Understanding the holiday cannabis consumer

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November 13, 2020
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Introduction

Shopping behavior changes dramatically during the holiday season. This can make preparing for the season difficult for cannabis retailers. The Demographics Add-on on Insights Premium can simplify the process by helping you understand the shifts in shopping behaviors so that you can better prepare for the upcoming holiday season.

In this report, we use the Demographics Add-on in our Insights Premium tool to look at shopping behavior across age groups and demographics around Christmas of last year (2019). This will tell us not only who was shopping and what they bought, but also how much they’re buying and when. In addition to providing you with an understanding of who your customers are, this insight is helpful for building effective marketing campaigns, efficiently managing product inventory, and ensuring sufficient staffing on the busiest days. Cannabis operators can also use this insight to help develop product development strategy and ensure they have enough products on store shelves to meet demand this holiday season. To keep track of holiday trends on your own, you can sign up for a free Insights Pulse account or request a demo with us today to find out how you can use Insights Premium data to better prepare for busy shopping days.

Executive summary

Different customers shop for cannabis differently during the holidays, but there are some clear trends that were observed from last year's holiday season that can inform retailers and operators what to expect this year. For example, during Christmas 2019 and in previous years, Edibles, Topicals, and Beverages sold more on average than the rest of the year. Interestingly, both Males and Females shopped similarly for Beverages and Edibles, but Male customers had a much larger increase in their average daily sales to Topicals than their Female counterparts. In this report, we explore in more detail how different age groups and demographics changed their shopping behaviors last year and what categories we can expect to grow this year as a result.

Methodology

Data for this report comes from real-time sales reporting by participating cannabis retailers via their point-of-sale systems, which are linked to Headset’s business analytics software. Sales data is cross-referenced with our catalog of over 500,000 products to provide detailed information on market trends. 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. Thus, there is a slight margin of error to consider.

All data with the exception of slide 3 is from loyalty program sales only, whereas slide 3 is from market-wide data. All of the data in this report is a combination of our US Insights Premium markets (California, Colorado, Nevada, Oregon, and Washington).

US market share by demographic group

US Market Share By Demographic Group: DEC 2019 vs OCT 2020

This graph compares the market share held by each demographic group in December 2019 and October 2020, and displays the index between these two values for each group. An index value over 100 represents an increase in market share over the time period while an index value less than 100 means their market share has decreased.

Millennials, Gen X, and Baby Boomers contributed the most to cannabis sales in December 2019 and continued to do so last month in October 2020. We can also see a clear trend with Gen Z and Millennials, who increased their market share over the previous 10 months. Part of this is due to the fact that more Gen Z customers are aging into the market while the Silent Generation is aging out of the market, decreasing their market share. It could also indicate that younger customers have been more ready to return to dispensaries during the pandemic than older generations. Let’s next take a look at who is more likely to shop during the holiday season.

Growth in average daily sales during Christmas Week 2019

PERCENT GROWTH IN AVERAGE DAILY SALES CHRISTMAS WEEK 2019 (US)

The above bar graph shows the percent growth in average daily sales for each demographic group between the four weeks leading up to Christmas (11/20 through12/17) and the week before Christmas in 2019 (12/18 to 12/24). While every demographic increased their average daily spend during the week before Christmas, three particular groups showed the strongest growth.

Female Gen Z, Millennials, and Gen X groups all shopped significantly more during the week leading up to Christmas than they had in the previous four weeks, indicating that they may have been more likely to shop for gifts at a dispensary. Gen Z Females stand out as the leader on this graph, meaning they may be the“ giftiest” demographic group in cannabis. It is also notable that Gen X Males were the only male demographic group to break 20% growth, although Males in the Silent Generation came in a close second at 19.6%. Next, we take a look at what these groups are shopping for.

Sales growth by category during Christmas 2019

CHRISTMAS WEEK SALES GROWTH BY CATEGORY (US)

This chart shows the market-wide growth in average daily sales for each category during the week before Christmas 2019 versus the previous four weeks. A trend we see every year continues with Topicals, Edibles, and Beverages performing best around the holidays. Vapor Pens and Tinctures also beat the total market’s growth with an increase of 16.9%, while Pre-Rolls, Flower, Concentrates, and Capsules particularly, underperformed relative to the total market.

This tells us to closely monitor stock of Topicals, Edibles, and Beverages leading up to the shopping season to ensure that, as the most popular products, they don’t sell out. Meanwhile, Vapor Pens and Tinctures should be ordered in amounts slightly larger than usual, and we don’t need to worry too much about running out of the remaining categories. Now let’s take a look at who buys Topicals, Edibles, and Beverages, the best performing products of the season.

