“In California alone, there are now over 100,000 unique product SKUs on sale. The growth in non-combustible products, which now accounts for half of all cannabis sales nationally, is especially noteworthy. Vapes, edibles, beverages, and topicals, all offer new use cases that were not possible pre-legalization when flower was generally the only product available.”
Data and analytics underline the solidity of any industry. It is upon this foundation that informed and objective decisions can be made. Data is the tool that’s used to predict consumer trends and determine the ROI of any venture hence businesses can make informed decisions.
John Kagia, chief knowledge officer for New Frontier Data has taken the time to study the cannabis market and consumer trends and leverages this knowledge to make industry projections. He is a thought leader in the industry and consequently a much sought after speaker. MyCannabis spoke to him to get an insider view on what’s currently happening in the industry and what to expect in the near future.
Without further ado, meet John.
The cannabis industry is one that many would rather not associate with. How did your career path lead you here?
I built my career as a market research analyst working in a range of sectors, serving clients in Technology, Healthcare, Finance and Government, but mainly working with C-suite stakeholders in industry-leading organizations to provide the market research and industry analysis that would inform their mission-critical strategies. In my last position before I entered the industry, part of my role was to identify potential opportunities that our research firm could enter, and it was then that I began paying attention for the opportunities for research in the very nascent cannabis industry. In late 2010/2011, as the push to get legalization on Colorado’s ballot initiative was starting, there was almost no good research on the legal industry, and I saw an opportunity to provide the same kind of strategic intelligence we were producing for the cannabis industry at a critical time in its growth. We knew policy makers, investors, and entrepreneurs were going to be making major decisions on the industry but with little hard, objective data to guide those decisions. There was a clear need, and it was a gap I was excited to fill.
As a market analyst, we don’t get many opportunities to observe and help shape an emerging market of global consequence, so I was very excited about the front row view to history that this role would afford me.
You recently spoke at the “Luxury meets cannabis conference.” What is the place of luxury in the cannabis industry?
One important point to understand about cannabis consumers is that they transcend the spectrum of American (and global) society. This includes adults from every walk of life, including consumers who participate in the premium and luxury end of the consumer economy. Consequently, while most of the early products and brands in cannabis have targeted mainstream (and main street) consumers, there is a growing recognition of the significant opportunity at the premium end of the market.
The growing market for luxury cannabis brands is also being fueled by our deepening understanding of the cannabis consumer. Over the past few years, New Frontier Data’s consumer research has shown the rich diversity of cannabis consumers and the range of reasons that drive them to consume. These insights have helped brands transition from a ‘one-size-fits-all' approach to creating more specialized, targeted brands aimed at unique segments of the market.
Tell us more about your role as the Chief Knowledge Officer at New Frontier Data
AS CKO, I have the privilege of leading the team of seven analysts that produces the research and market insights that New Frontier Data has been delivering to the market over the past seven years. In this role, I oversee all our research operations, including selecting the priority areas for our research, developing our operational calendar, supporting each analyst on their specific focus areas, and presenting our research to the market through internal and external media. More broadly, I also work with the executive team on developing and implementing our corporate strategy.
The need for accurate data cuts across all industries. In what ways has New Frontier Data helped to shape the cannabis industry?
When I joined the company in early 2015, there was almost no data about the cannabis industry, and the little that was available was generally published by organizations which were either strongly biased for or against legal cannabis. Consequently, I think the two most impactful contributions we have made are:
– Bringing rigorous analytical standards and research best practices to the market, giving industry stakeholders much greater confidence in the intelligence they are using to inform critical decisions.
Conducting groundbreaking research into previously unexplored parts of the market, including developing the most robust estimates for U.S. and global cannabis consumer demand, building foundational new archetypes of cannabis consumers, bench-marking energy and water use in cannabis cultivation, and understanding the impact of cannabis policy on industry and social outcomes.
Can you briefly share with us the latest consumer trends in the cannabis industry and how this has evolved over time?
The consumer landscape is evolving so rapidly that there’s a great deal we can talk about here, but a few developments that are especially noteworthy:
– The fragmentation of the product landscape: In California alone, there are now over 100,000 unique product SKUs on sale. The growth in non-combustible products, which now account for half of all cannabis sales nationally, is especially noteworthy, as vapes, edibles, beverages, and topicals, all offer new use cases that were not possible pre-legalization, when flower was generally the only product available.
