. The 4/20 deals are therefore only for medical card holders.
So, deals aren't a driver of attracting new consumers to your business. That's sort of a problem. One thing we've seen our retail clients focus on is clever bundling to introduce new product lines, such as beverages or tinctures.
You want a customer to go in and get a wide selection of products, not just one brand that comes from this one farm. I think that's where we're also seeing stark contrasts in the performance of dispensaries in recreational markets as well.
MP: How are you seeing cannabis brands navigating strict ad laws on social media platforms?
MB: We work with a bunch of brands who are circumventing it, but they're not doing anything illegal.
What you're not allowed to do on Facebook is run creative that violates the platform's acceptable use policy. They're very stringent about that; anything that has the flower, anything that references cannabis directly will get pulled.
But what you're allowed to do is target a known audience with a compliant creative. I can send the same targeting parameters on social media as a lifestyle-based ad and that's going to run fine.
So what we allow our clients to do is target the correct audience. You can build an audience within our platform and then push back to Facebook as a channel and activate media against it. You just need to make sure they're compliant ads that aren't violating any policies.
That's where smart brands are differentiating it.
In terms of the traditional funnel, it's almost like in cannabis you need another level of brand awareness, like subtle brand awareness where you're not actually pushing your raw product. It's like Nike trying to sell sneakers without ever showing a shoe in the creative. It's definitely possible, but it's a different type of marketing challenge.
MP: What overall changes do you see happening in the cannabis industry?
MB: The market is maturing. We've seen more requests from clients to do integrations with mainstream CRM platforms.
As more CMOs come in from the CPG space, they want to use the best-in-class tools. I expect that advertising space will open up substantially in the next couple of years as we near closer to federal legalization.
But the opportunities that we still see is providing that connective tissue between the transactional data that allow us to say 'This ad or this campaign yielded X amount in return for you as a company.' And I think a lot of value lies in helping cannabis businesses understand what's driving conversions.
MP: Were you always set on entering the cannabis industry?
MB: We weren't planning on getting into cannabis when we started the business.
We originally founded on ecomm and B2C. We wanted to build a platform that allowed the brand to own all of their customer data and start empowering them to make their own decisions.
By design, we are for any modern brand or advertiser who wants complete data ownership.