The cannabis industry is poised for its biggest 420 yet

Emily McCormick and Alexis Keenan - finance.yahoo.com Posted 5 years ago
image
View photos
This 4/20 will be a lot different than last year. Image: Getty
More

The “Black Friday” for cannabis is expected to be bigger than ever this year.

A lot has changed since last year’s 4/20 “holiday,” celebrating the plant first popularized for its psychoactive chemical THC. For one, the U.S. passed the 2018 Farm Bill removing industrial hemp from the list of Schedule I drugs. Canada fully legalized recreational adult cannabis use. To date, 10 states and the District of Columbia have legalized adult use cannabis, while 33 states and D.C. have approved medical marijuana.

According to Denver, Colorado-based software company Flowhub, cannabis companies should prepare for heavy sales, especially given that this year the holiday falls on a Saturday.

“This will be the biggest 4/20 in history,” Flowhub wrote in an email to Yahoo Finance. Anne Fleshman, Flowhub’s VP of Marketing, said the industry has seen “amazing” year-over-year growth for the holiday.

The origin of 420

The concept of 4/20 is widely accepted to have begun as an inside joke among a group of San Rafael, California, high school students in the 1970s, who chose 4:20 p.m. as a time to meet after school and look for what they believed to be mythical crop of hidden cannabis.

View photos
Jerry Garcia of the Grateful Dead, which plays a role in 420 history. Image: Getty
More

“They never found the mythical plant,” Darren Karasiuk, Aurora Cannabis’s Chief Commercial Officer, told Yahoo Finance about the story. “From there it became a much broader way to celebrate cannabis’s history and legacy.”

The codeword later made its way into mainstream vernacular after members of the band the Grateful Dead — who were acquaintances several steps removed from the students — and an editor at a cannabis culture publication began using the term.

“420" is now widely accepted as a reference to cannabis consumption, and its calendar designation has become the de facto holiday for users across the globe.

On 4/20, purchasing trends in states tracked by Flowhub’s database — including Alaska, California, Colorado, Michigan, and Oregon — have historically shown an increase of 51%-61% over typical weekday sales, Flowhub said. Dispensary visits on the holiday have shown to jump as much as 59%. And holiday sales year-over-year increased 30% in 2018.

Socrates Rosenfeld, founder of Jane Technologies and iheartjane.com, an online marketplace for cannabis products, predicts 4/20 sales will center on CBD, edibles, pre-rolls (joints) and topicals.

“CBD will be big this year, particularly when it comes to how much customers are willing to spend,” a company spokesperson said in an email to Yahoo Finance. “Our data shows people buying CBD spend 50% more than a shopper looking for THC.”

Which products are popular?

Rosenfeld said Americans are increasingly purchasing edibles, particularly to satisfy a sweet tooth, as well as topical lotions and balms. Over the last six months, Rosenfeld’s sales of sweet edibles such as candy and ice cream have grown 50%. Topical lotions and balms have jumped more than 150%.

View photos
A person uses a Pax Labs Inc. Era cannabis vaporizer in this arranged photograph taken in Berkeley, California, U.S., on Tuesday, Oct. 23, 2018. Photographer: Cayce Clifford/Bloomberg via Getty Images
More
Story continues

As for traditional joints, Rosenfeld said pre-rolls maintain a solid spot as “cart toppers,” meaning shoppers tend to add them to their online shopping carts when they’re shopping for at least one other product. “Pre-rolls are in at least 10% of overall baskets when bundled with at least one other product,” he said.

Cannabis flower products, which have recently been losing some market share to faster-growing categories like vapor, generally see a resurgence around 4/20, Greg Schoenfeld, vice president of operations for market research firm BDS Analytics, told Yahoo Finance. That’s because many participants in the event tend to be the “long-time connoisseurs and hard-core consumers of cannabis” as opposed to new users, who may be seeking out cannabis for other reasons including wellness, he said.

“It’s a temporary reprieve to that ongoing trend of a loss of share for flower,” Schoenfeld said of the holiday. “When we actually look at 4/20 sales, it resembles a little bit more the cannabis industry of the early years. That was more dominated by flower, pre-rolled joints and even what we call our dab-able concentrates.”

