Getting to know the cannabis consumer with customer metrics

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June 23, 2020
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Executive summary

This report looks at the intersection of sales data and demographic data, both as two ways to look at the market, and as one integrated one. While Headset’s new Insights Demographics dashboard can pull cross-referenced demographic and sales data for any product category, this report is based on data from the Pre-Rolls category as an example. It juxtaposes demographic data with data on price sensitivity, segment preference, and accompanying purchases, aiming to provide a comprehensive view of the Pre-Roll customer base.

Introduction

What exactly are we talking about when we say consumer metrics? We’d define it as the perfect marriage of sales data and demographic data. Many of our previous reports have drilled down into one topic within each of those realms, but this one attempts to synthesize them. It’s based off of the work we’ve been doing on our new Insights Demographics dashboard, which is exactly what it sounds like: all of Headset’s real-time sales data and opt-in consumer demographic data, all in one place. The idea is to answer the all-important question in any consumer packaged goods environment: Who is buying what?

Within the Pre-Rolls category, we see a strong lean towards younger generations. Gen Z buys Pre-Rolls many times more often than the Silent Generation. Those generations are also interesting in terms of gender, as there isn’t much perceptible gender difference in affinity except in the oldest and youngest cohorts. From there, we drill deeper into the “what” part of that “Who is buying what?” question, looking at companion purchases — Flower is actually not as popular among Pre-Roll buyers as you’d think — and different segments within the Pre-Rolls category. 

This should surprise exactly no one, but the Silent Generation isn’t super into Cannagars/Blunts. Martha Stewart might be part of that cohort, but then again, not everyone her age hangs out with Snoop Dogg. We also examine segments by gender, which confirms some previously seen trends around CBD. Lastly we look into price, which also corroborates some previous data. Older generations tend to be significantly less price sensitive, while Millennials and Gen Z — still an overwhelmingly larger part of the cannabis consumer base — go for lower priced items. That doesn’t hold true across all segments, just most of them, but it’s especially true for CBD.

Overall, this report offers a lot of insight into one of the most iconic product categories in cannabis. Joints are a classic consumption method, and have made the transition to legal cannabis (where they’ve been slightly rebranded as Pre-Rolls) pretty seamlessly. But while we love offering detailed category reports like this, the really big news here is that data like these are available across all categories. Our Insights customers who add the Demographics dashboard can call up detailed customer data for any category or segment, all updated in real-time. Knowing what’s selling is vital, of course, but knowing who you’re selling it to is even more powerful.

Methodology

Data for this report comes from real-time sales reporting by participating cannabis retailers via their point-of-sale systems, which are linked up with Headset’s business analytics software.

The data included are from the 180 days prior to May 28, 20209, unless otherwise noted. Data comes from California, Colorado, Nevada, and Washington, and is from adult-use cannabis sales. Sales data are cross-referenced with our catalog of over 500,000 products to provide detailed information on market trends.


Demographic information comes from loyalty programs at Headset retailers. This information includes birth-year and gender for many customers as well as a customer number (much like a loyalty card number when you shop at QFC or Safeway).

As this report deals with age groups, we use the following definitions:

Generation Z: born 1997-2012, currently aged 8-23

Millenials: born 1981-1996, currently aged 24-39

Generation X: born1965-1980, currently aged 40-55

Baby Boomers: born 1946-1964, currently aged 56-74

Silent Generation: born 1928-1945, currently 75-92


Source: https://www.pewresearch.org/fact-tank/2019/01/17/where-millennials-end-and-generation-z-begins/


Headset’s data is very reliable, as it comes digitally direct from our partner retailers. However, the potential does exist for misreporting in the instance of duplicates, incorrectly classified products, inaccurate entry of products into point-of-sale systems, or even simple human error at the point of purchase. For this report, the data are also self-reported by loyalty program participants. Thus, there is a slight margin of error to consider.

Towards a total addressable market

When most of us think about a product’s total market, we think total revenue. But to get a complete picture of the market, we have to compare that to its customer base. Those metrics are presented for Pre-Rolls here as a side-by-side, allowing us to see that while Pre-Rolls accounted for only 9.1% of total sales in the last six months, just about a third of all customers bought a Pre-Roll. Instantly, that tells us that Pre-Rolls have a comparatively lower price point. But it also tells us that they’re immensely popular, and likely bought frequently as add-ons. If you were doing a deep dive into your consumer base, this would tip you off to look deeper into basket data for Pre-Rolls, finding out which products they’re most frequently bought alongside. Not to belabor the point, but that’s exactly what Insights as a whole, and Insights Demographics specifically, is designed to do. Sign up for a demo to learn more about cannabis demographic data on Headset.

