Convenience stores could have distinct advantages in marketing cannabis, should marijuana become legal.

Thinking ahead often pays off — and for the convenience retailer, it has the potential to pay off big when considering the sale of marijuana. The convenience channel has several distinct advantages over the other classes of trade that should provide for major business gains if marijuana is legalized.

Of course, much has to happen for this to become a reality. Currently, 10 states plus the District of Columbia have legalized marijuana for recreational purposes, and in 2019, it is encouraging that additional state governors and legislators are considering recreational legalization. It is important to note that, as states legalize marijuana for recreational purposes, laws will need to allow for its sale at traditional retail outlets rather than dispensaries.

Realistically, for the c-store retailer to capitalize on the selling of marijuana, it will be best for positive action to also occur at the federal level. This will allow marijuana purchases to occur using a credit card, as with any other transaction. Support to bring federal requirements in line with state regulations is stronger than ever in Washington, and for the c-store retailer, there is good reason to hope this occurs.

Consumer opinion of marijuana is more positive than ever. Management Science Associates (MSA) recently reviewed research showing that two-thirds of adults approve of medical and/or recreational use. Eighty percent of consumers that have tried marijuana said they’re likely to use it again within the next year, and 72% of this group approve of both recreational and medical use. With this rising tide of strong consumer sentiment, there will be increased pressure to bring federal regulations in line with those of the states.  

MSA’s analysis of consumer interest levels, conducted by reviewing Google search trends, revealed that this strong consumer interest in marijuana is not going to abate. For perspective, MSA has been monitoring Google search trends for many years as we tracked and projected the growth of the vapor category. With the launch of Juul, search trends in the vapor category have increased significantly, most notably where ‘Juul’ was included in the search terms. However, since late 2017, the growth rate in search for CBD/cannabis has far exceeded that of ‘Juul’/vapor, suggesting that far stronger consumer demand is on the horizon.

C-Store Advantage
This horizon looks very bright, as convenience retailers have several significant advantages over other trade channels in the potential selling of marijuana. Research conducted on 70,000 adults in over 65 markets in the U.S. explored the demographic profile of the typical cannabis purchaser. The most likely marijuana purchasers are males 18-49 years old, which closely aligns with the typical c-store shopper. For female consumers, the marijuana purchaser skews younger, in the 18-34 category. Further, the typical marijuana purchaser tends to be younger, single, childless and rents rather than owns a home. Should marijuana sales become legal, c-store retailers have the most likely cannabis purchaser walking through their door several times a week.

This study identifed another interesting characteristic of the marijuana purchaser: The typical purchaser is more likely to be a current tobacco consumer. This is another big advantage for the convenience retailer — current cigarette or cigar purchasers are about 50% more likely to purchase marijuana than the general population.  And the current vaping consumer? About 60% more likely. 

While the legalization of marijuana in many states and at the federal level is still unknown, the convenience channel has distinct and impressive advantages over other retail channels. Today, many c-store retailers are looking for opportunities to overcome declines in some top convenience categories. The selling of marijuana products has the potential to overcome these declining categories and grow a store’s revenue considerably.

Tobacco Sales Cannibalization
Nevertheless, as you may expect, the news is not completely positive. Further research by MSA shows a relationship between the sales of marijuana and those of tobacco. We already know a close relationship exists between the purchases of these two products, but it also appears there can be some cannibalization of tobacco sales in states where marijuana is legal for recreational purposes.

Interestingly, the cigarette category also exhibited slight decline in areas where marijuana was both recreationally legal and where it was not legal, suggesting there was not a significant impact on cigarette sales. Similar results were noted across the other tobacco product (OTP) categories — moist, pipe and snus —  as no impact was seen on the sales of these items where marijuana is recreationally legal.

Yet, analysis of the cigar category found a significant impact on sales where marijuana was recreationally legal. In states where marijuana was not legal for recreational purposes, cigars were growing by nearly 9%; however, the category declined by more than 2% where marijuana was recreationally legal. 

We realized similar results in the vapor category. In states where marijuana was legal for recreational purposes, the vapor category grew by 60%, compared to a growth of over 100% in states where marijuana was illegal.

Analyzing both the positives and negatives surrounding the potential sale of marijuana, it is clear the positives far outweigh the possible negatives for the convenience retailer. Just as this category has great potential to build revenue and profitability for the convenience channel, it has a similar ability to build tax revenue for all levels of government.  

For these reasons, as well as a strong level of consumer interest, thinking ahead about how to manage this category is a smart exercise for the convenience store retailer. Staying informed on state and federal regulations and industry developments will enable the convenience store retailer to capitalize on the opportunity when  cannabis legalization does occur.

Don Burke is a senior vice president at Management Science Associates, a data management and analytics firm. He has 20 years of consumer packaged goods experience working across the cannabis, tobacco, grocery, confectionary and beverage categories.

 

 

 

CBD, Technology, Tobacco