For those not familiar with the term, “420” is celebrated every April 20 at precisely 4:20 p.m. and is an annual celebration of all things related to cannabis culture.
It is believed to have originated in California in the early 1970s, after a group of young people started to meet daily at 4:20 each afternoon to partake in what was then an illegal activity in their state. Eventually one of them began working with the Grateful Dead as a roadie, and the band helped popularize the term, making April 20 the unofficial cannabis holiday it is today.
In Canada, “420” was for years marked by protests in support of cannabis legalization. Since the Trudeau government moved to legalize the recreational use of cannabis by adults in 2018, the annual holiday has become more of a celebration, even as some activists push for further liberalization of cannabis laws around the world.
Unfortunately, pandemic restrictions are putting a damper on “420” celebrations for the second year in a row. Like other retailers, legal cannabis stores have been faced with shifting consumer behaviour coupled with government-imposed capacity limits and, in some provinces, a total shutdown of in-store sales, forcing consumers to rely on home delivery or curbside pickup options.
What is unique to the cannabis sector, however, is the fact that licensed retailers must still compete with an entrenched illicit market and, in some provinces, competition from government-owned e-commerce platforms.
Despite these challenges, many cannabis retailers have proven resilient and have continued to grow by successfully adapting to the new realities.
According to Statistics Canada, more than one-third of Canadians who consume cannabis increased their consumption during the pandemic.
This has, in part, been driven by tremendous shifts in the quality, variety, and price of products on offer through legal retail channels. While dry bud remains the most popular product format in Canada, a March report by the research firm Pollara Strategic Insights finds that to date, 2021 has seen a steady rise in the demand for cannabis-infused products, including edibles and drinks, along with extracts and vapes.
Cannabis retailers that are succeeding despite pandemic-related challenges are the ones that have properly differentiated products to showcase quality and product variety.
New products and brands are launching at a dizzying pace. As the buying behaviour of the consumer shifts in response to new offerings, smart retailers are optimizing their assortment, leveraging a wide variety of ancillary products that are in high demand, like cannabis accessories, and arming their staff with a clear understanding of the key selling features of a diverse product mix.
Governments can also play a role in ensuring the post-pandemic success of an industry which, according to BNN Bloomberg, now rivals the auto sectors’ contribution to Canada’s economy.
In too many provinces, private sector cannabis stores are being forced to compete with government entities that have a monopoly on wholesale supply while simultaneously competing with their clients in the e-commerce space.
Federal regulations that were intended to prevent the “normalization” of cannabis consumption have instead made it difficult for legal players to build the brand awareness necessary to lure consumers away from the illicit market.
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History has shown us, however, that waiting for governments to act is not a sound business strategy.
As we look ahead to “420” 2022, the strength of the cannabis retail sector will be driven by those that are able to be nimble and implement innovative offerings to meet shifting market realities regardless of government action. As vaccination rates increase, case counts will inevitably drop, and retail stores will reopen.
For those entrepreneurs operating in the cannabis retail space, now is the time to pivot operations to take advantage of the new normal, when it comes.
— Andy Palalas (Chief Revenue Officer) and Omar Khan (Senior Vice President for Corporate and Public Affairs) are senior executives with High Tide Inc., Canada’s largest retail cannabis chain by revenue operating stores under the Canna Cabana, KushBar, Meta Cannabis Co., Meta Cannabis Supply Co. and NewLeaf Cannabis banners