PRE-ROLL ADDRESSABLE MARKET: TWO METRICS

Zoomers and Pre-Rolls: a love story

You might think the kids would all have switched to vaping by now, but that’s just not true. The portion of Gen Z that’s aged into the adult-use cannabis market absolutely loves Pre-Rolls, buying them at an even higher rate than their Millennial forebears. Just about an even third of Millennials bought a Pre-Roll in the past 180days, while 36% of Gen Z women and 34% of Gen Z men did. That’s a lot of doobs, Scoob. Somewhat ironically, the Baby Boomers, who made the joint an iconic part of their countercultural cannabis culture in the ‘60s, are not so into them anymore. Less than a quarter of Baby Boomers bought joints, and the Silent Generation was even more averse. Interestingly, there weren’t many gender differences in the middle of the spectrum, but Silent Generation women clearly do not like Pre-Rolls, while Generation Z women like them three times as much. Our other reports have shown older women strongly preferring wellness products, so it makes sense that they would shy away from something so closely associated with recreational use.

PROPORTION OF CUSTOMERS WHO PURCHASED PRE-ROLLS IN THE PREVIOUS 6 MONTHS BY AGE GROUP AND GENDER

Know your audience

This graph has similar information, but gives you the likelihood a given cohort will purchase a Pre-Roll versus the market average. If you’re looking to move Pre-Roll products, looking at the left side tells who you should tailor your marketing towards. In this case, young women, who purchase Pre-Rolls at a rate of 15% above average for Gen Z and 8% above average for Millennials. All those cannabis billboards featuring carefree Millennials at festivals and beaches are spot on actually, at least they’re selling Pre-Rolls. Conversely, trying to pitch Pre-Rolls to elderly women probably isn’t going to work no matter how perfectly tailored your marketing is. Silent Generation women buy at 61% below average.

PRE-ROLL PURCHASING INDEX VS TOTAL MARKET BY AGE GROUP AND GENDER

What’s along for the ride?

Looking at market share by category is another example of how applying a customer metrics approach can shine new light on things. When we compare overall category market share to category market share for only Pre-Roll customers, we see some notable differences. Most prominent is that Pre-Roll customers buy significantly more Pre-Rolls and significantly less Flower. Flower accounted for 47.2% of overall market share and only 40% of market share among Pre-Roll buyers, and they bought double the Pre-Rolls of the average customer. This lines up with other data that shows Millennials and Zoomers to be a price-conscious cohort, as Pre-Roll shave very low average item price. It also makes sense, as we see Pre-Roll consumers buying slightly more Vapor Pens, which we’ve also found to grow in popularity a sage decreases.

CATEGORY WALLET SHARE OF PRE-ROLL CUSTOMERS AND TOTAL MARKET CATEGORY SHARE

Segment specifics

Category sales aren’t the only thing affected by age and gender groups. Segments, the assortment of product styles within a category, also appeal to different demographic groups. Pre-Rolls offer us a good illustration of that, as a few of the segments within Pre-Rolls are very distinct. For example, Cannagars/Blunts are very specifically marketed to a young, recreation-oriented audience. While we can’t say that no one smokes a Cannagar for wellness reasons (all recreational use is relaxing, at the very least!), most people looking to calm anxiety or ease pain aren’t sparking big blunts to do it. Therefore it’s no surprise that that segment skews towards Gen Z and Millennials, with a combined 73.1% of sales going to those two generations.

PRE-ROLL SEGMENT SHARE BY AGE GROUP

Blunts are for the boys

Insights Demographics allows us to slice the data by both age and gender, so let’s see how segment preferences shake out by gender. Given that blunts are best associated with rap, a genre of music rife with machismo, it’s no surprise men outbuy women by the most in that segment, at 69% to 31%. Women average around 35%of the market for most Pre-Roll segments, but buy above that average in Mixed Strain and CBD - Single Strain. While women preferring wellness products may be stereotype, it’s one that’s borne out by the data here. Remember, however, that at least when it comes to Gen Z, women outbuy men in the Pre-Roll category overall, and the category is still very much a recreational one.

PRE-ROLL SEGMENT SHARE BY GENDER

PRE-ROLL SEGMENT SHARE BY GENDER

But will they pay?

