By now it’s pretty clear COVID-19 has changed much about how Americans will live their lives moving forward. And while the impacts can be seen in almost every facet of life, there are certain areas that have seen distinctive pattern shifts, in particular, consumer behavior. Consumer behavior shifts during crises often indicate a hierarchy of importance among products, and thus demonstrate consumer adoption rates. Now that cannabis is a legal commodity in many states, it can be evaluated in the same way. Let’s explore what consumer data tells us about cannabis consumer product adoption, and what we can expect to see within the cannabis industry as we make our way to the other side of the pandemic.
COVID-19 Timeline (adapted from USA Today)
- January 17th: CDC implements additional airport screenings at SFO, JFK, and LAX due to growing concerns around the spread of a novel coronavirus.
- January 21st: The first novel coronavirus case was confirmed in Washington State.
- January 24th: Dr. Anthony Fauci goes on the record to inform the United States public their risk of contracting the novel coronavirus is low.
- January 30th: The World Health Organization (WHO) declares the novel coronavirus outbreak a global health emergency. On the same day, the United States reports its first person-to-person transmission.
- January 31st: President Trump’s administration declares the novel coronavirus outbreak an American public health emergency — and sets up quarantines for Americans coming back from China.
- February 6th: The first death from the novel coronavirus is reported in the U.S. (The autopsy isn’t released until April 21st to confirm it.)
- February 11th: The WHO formally names the coronavirus COVID-19.
- March 3rd: U.S. surpasses 100 known cases of COVID-19.
- March 11th: President Trump issues a travel ban on Europe. On the same day, WHO declares the COVID-19 outbreak a pandemic as the United States tallies more than 1,000 cases.
- March 12th: Schools begin shutting down due to fears of unnecessary exposure to the virus for children.
- March 13th: President Trump declares the COVID-19 pandemic a national emergency. In legalized cannabis states, cannabis purchases surge and basket size is significantly increased, anecdotally being compared to prior 4/20 holiday sales.
- March 16th: State governors begin issuing shelter-in-place-executive orders. Cannabis sales again spike in response to potential future limited access.
- March 19th: The U.S. surpasses 10,000 confirmed COVID-19 cases.
- March 20th: States begin deeming cannabis an essential business. Again, cannabis dispensaries report an increase in traffic with above average basket sizes.
- March 26th: The U.S. surges past China and Italy to become the nation with the most confirmed cases.
- March 27th: President Trump signs the $2T CARES ACT stimulus package. On the same day, the U.S. surpasses 100,000 COVID-19 cases.
- April 1st: The U.S. confirms more than 200,000 COVID-19 cases and toppes 1,000 deaths in a single day for the first time.
- April 7th: The U.S. reports more than 2,000 deaths in a single day.
- April 14th: All 50 states have reported deaths due to COVID-19. Additionally, the U.S. becomes the nation with the most deaths from the virus.
- April 15th: First round of stimulus checks hit Americans’ bank accounts. The extra accessible money influences a sharp cannabis sales increase.
- April 20th: The cannabis industry celebrates its “420” holiday with dispensaries raking in more sales than usual, but less sales than on the 4/20 holiday in 2019. States begin issuing reopening plans.
- April 28th: The U.S. tops one million COVID-19 cases.
- May 8th: U.S. unemployment rates soar to 14.7 percent — the highest unemployment rate since The Great Depression.
- May 11th: States begin loosening restrictions.
- May 27th: The U.S. hits a monumental mark with more than 100,000 COVID-19-related deaths.
- June 11th: The coronavirus reaches 2 million confirmed cases in the U.S.
Cannabis Deemed Essential Business
When governing bodies in the U.S. determined COVID-19 would become a national crisis, they quickly started making decisions on the out-of-home activities the public would be permitted to do. When the safety protocols were distributed to the masses, the only permissible activities were the ones that were required to keep the public healthy and alive: grocery shopping, prescription pickup at pharmacies, getting gas at gas stations, getting cars fixed at auto-body shops, and anything else necessary to make society run appropriately without the potential for citizens’ exposure to the virus. These permissible activities were deemed “essential business.”
California was the first state to call a shelter-in-place order on March 16, 2020. Only four days later, cannabis was officially declared an essential business in the state of California. This presented an opportunity for cannabis to be an industry not only accepted as essential in the communities it resided within, but also provided cannabis companies the ability to be “recession-resistant.” State-by-state, every other medical and adult-use state followed California’s lead, making cannabis essential business in some form, with the exception of Massachusetts, which closed down their adult use cannabis businesses on March 23, 2020. In all the other legal states, cannabis companies began quickly setting up safety protocols to comply with social distancing measures in order to open their doors.
