It's Like IRI or NPD for Weed: Marijuana Gets Classic CPG-Like Market Research

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Credit: LICreate via iStock

The legal cannabis market is hotboxed with THC-infused candies, calming and energizing beverages and other products that, without the marijuana injection, would seem a lot like the stuff of mainstream packaged goods. But when companies the growing industry need fusty old data, there's no industry analysis group -- like the IRI or NPD Group -- to reference, for example, how cannabis-enhanced chocolate confectionery brands measure up in particular markets.

That's where a new firm like BDS Analytics come in. When Dixie Elixirs, known for its tart candies and fruity THC-laced drinks, aimed to develop a new product line that took advantage of gaps in the market, it looked to the subscription research data firm.

Dixie Elixirs -- which already offers 30 different products in the candy tarts, chocolate, gummies and beverage categories -- needed data in order to find new opportunities. According to Joe Hodas, CMO of Dixie Elixirs, the company wondered whether there were market areas to fill with a less-expensive value product in a certain category, or whether there is room for additional competition.

BDS data shows that in 2016 cannabis-infused gummie candy, chocolate bars and baked goods were the top-selling edibles categories in Colorado recreational and medicinal dispensaries.

Gummies on Top: The Best Selling Cannabis Edibles of 2016
Data is provided by BDS Analytics and reflects sales in Colorado medical and recreational cannabis stores.

However, the firm's analysis of BDS data uncovered new, albeit less whimsical, category than candy: pills. Just a few weeks ago, Dixie launched the first product in its new line, a pill that combines a dose of THC, the active ingredient in marijuana, with botanicals and other components. Dubbed Dr. Stash, the brand logo features an old-timey mustache.

"It's not quite as sexy as, say chocolates or other product lines," admitted Hodas, who said the company evaluated the top 10 products selling in the pill category and decided to enrich its versions with added botanicals as a way to differentiate from other products.

"No one in the top 10 of this category has any differentiated products other than by dose or [cannabis flower] strain or price point," he said. The BDS data revealed that.

"It's been a lot of fun, actually, to bring data to an industry that is so starved for data," said Elizabeth Stahura, president of BDS Analytics, who had close to 10 years working in consumer research roles at NPD Group and its subsidiary Leisure Trends, which tracks the athletic apparel and equipment industries, before co-founding the company.

Available to recreational cannabis consumers in Colorado,Morning Sativa Plus features ginseng, ginkgo and orange oil and is intended to spark energy, clarity and sociability. Night Indica Plus includes passionflower, lemon balm and peppermint oil to soothe anxiety, nervousness and general restlessness.

Stratos, another maker in the category, offers immediate-release THC-infused tablets branded as Sleep, Relax and Energy. However, the firm's tablets come in 10 mg or 50 mg varieties. Armed with BDS data, Dixie spotted an opening for pills featuring a relatively low 5 mg dose, considered a sensible amount to ingest, especially for beginner cannabis consumers.

Credit: Dixie Elixirs

BDS collects its market data two ways. Data reflecting things such as pricing, product, flavor and strain sales trends by state market comes straight from Point of Sale systems at more than 700 dispensaries across the country in California, Colorado, Oregon and Washington. The company plans to launch point-of-sale data harvesting with partners in Arizona and Nevada this year.

The research firm complements that information with data from in-person and online surveys of consumers -- including people who use cannabis products for medicinal purposes, recreational users and those who say they'll never touch the stuff.

The result is research intended to help clients understand who the consumer is and what they're buying "from a brand preference and shopping preference perspective," said Stahura. The company is gearing up to conduct survey research in Oregon and Washington next.

Coming from the methodical consumer research world, Stahura said the consumer insights division at BDS ensures surveys involve at least 2,000 consumers in each state covered to achieve statistical significance and to capture the nuances of markets that are divided by state borders and state-specific laws.

"They're completely different markets," she said. "You're seeing a relatively isolated infrastructure and marketplace building up in each state." For that reason, Stahura added, the research firm cannot use data reflecting consumer behavior in one state to project behavior in another.

As they do in grocery stores, POS systems vary, which adds to the complexity. BDS spent much of its first year of operation building an internal data warehouse and system that could ingest, clean and match aggregated data gathered daily from "literally dozens" of cannabis-specific POS systems.

The two-year-old firm has 15 brand clients including Dixie Elixirs, said Stahura. She stressed that the leadership team at BDS have backgrounds in providing consumer research data, including five who also worked at Leisure Trends Group or NPD Group. In addition, the firm's co-founder Roy Bingham is an early-stage investor in natural foods industry research and analytics firm Spins. BDS recently closed its series A round of funding of $2.1 million, bringing total funding to around $4 million.

BDS partners with Arcview Market Research, a publisher of large-scale cannabis market tracking, which released the fifth edition of its "The State of Legal Marijuana Markets" report recently. Another marijuana market research firm, Cannabis Reports, operates in California, providing data on marijuana products from seeds to candy, and Marijuana Business Daily also publishes industry research.

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