Future of cannabis – Cannabis Quarterly insights, Q2 2022

Chris D’Arduini, Amanda Goldston

Cannabis organizations can benefit in myriad ways from utilizing data. Operators should look to industries with similar market and operating characteristics to understand the most effective ways of capturing and effecting change based on data and a connected environment. The wine industry is a great place to start!

The cannabis and wine industries are at different levels of maturity, adoption, and acceptance, but ultimately their operators and producers have the same challenges in understanding what to make, and when, in order to capture long-term repeat purchases in a highly competitive market. 

Below are 5 key takeaways from the wine industry that cannabis businesses – from newly established craft brands to multi-state operators – should incorporate into their go-to-market and operational strategies. The common denominator: data-driven decision-making.

Create trusted brands by understanding consumer needs

Like with CPG (consumer packaged goods), the average wine consumer has brands they trust and recognize, and a roster of go-to’s they expect will meet or exceed their desires.

Cannabis connections: As organizations continue to consolidate in cannabis, and more brands are made available across multiple markets, they will similarly curate high brand loyalty and be positioned to dominate the industry. 

Notably, trusted brands in wine span various price points – consider an under-$10 Moscato versus a luxury Champagne. Both products can be top sellers in the market because both cater to different end consumers. The possibility of premiumization and niche products is evident in wine. 

Cannabis, too, is starting to explore and support premiumization, as evidenced by an emerging interest in premium hand-trimmed flower and infused pre-roll products, and even strategic business acquisitions by larger MSOs to acquire premium-focused brands. While the core cannabis consumer is still price-conscious, research indicates that household incomes of cannabis purchasers can support higher price points. 

Sustainability concerns and new consumers’ ever-growing desire to have trusted, sound products will further create opportunities to differentiate and sway consumer preference between brands. Like Organic or Biodynamic certifications in the wine industry, special cannabis cultivation techniques or practices can provide consumer segments with needed justification for their purchase.

The key is to match up market research with target consumer segments to understand which qualities are most important to ultimately drive sales.

Make data-driven business decisions on what to make, and when

Beyond understanding the consumer, CPG companies like those in the wine industry utilize data to drive sales and determine what to make, when to make it, and who to sell it to.

Cannabis connections: Winegrowers and cannabis cultivators both experience varying growing season times (as grapevines are perennials primarily grown and maintained outdoors, and cannabis plants are annuals grown in a combination of indoor and outdoor grow sites); the need to take cuttings and directly root or graft them as necessary to support production goals; and often finicky varietals (Pinot Noir) or strains (Amnesia Haze) that require special cultivation attention. They also both have the important decision of what final products to make given the capacity constraints of their winery or manufacturing sites.

This opens up a plethora of questions. Should wineries create blends with multiple varietals of wine? Or are single-varietal wines trending in the market? Should cannabis operators use trim to produce more distillate? Or would the trim create more opportunity for margin capture if used to make pre-rolls instead?

The answer is in accessing data and using the insights it can provide.

Connect systems to capture data and support costing analysis

Tracking costs from the start of the growing season or beginning of a batch all the way through to end bottling or packaging allows identification of which end products are producing the greatest value for the organization.

Cannabis connections: Analyzing key KPIs like labor hours required for harvest, time spent curing or vinifying, and the cost of end products’ packaging allows producers and operators to streamline the cultivation and production processes, identify which manufacturing lines are the most efficient, and find ways of reducing overall expenses.

In the event of an infestation event, such as nematodes, cultivators in both industries must execute mitigation measures with the potential to affect yield, labor and materials cost, and the quality of the end product. The ability to track how these infestation events and mitigations might impact the bottom line is an essential piece of the planning puzzle.

Costing data analytics can further help ensure that products are priced correctly on the shelves and capture margin as the wine or flower moves through distributors and on to the end consumer.

Enable production optimization with data analytics

The “processing” stage itself requires extra consideration and use of data to produce the correct end product.

Cannabis connections: In wine, the grapes undergo fermentation and the various organoleptic characteristics (alcohol content, acidity, sweetness, etc.) are either amplified or restrained based on the initial grapes and the winemakers’ understanding of how certain activities will impact the wine.

In cannabis, where extraction activities can highlight or subdue similar characteristics (terpene profiles, potency, etc.), lab technicians rely on data from previous strain batches to optimize distillate output and confirm they are producing the right product.

In both scenarios, data provides the answer to not only what should be produced, but also how to produce the desired end products to meet consumer demand and support an optimized production line.

Support future growth with data-driven planning

Besides planning out the immediate next grow, harvest, or product line to pursue, data should be used to prepare for the future. 

Cannabis connections: As M&A activity continues in the cannabis industry and national brands get a stronger hold on the market, operators will need to evolve to continue penetrating and reaching new segments. The biggest wine brand conglomerates use market insights to better understand their customers and further tailor production planning and marketing outreach decisions. They even go so far as matching up consumer segments with expected flavor profile interests – as cannabis operators should be able to do with strains and their differing flavor and effect profiles.

In the event that the future of cannabis includes federal legalization and interstate commerce, new avenues for sale could follow, along with the potential to pivot to a primarily wholesale distribution-focused model, in alignment with wine industry counterparts. Operators that want to be part of any changed market landscape need to lay the groundwork today by establishing strong, scalable data capabilities that will allow them to communicate and collaborate with industry players across the country.

Here for the right Riesling 

The data conversation is multilayered and may seem intimidating to approach. The good news is, cannabis operators already have valuable data at their fingertips. All that remains is learning how to best access and utilize this data for business decisions. 

Contact

Chris D’Arduini, Senior Manager, Technology+

Amanda Goldston, Senior Consultant, Technology+

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