BDS Analytics predicts that dispensary sales on 4/20 will grow to $55 million this year combined between Arizona, California, Colorado, Nevada and Oregon — states which Schoenfeld said comprise about 55% of the U.S. cannabis market. That’s up from $41.5 million sales on 4/20 in 2018, which had been the single largest day of sales for the year.

But while the day is a “good opportunity to boost sales, move some inventory and potentially draw in a few new customers,” it does not necessarily make or break revenues for most dispensaries, Schoenfeld added.

“4/20 is certainly the biggest day of the year, but when you put it into perspective, it represents just seven-tenths of a percent of annual sales for dispensaries,” he said. “For a typical dispensary, it’s going to be a little bit greater than two times a busy Friday or Saturday.”

Who’s using?

Josh Segal, CEO of cannabis adtech platform AdLoop, said the walk-up to this year’s 4/20 has been marked by an uptick in advertising toward women, helping move the event away from what he considers to have been a largely male-driven experience in past years.

“One of the growing trends over the last couple years has been that the female market has become a significant purchasing power,” Segal told Yahoo Finance. “A lot of brands recognize that.”

According to a recent AdLoop study, 60% of a typical advertisers’ budget has been allocated toward marketing to women around 4/20 in 2019, versus 40% for a male audience. This marks a 20% rise over last year in brand spending on ads toward women. Millennial women comprise about 40% of the total cannabis marketplace, AdLoop estimates.

The study added that women tend to favor “more high-end and health-specific products than men” including CBD topicals and sativa flower, contributing to the expected boom in CBD product sales around 4/20 this year.

Segal added that brands AdLoop has worked with this year have by-and-large tried to steer away from traditional “stoner” imagery and messaging in their advertisements, broadening out the potential market for new users.

View photos
This May 9, 2018 photo shows a billboard for MedMen, a marijuana dispensary, at an intersection in Los Angeles. MedMen recently rolled out an ad campaign that featured photos of 17 people including a white-haired grandmother, a schoolteacher, a business executive, a former pro football player and a nurse, being splashed across billboards, buses and the web. (AP Photo/Chris Pizzello)
More

“4/20 has traditionally been known as a ‘stoner’ holiday. And I would say 99% of the companies we work with, they don’t want to be associated to that stigma,” Segal said. “A lot of our clients that come in want polished, mainstream advertising.”

U.S.-based cannabis company MedMen, for instance, previously launched a campaign depicting imagery of doctors, lawyers, accountants and other pedestrian archetypes to help change some earlier associations with cannabis culture, Segal said.

“It’s moving beyond that Venice beach surfer dude and putting it out there that this is the new normal,” he said.

The Big Tickers

Some of the world’s biggest cannabis players have 4/20 plans of their own.

Canadian medical and recreational cannabis cultivator and brand conglomerate Canopy Growth (CGC), the first publicly-traded cannabis company in North America and the first cannabis-producer listed on the New York Stock Exchange, will host an open-to-the-public party at its Smith Falls, Ontario headquarters. The headquarters is home to Canopy’s flagship retail store. At retail locations across Canada, Canopy plans to host games, and offer tea and coffee at local retail stores.

“Our flagship retail store — where we don’t have a license to sell cannabis — is basically like a cannabis museum,” Canopy’s Corporate Communications Manager Caitlin O'Hara told Yahoo Finance. “We decided to re-open the visitors center once home to Hershey’s chocolate...now visitors can view seed growing rooms, production and our own chocolate factory.”

View photos
FILE- In this May 31, 2018, file photo the logo for Canada's Canopy Growth Corp. appears on a screen above a trading post on the floor of the New York Stock Exchange. Investors are craving marijuana stocks as Canada prepares to legalize pot next month, leading to giant gains for Canada-based companies listed on U.S. exchanges. (AP Photo/Richard Drew, File)
More

On Thursday, Canopy announced an agreement giving it the right to acquire 100% of Acreage Holdings, Inc. (ACRGF) once cannabis production and sales become federally legal in the U.S.

Global medical and recreational cannabis grower and producer Aurora Cannabis (ACB) is commemorating the day with activities at retail stores across Canada and is set to launch a new retail store in Toronto, Ontario with its partner Nova Cannabis. A retail regulation framework in Ontario went into effect April 1, permitting expansion of the company’s retail footprint.

The company is also supporting a Toronto film screening of 

  • 1