Knowing how much each consumer segment is willing to spend on your product is hugely important. Thus, we present a very granular graph from the Demographics dashboard: segment price sensitivity by generation. We should note two things here. One, older customers tend to spend more in general. And two, despite prices being much higher than normal, younger customers spend more per product in the Mixed Strain category. Why is that? Probably because most Mixed Strain products are multipacks, which might be more popular with Millennials because they often give you more bang for your buck. While the Cannagars/Blunts category also exhibits a more generous spend from Gen Z and the Millennials, we think we’ve figured out by now why that is!

PRE-ROLL AVERAGE ITEM PRICE BY AGE GROUP

Across all other segments, the trend is what we’d expect, with the bars rising steadily along generational lines. Older generations are more economically established, and more able to make bigger purchases all at once. Younger generations shop more frequently but spend much less, which suppresses their average price numbers. Especially interesting here is that the Silent Generations is willing to spend a whole lot more on average on CBD strains. If you’re using it as a form of treatment or relief, it certainly makes sense that you’d want to get the good stuff.

PRE-ROLL AVERAGE ITEM PRICE BY GENDER

Predictions

• Total addressable audience is not the same as total sales. For Pre-Rolls, the customer base is more than three times the size of overall revenue share, at 31% and9.1% respectively.

• The bulk of the market for Pre-Rolls is Gen Z and Millennial customers, while the Baby Boomers and the Silent Generation are not particularly interested.

• There isn’t much difference in preference for Pre-Rolls between the genders, except with Gen Z and Silent Generation women, who are respectively over and underrepresented compared to men of the same generation.

• Pre-Roll customers really like Pre-Rolls. Compared to the market average, Pre-Roll customers spend twice as much of their wallet within the category. They’re also slightly more likely to buy Vapor Pen products too

.• Among Pre-Roll segments, previously documented generational preferences around wellness and recreation hold true. Older generations are more interested in CBD, while younger ones are much more likely to buy Cannagars/Blunts.

• Gender-based preferences hold true in some instances, with women leaning towards CBD and shying away from Cannagars/Blunts. That said, Gen Z women are still the most frequent purchasers in the Pre-Roll category overall

.• In terms of spending, generational stereotypes apply. Spending increases by generation in almost every segment except Cannagars/Blunts and Mixed Strain. ForCBD, Silent Generation spending is significantly higher than any other generation.

Conclusion

Some trends are here to stay, and the one that really sticks out here is that, even in a largely recreational category, generational and gender preferences for wellness remain. That, we suspect, will stick around even after the Baby Boomers reach the age the Silent Generation is at now. It might be early, but the preference for CBD among older women is present in this report and many others, so we think it simply reflects how useful those products are to the elderly.

On the other side of that coin, young people still just want to have fun. Who knew? But again, the fact that products like Cannagars/Blunts resonate well with a younger audience — people who grew up on music extolling the virtues of blunts, mind you — appears to be an ongoing trend. Blowing of steam by getting a little blasted is, after all, a time-honored pastime of youth.

What’s especially interesting about consumer metrics, we think, is that it often lines up with trends from outside the cannabis industry. For example, we read every where that Millennials, and by extension Zoomers, are the most cash-strapped generation in history, and so seeing their overall spend remain lower lines up with that. When it comes to price sensitivity, that seems to very much reflect each generation’s economic position, so unless something changes more generally, we don’t expect it to change much in cannabis.

Lastly, the gender divide in cannabis carries on. Men still show up in the industry at nearly double the rate of women, but that is something we do expect to change on its own. Though Pre-Rolls’ exceeding popularity with Gen Z might affect this, it’s notable that Gen Z women have higher purchase rates for Pre-Rolls than Gen Z men. Historically, men have been especially overrepresented in categories that are what we would define as more recreational, or even “hardcore.” Concentrates, for example, skew towards men. But while Pre-Rolls don’t have the macho aura that dabs do, we think it’s still significant that younger women are so enthusiastic about them. It’s too soon to call, but as more of Gen Z enters the market, the gender balance seems likely to shift much more closely to the actual population’s.

About Headset

Headset is a consumer data analytics platform that provides market intelligence for the cannabis industry. Our extensive Market Reports deep-dive into specific categories and aspects of the industry to help businesses better monitor the market and perform exhaustive category analysis. Reports are generated via aggregate, real-time transaction data to get a unique and thorough analysis of what’s happening in the cannabis industry as the data becomes available. Headset offers three distinct products that help retailers, dispensaries, brands, product manufacturers, distributors, and investors move ahead in the industry.

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