Category growth in average daily sales by gender

CHRISTMAS WEEK CATEGORY GROWTH IN AVERAGE DAILY SALES BY GENDER

Here we can see the growth in average daily sales by gender for the three categories that performed the best during the week before Christmas in 2019. Both Males and Females responded similarly in their Beverage and Edible purchases leading up to Christmas, but Male customers bought significantly more Topicals daily on average than Females.

This is great information for marketing teams as it shows them where to focus their marketing efforts for Topicals. Looking at the graph, marketers can understand that they need to build marketing strategies to attract even more Males to their store to purchase Topicals in an effort to draw customers away from other retailers.

Category growth in average daily sales by age group

CHRISTMAS WEEK CATEGORY GROWTH IN AVERAGE DAILY SALES BY AGE GROUP

Now we look at growth in average daily sales by age group for each of the same three categories during the week before Christmas 2019. For both Topicals and Edibles, the trend is quite clear: the younger the customer, the greater the increase in spend on these products in the week leading up to Christmas in 2019. Beverages share this trend to some extent with the exception of the Silent Generation, who increased their average daily spend on Beverages by more than 50% last Christmas!

Proportion of sales by age group

DAILY AGE GROUP PROPORTION OF SALES CHRISTMAS WEEK 2019

In this graph we can see the proportion of total Christmas week sales going to each age group on each day of the week. It appears that the majority of last-minute Christmas shopping took place on Monday, especially for the youngest (Gen Z = 17.2%) and oldest (Silent Generation = 18.6%) age groups. This also deviates from a common trend we see for Mondays, which are typically the slowest days of the week in the cannabis industry.

Friday, December 20th saw the largest population of sales from Millennials, Gen X, and Baby Boomers, the three groups who, combined, make up a significant majority of cannabis consumers. We can expect similar trends this year with strong sales on both the weekend before Christmas as well as on the 23rd.

Average basket growth by demographic group

CHRISTMAS WEEK AVERAGE BASKET GROWTH BY DEMOGRAPHIC GROUP

Next we look at the change in basket size for each demographic group during Christmas week 2019 compared to the previous four weeks. Basket size increased across all demographic groups, even slightly with Silent Generation Males, during the week leading up to Christmas. In general, younger customers had smaller baskets than their older counterparts both before and during Christmas week. However, they also had the largest relative increases in basket size, especially Gen Z Females with15.2% larger baskets on average during Christmas week.

Also important to note is that in every age group except for Baby Boomers, Female customers saw a greater increase in basket size than their male counterparts. Looking at the largest and smallest average baskets during the week leading up to Christmas, we see that Silent Generation Females out-performed the rest at $68.96per transaction while Generation Z Males spent the least with $46.17 per transaction on average.

Average discount growth by demographic group

CHRISTMAS WEEK AVERAGE DISCOUNT GROWTH BY DEMOGRAPHIC GROUP

This graph shows how average discount rates changed for each demographic group during Christmas week 2019 in comparison to the previous four weeks. We see that almost all demographic groups except for Millennial Males and Gen Z Females enjoyed higher discount rates during the week before Christmas last year. Millennial Males had one of the highest average discount rates in the preceding four weeks and a significant 16.2% decrease in average discount rate during Christmas week .Gen Z Females were the only other demographic to experience a relative decrease in average discount rate of 3.2%.

Meanwhile, Silent Generation Males seemed to be the most hungry for deals last Christmas with the largest increase in average discount rate at 5.8%.

Conclusion

A lot can be learned by looking back at consumer behavior during last year’s holiday season. We can now expect young customers to contribute even more during the2020 holiday season because we understand that more Gen Z customers are aging into the market and older generations are likely more apprehensive to visit a store during the COVID-19 pandemic. Younger female customers, especially in the Gen Z age group, had the largest increases in spend during the week before Christmas last year across a variety of metrics.

Cannabis operators should also expect to see Edibles, Topicals, and Beverages perform particularly well around the holiday season, just as in every year past. With our analysis, they also know that the growth in Edibles and Topicals will likely be driven by younger customers, whereas Beverages are popular with all age groups around the holidays and particularly among the Silent Generation. With these insights, brands can better plan their product development strategy for the holiday season and make sure their products are on store shelves to meet the holiday demand.

Retailers can also anticipate the last Friday and Saturday before Christmas to be the busiest shopping days, as usual. They can also expect high foot traffic on Christmas Eve as customers complete their last-minute shopping. All demographic groups will expand their usual basket size while none will be particularly hungry for a discount. In fact, some groups that typically seek out higher discounts, like Millennial Males, may be significantly less price sensitive than usual. To get more insights, learn more about Retailer Premium and find out how your store’s data can help you get the most out of this holiday season.

To keep track of high-level market insights during the holidays, sign up for a free Insights Pulse account.

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