Albeit macro-economic challenges such as inflation, price competition and supply-chain shortages generate uncertainty about the future, global cannabis sales for 2022 will reach just over $35 billion, a jump of approximately 22% YoY, per a March report done by BDSA, a global market research firm focused on the sector.
In this uncertain and highly competitive scenario, business owners might want to understand how to tap into marketing effectively to drive their sales up.
Did that campaign we ran two weeks ago actually increase sales? How do our competitors' prices compare to ours? Are they dropping them right now? Are they dropping prices going into the 420 holidays? Are their prices rising as they deal with inflation? These are key questions that can be addressed through technology. All of these insights are now available on a weekly basis, thanks to BDSA’s Rapid Retail Sales Tracking System, which collects data from thousands of retail and wholesale operators and then provides reports for informed decision-makers.
“We are focused on removing uncertainty from the decision-making process for businesses by looking at the data and looking at the facts to allow conversation and the discussion to move on to the qualitative, opinion-based aspects of every business,” said Micah Tapman, CEO of BDSA in an exclusive interview with Benzinga. “If we want to know the price of a particular product in a particular market, that is not a debate, that is a fact, it is about what it is actually selling, what is the price point, is something that shouldn't consume the time of a company’s board trying to figure out the competitive landscape for their products.”
Tapman is a long-time venture capitalist with a background in cybersecurity and financial services. He led the first investment in BDSA in 2015 and has served the company in a variety of roles including investor, advisor, director and now CEO. Micah is a co-founder of CanopyBoulder and 7thirty, two venture capital investment groups focused on the cannabis industry. He is a veteran of both the U.S. Marine Corps and the Fortune 500 world with an MBA and B.S. in computers.
The CEO explains that solid data allows BDSA to step up to the next level: the insights. “It is the difference between saying ‘something is selling at x dollars’ and saying, ‘there's an up and coming subsector of this category’. For example, BDSA saw the rise of live resin in the concentrate category in real-time. We were able to anticipate that live resin was outperforming other subsets of the concentrate category by looking at the data.”
BDSA’s Rapid Retail Sales Tracking System: A Win-Win For Cannabis Operators
In order to collect data from multiple data providers, BDSA works with thousands of retailers and wholesale marketplaces. Its system concentrates on transactions at the point of sale by collecting data that it shares with retailers so they can understand the market around them.
“It's a very symbiotic relationship between media and retail organizations. We are a trusted third-party authoritative source that says, ‘this is the price of a product on the market,’” Tapman noted.
In addition, BDSA cleans, organizes and normalizes the data - a task that Tapman describes as “incredibly important, especially in the U.S., where there are very loose regulations over what needs to be collected by the market.
“We don't have a barcode like you would in the grocery industry that says this is product #1. BDSA has to deduplicate, for several variants of the naming conventions to understand that product #1 did sell in 10 different stores under 10 different names, all in a price point within 30 cents of each other, or [contrariwise], the price point was actually highly variable across those retailers.”
Tapman highlighted three innovative aspects of BDSA’s Retail Sales Tracking System. The firm reduced the report lag time, to 10 days, and is now publishing weekly data. “We've been able to speed that up through machine learning,” he said. “We've also added new filters for the flower category -which is the largest category in most states, and a look at sales by unit size. We can see all of the brands under GTI or Cresco Labs, and how they are performing. And if they are up, see which brands are really contributing to their growth. And, ‘what's driving that uptick?’”
“That's really [useful] for the financial services community where they can have a clearer picture of the performance of the companies that they're trying to refer to,” added Tapman.
-Is this a solution for a small business with a small population sample and a small amount of data?
"Mom and pop retail operations, for example, might be highly focused on using data sets to optimize their assortment of brands and products within their store. Retailers are heavily focused on maximizing the dollar per square foot, and figuring out the right assortment can be a bit counterintuitive. They could find they're really good at, let's say topicals. If they want to know which topicals they should carry, they can resort to basket analysis to decide: What is the motivation for somebody buying topicals likely to be? ‘Do I want to upsell to concentrates? or Do I want to start the edibles?’
We claim we're unique, right? And we're always a little bit. But the reality is the numbers don't lie, and we generally do see people move in certain directions as a group. This idea of ‘when I walk into a store I can't tell what I'm likely to buy, but that's generally not true when we look at the data. If we see somebody walking and they go shopping for topicals, we can say that they are more likely to be interested in edibles than concentrates.
When your budtenders take that valuable time to recommend another product, 10 or 20 seconds, to talk about what else they might purchase, they might want to lead customers in the direction of edibles. You can get a 10 percent increase in your basket, on average, by simply changing the order of the recommendation your budtenders make."
Market Highlights In Early 2022
Tapman said BDSA’s latest reports show there are a number of cannabis markets that are starting to further develop their supply chain, despite a reduction in the average retail price. He referred to inflation impacting shoppers’ purchasing power, and price competition, as the main drivers of this reduction.
“The supply chains themselves are becoming more robust, allowing companies to reduce their prices and then pass on the savings to the shopper. We're seeing that in the flower category. But the reality is that there are some categories that are withstanding that. We've seen a higher price point in some of the edibles areas where people are using the minor cannabinoids CBD, CBG, to drive up pricing as people seek an advantage and a competitive edge,” he explained.
In the future, Tapman expects “to see a lot of innovation around product formulations” as companies compete to differentiate their products.
“Inflation is likely a driver of price sensitivity,” he added. “Looking at sales in Massachusetts, the number of units being sold stayed reasonably strong, but at a lower price point. Looking at it from a finance point of view, the trick here is to recognize that the shopper's demand is still strong, but they're price sensitive. From the investor's side, it's interesting to think about doubling down into the most efficient producers, low-cost producers have an opportunity to ride the lower price point.”
Micah Tapman, CEO of BDSA, will be one of the keynote speakers at the Benzinga Cannabis Capital Conference in Miami. There’s still time to sign up for the event that will host many top names in the cannabis industry. Click here for more info.