– Effect-based experiences: The expanding knowledge of how different cannabinoids interact with the body has led to a proliferation of effect-based products. Non-flower products in particular give immense flexibility in combining cannabis compounds to create specific effects, which then allow consumers to select products tailored to specific activities they may engage in. In the coming years we expect to see even further fragmentation of the product landscape, with products tailored to everything from exercise and socialization to meditative and sexual experiences. This will result in consumers selecting products for specific experiences, much the same way they pick their clothes for specific activities.
– Cannabis and wellness: The term ‘recreational’ cannabis use has become outmoded as we better understand that most cannabis use is wellness related. Given that the main reasons consumers use cannabis include relaxation, managing anxiety, alleviating stress, improving sleep outcomes, and alleviating pain, the label ‘recreational’ belies the reality that most cannabis use is wellness oriented. This is an important point for both brands and policy makers as it re-frames who participates in the non-medical markets, and why.
– The rise of social use spaces: We are at the beginning of social use spaces in legal cannabis markets, which will be immensely consequential in bringing cannabis consumers (and cannabis use) out of the shadows and onto main street. With states across the country now permitting social use, including CA, CO, NV, and NY, the mainstreaming of social use cannabis will be key in bringing many consumers, who currently consume alone, into settings they can share with other consumers in their communities. If effectively done, these spaces will play an instrumental role in the normalization of cannabis in American society.
Which is the most rewarding aspect of your job?
Working with my team. Our analysts are the smartest, most insightful, hardest working, and most collaborative team I’ve had the honor of leading. They make it a pleasure to come to work every day.
Second is sharing what we are learning with the public. I’m a teacher at heart, and I love public speaking, so I enjoy all the opportunities we get to speak at conferences, webinars, forums, private briefings, and with stakeholders interested in learning about this extraordinary market.
What are the most important industry dynamics in 2022, and what are your personal predictions for the year ahead?
The mounting pressure for federal reform: While efforts to pass comprehensive national cannabis reform drag, pressure is mounting on congress to finally address banking access for the cannabis industry which continues to be a major impediment to industry growth given the limited capital sources and extremely high borrowing rates paid by cannabis businesses.
The eastward expansion of the legal industry: New York, New Jersey and Virginia are all building recreational markets in 2022. While sales may not start in NY and VA before next year, the loosening of prosecutions and homegrow allowances will dramatically change the social landscape for cannabis in these states and in the states which surround them.
Consolidation of the U.S. market. 2021 saw some record M&A deals and we expect the trend of industry consolidation to continue over the coming years. As long as the industry remains in this geo-fenced state model, mergers and acquisitions will present a faster way to expand into new markets than building entirely new operations in each market. Furthermore, as increasing competition and tightening capital supply create more challenging operating conditions, there will be more distressed assets available for acquisition at a discount that will be attractive targets for well capitalized operators.
The early shoots of recreational reform in Europe: Germany, Luxembourg, and Malta have all committed to permitting recreational cannabis use. While the regulatory structures will necessarily look quite different from the commercialized retail models we see in the US and Canada, the advent of fully legal adult use in Europe is a major milestone for the expansion of the global cannabis industry.
Hemp for fiber and grain: To date, much of the hemp produced in the U.S. has been for CBD extraction, but 2022 will be the first year where there will be a major surge in production for fiber and grain. The combination of low prices being earned for CBD due to the glut on the market, coupled with the increasing availability of hemp fiber processing capacity are driving more growers to pursue non-cannabinoid applications for hemp and, over time, the production for fiber is expected to dwarf that of CBD.
Cannabis health insurance coverage: While not often discussed, most medical patients pay for their cannabis out of pocket. With the growing research affirming the therapeutic uses of cannabis, and the first cases of courts siding with employees seeking medical cannabis coverage under workman’s comp complaints, there is growing momentum for cannabis to be covered for specific uses under health insurance. Given the relative cost of cannabis to pharmaceutical drugs, the advent of cannabis health insurance coverage will likely be a catalyst for significant expansion of patient participation in medical markets.
Thank you for the great interview and for all of the work that you have done to help move this industry forward, readers who wish to keep track of new and emerging cannabis intelligence should follow New Frontier Data.