In a session called, “What’s New With Cannabis?” Melissa Vonder Haar, managing director, ISEE Store Innovations; Jon Taets, director, government relations, NACS; Trevor Fencott, president/CEO, Fire & Flower; and Chris Walsh, CEO and president of Marijuana Business Daily, discussed the opportunity in cannabis for convenience stores.
Vonder Haar shared a number of stats on what’s happened over the past year, as well as what is happening legislatively. The bottom line: “There’s a huge potential for this market, but it’s not going to reach that until the Food and Drug Administration (FDA) says ‘Go.’”
In 2020 U.S. CBD sales were $2.2 billion, and brick-and-mortar sales were down 3.5% as COVID-19 shifted sales online. By 2025 just 33% of CBD sales are expected to be direct to consumer, Nielsen predicted. Of U.S. cannabis consumers, 20% use just CBD, 16% use marijuana, and 64% use CBD and marijuana, she pointed out.
Fencott explained how Fire & Flower cannabis retail stores, through a pilot with Circle K, is opening locations adjacent to existing Circle K stores across Canada. In these co-located stores, they’re seeing a lot of transfer of customers between the c-store and cannabis store.
Walsh noted that cannabis is spreading into the mainstream business world. “On the c-store side, even though you may not be able to sell cannabis with THC in it any time soon, you have to start planning where your path may be early,” he said.
The industry is complex with rules and even terminology differing by state. On the legislative front, there’s the Senate Majority Leader Chuck Schumer (D-NY) bill, known as the Cannabis Administration and Opportunity Act, which is not likely to pass but is a significant step. As Walsh pointed out, having the Senate Majority Leader as the main backer of a cannabis bill means there’s a movement toward change. “This is how things change over time,” Walsh said.
There’s also the MORE Act, which passed the House but is unlikely to pass the Senate. Five states put measures on their ballots for recreational or medicinal cannabis in 2020, with another four states legalizing cannabis since last November.
“If you look at global context, the accelerated pace of other countries coming on board with (legalizing cannabis) is phenomenal. While we’re not seeing everyone go at the same time, I think external pressures will play a part. It’s an economic issue. …” Fencott said. As an economic issue, it’s also a bipartisan issue.
Walsh agreed the pressure is building for eventual action on the federal level.
“This isn’t the devil’s lettuce, there’s a real industry here,” he said.
As recreational cannabis has gained steam it has become the majority of the market, Walsh noted. And the opportunity for cannabis is growing. He pointed out that legal recreational and medical cannabis in 2020 had more revenue than the NFL. By 2025 it will be more than the global opioids market and more than craft beer.
That said, it’s going to be a while before convenience stores can start selling cannabis, but there are things retailers can do today to position themselves to capitalize on the market. One option is opening your own cannabis store, if you’re located in a state where selling cannabis is legal. The licensing process is the biggest challenge, and it varies by state.
It’s also important to start familiarizing yourself with the trends in the market. The cannabis market today varies by region — what’s selling in California is different than what’s in-demand in New York. There is major innovation in product formats from edibles to topicals. Bioavailability — how fast the onset of the effect and offset of the effect — is becoming more important to consumers. Nano emulsification — creating tiny particles that can get into and out of the systems faster — is a growing trend.
Fencott also pointed to innovation on the accessories side including whole flower vaporizers, bespoke grinders and more. At the Fire & Flower stores 4-6% of sales are accessories. C-stores can start selling cannabis accessories (depending on local laws) now. Rolling papers and small screens can be a big opportunity. A lot of dispensaries don’t have space for accessories, which creates a big opportunity for c-stores to fill that void.
Walsh cautioned against selling Delta 8. “We’re seeing states crack down on this, so if you’re selling it now or planning to, it’s probably a matter of time before things change in your market.”
Understanding the customer is also key. Fencott noted that the c-store and cannabis customer are the same. Today’s cannabis customer base crosses multiple demographics from police officers to lawyers to soccer moms to the elderly. As people become more regular users they are also become more discerning. The biggest growth market Fencott sees at Fire & Flower stores is the demographic over age 55.
Co-locating with Circle Ks has allowed for co-promotions, and the value-add has been having customers go into the dispensary and then next door to the c-store and vice versa.
Both speakers advised that c-store retailers look into forming relationships now in the cannabis segment, including with local dispensaries. Is it legal to sell gift cards to dispensaries in your area? Are there relationships you can form and cross promotions you can run with dispensaries? Can you sell screens and papers? Pay attention to what is being sold in dispensaries and which parts — screens, papers, grinders — don’t need to be regulated that you can sell now.
When opening a new location, due your due diligence and consider if you want to be near a dispensary or not, Walsh recommended. “Understand the industry – it’s difficult, and you don’t want to have something change and not know what’s going on.”