Hot for reefer: 76% would try legal cannabis therapeutic product

27 November 2018

Positive perceptions of medical and recreational marijuana – and the companies that sell them – could be a boon for brands, according to a report from consultancy A.T. Kearney.

Responding to relaxing norms, policing costs, and taxation incentives, governments around the globe are relaxing their laws surrounding cannabis/marijuana use. Last year, Uruguay became the first country to legalize recreational cannabis use, while Canada followed suit earlier this fall. Meanwhile, in the US, recreational marijuana is legal in nine states, while medical marijuana is legal in 30. The age of moral panic surrounding ‘reefer madness’ or ‘jazz cigarettes’ has loosened into one where elderly folks get it prescribed for their glaucoma. Nonetheless, the possession, use, distribution, and sale of marijuana and derived products conflictingly remains illegal under US federal law.

According to an A.T. Kearney study of 1000 Americans and 1000 Canadians, North American consumers are knowledgeable about cannabis products, while also being open to trying the increasingly legal herb. About 80% of consumers surveyed have used or know someone who has used cannabis products, with smoking (92%) and edibles (61%) being the most common usage formats.

Though the ‘intoxicating’ element of marijuana is well-known (specifically, the THC compound), the survey found that 76% consumers knew that there was a therapeutically beneficial but not psychoactive element of marijuana (cannabidiol or CBD). A.T. Kearney surmises that CBD products could have an even larger market than recreational marijuana.

proportion that would try legal therapeutic and recreational marijuanaOverall, 72% of respondents said medical cannabis should be legal, with 21% responding that both recreational and medical cannabis should be legal, and 51% saying that only medical cannabis should be legal.

Across all age groups, about 80% agreed that cannabis products offer wellness or therapeutic benefits. Moving on from this, the survey found that 76% would try a legal therapeutic (non-intoxicating CBD) cannabis product, while 55% of US and Canadian consumers would try legal recreational cannabis.

In terms of what kind of recreational products they would consume, the most popular category was foods – like candy, chocolate, and snacks – while the second most popular category was ‘smoking.’ Meanwhile, the survey found that if consumers were to replace alcohol consumption with recreational cannabis, beer would see the highest substitution effect, at 27% of respondents – compared to 22% for wine and spirits.

Relaxing marijuana laws and positive consumer attitudes mean that potentially huge markets are opening up, with one estimate projecting the US market to be worth $40 billion by 2021. A Deloitte projection for Canada expects the legal cannabis market to be worth $4.34 billion in 2019.
releasing a cannabis product does not worsen consumer perceptionAccording to A.T. Kearney, the market represents an especially large opportunity for trusted brands. 72% of North American respondents said that brand was a very or somewhat important factor in assessing the quality and safety of cannabis products. In addition, releasing a cannabis product does not significantly worsen consumer perception, with 32% saying that the launch of a cannabis product from their favorite brand would improve perception, while 54% said it would not change their perception of the brand.

Of those who said it would improve their perception of the brand, 49% said they would buy more frequently from that brand, 46% would feel more brand loyalty, 36% said the brand would better represent their values, and 42% said they would perceive the brand as ‘trendy’ or ‘innovative.’

"The survey clearly demonstrates the viability of the market for cannabis across multiple consumer segments,” commented Randy Burt, a partner in A.T. Kearney’s consumer and retail practice. “CPGs and retailers focused on health and wellness, snacking, functional food and beverage, and beverage alcohol need to have a perspective on how they will approach the cannabis opportunity."



US grocery sector in store for further hard discounter expansion

01 April 2019

Hard discounters offer customers bulk food at low prices in an unassuming shopping environment. German firms Aldi and Lidl have considerable clout in Europe, and in recent years have globally expanded their store footprints. Aldi is well-positioned in the US, garnering high-level support from consumers, while Lidl, which entered in 2017, has quickly built a strong reputation. As the rollout of the discounters continues, local brands face stiff competition.

Competition among supermarkets has heated up in recent years as consumers increasingly sought out discounters and moved away from hyperstores. German discounters Aldi and Lidl in particular have asserted their dominance across global markets with the former opening of hundreds of new stores and the latter entering the US market in 2017.

New analysis by Bain & Company analyzes how far the rise of discounters has affected grocers in the US market. The report, titled "How US Grocers Are Standing Up to Europe’s Hard Discounters," is based on a survey of 17,400 consumers, among other data sources.

Hard discounters NPS

To better understand the impact of hard discounters Aldi and Lidl on the US market, the firm’s recent survey of consumers asked respondents about their grocery shopping habits using the Net Promoter Score function. The Net Promoter Score measures how likely it is that a consumer will recommend a product, service, or brand to friends and family. 

In terms of the regular grocery shopping trip, hard discounters have managed to top the market at 43 points, with supermarkets around seven points behind. Mass merchants have the lowest score in the category at around 20 points. For big stock-ups, hard discounters, with their large bulk offering and appeal, score 60 points – well above that of warehouse clubs (45) and supermarkets (38). The analysis shows that even for quick trips for a couple of items, hard discounters top the score at around 10, compared to six for supermarkets and negative scores for warehouse clubs and mass merchants. The only category in which the hard discounter segment performs relatively poorly is buying prepared foods for today – at 25 compared to 50 for warehouse clubs and 35 for supermarkets.

Aldi customer advocacy

Aldi, which has been in the US market since 1976, has resonated strongly with consumers, coming in the top three for NPS for consumer advocacy. The company has managed to increase its position on last year by nine points, arriving at 55 – 15 points behind the leader. Aldi was noted in particular for its delivery of “best everyday low prices” and “best value for the money.” Lidl, a relative newcomer to the market, has a middle-of-the-road score.

Consumer advocacy is crucial to success within grocery

The success of discounters generating high consumer advocacy scores, according to the Bain, mean they are likely to show strong performance in the future, The firm notes that promoters purchase more than twice as frequently as detractors, with 70% of promoters shopping two times a month or more compared to detractors at 32%. The firm also found that the average monthly amount spent among promoters is almost three times as high as detractors, at $111 against $39. Promoters additionally tend to be more loyal to their chosen company, netting 28% of the total wallet compared to 11% for detractors.

“Lidl and Aldi are just beginning to flex their competitive muscles,” Mikey Vu, a partner with Bain & Company’s Retail Practice and a coauthor of the report, said. “What we’re seeing is that US grocers can effectively stand up to these hard discounters, but that they need to remain vigilant and innovate in strategic areas to keep their edge.”