Delivery & Curbside Increase
With the current health concerns, it’s no surprise shoppers are being more conscientious with how they purchase their everyday goods. Since social distancing procedures have been adopted by the masses, retail stores and restaurants have scrambled to implement safe shopping operations for their consumers — many of which have turned to delivery and curbside pickup as safe shopping method options.
McKinsey & Company recently conducted a global consumer study regarding consumer behavior during COVID-19. An area demonstrating a statistically relevant insight is around delivery and curbside pickup behaviors. “Consumers are adopting and intensifying digital and reduced-contact ways of accessing products and services. This digital trend is magnified for Gen Z and millennials and for higher-income consumers” (McKinsey and Company COVID-19 Consumer Pulse Surveys Conducted Globally between May 18 to May 25, 2020). In the same study, the McKinsey & Company team measured the likelihood these shopping formats will stick around on the other side of the pandemic. “Consumers globally intend to continue using many of these activities after the COVID-19 crisis passes. Activities with the highest intent to continue across countries include using contactless checkout services like self-checkout or in-store pickup.”
As for the cannabis industry, once cannabis was deemed essential by adult use states, dispensaries were at a significant disadvantage, as most jurisdictions did not permit curbside pickup or delivery, and the ones that did hadn’t created a streamlined approach to regulate these shopping methods. The pandemic required many cities’ and states’ governing bodies to quickly reassess their policies around how cannabis consumers purchased their goods, many ultimately opening up the opportunity for dispensaries to begin curbside pickup and delivery options. As dispensaries began organizing and implementing safe shopping practices, there was a sharp increase in the amount of consumers utilizing curbside pickup and delivery options to purchase their cannabis products.
BDS Analytics (BDSA) has been conducting ongoing bi-monthly webinars to track the impacts of COVID-19 on the cannabis market. One area the BDSA team has been reporting on frequently is the changing methods of cannabis shopping. The BDSA team is tracking data from pre-COVID-19 to mid-May, when buying behaviors began normalizing — and beyond. During the COVID-19 Impact on Cannabis Webinar hosted on May 21, 2020, BDSA shared a statistically significant swing in consumer purchasing behavior from shopping in-store to delivery and pickup. The report cites retailers attributed only 15 percent of sales to delivery and pickup at the beginning of March. In the midst of the pandemic, together pickup and delivery accounted for approximately half the cannabis products sold. By the second week of May, 24 percent of retail sales were still purchased by means of delivery and pickup. The bottom line, cannabis pickup and delivery will be an ongoing trend if governing policies support the adoption, just as we see in other consumer good categories.
If you went out to the grocery store anytime between the end of March and the beginning of May, you would’ve likely encountered the same types of consumer behavior. Stores had less than normal shopper traffic, but the consumers who were braving the potential of exposing themselves to COVID-19 had their carts filled to the brim with all the necessities: canned goods, rice, house cleaners, and of course, toilet paper.
General retail insights platform 1010 Data culled together credit and debit data from over 5 million retail transactions between March and May 2020. When looking specifically at the data around general merchandise and groceries, “spending on groceries reached a year over year increase of 97.1 percent on March 18, 2020,” reports 1010 Data. This consumer spending behavior has a peak around the time governors began issuing executive orders for shelter in place. “However, these sudden panic-buying urges leveled out by the start of April,” asserts 1010 Data. This behavior trend demonstrates a consumer stock up mentality.
The consumer behavior for the cannabis industry — both medical and adult use — followed suit. Dispensaries were logging fewer visits to their stores, but the basket size or purchase amount was much larger than the sales trends prior to the COVID-19 outbreak. According to BDSA’s COVID-19 Impact on Cannabis Webinar hosted on April 10, 2020, cannabis dispensaries saw a sharp increase in customer traffic from March 10 to March 18, with upwards of a $20 to $30 increase per transaction. The same report cites heading into April, dispensaries saw less traffic overall, but each transaction was still $10 to $15 more than sales trends before COVID-19 hit. These behavior trends illustrate that cannabis consumers were stockpiling products, much in the same way they would stockpile survival items like canned goods, rice, and toilet paper.
Private Label Sales Increase
As stores took on an influx of customers in mid-March, they felt more like a battlefield than a place to buy household goods. Consumers were frantically buying items they felt they’d need in the case of a long-haul quarantine and potential long-term unemployment, requiring consumers to ask themselves the question: “Is it worth it to pay extra money for a brand name versus buying a less expensive private label option?” According to Yahoo Finance, “Nielsen reports that first quarter sales of private label products across all retail outlets compared to the year before climbed nearly 15 percent during the first quarter, up $4.9 billion.” When looking at a comparison between private labels and nation-wide brands, “during the [first quarter of 2020], private labels gained about one third more in both dollar and unit sales than national brands,” according to the same Nielsen report.
Cannabis has the same setup as every other retail industry — dispensaries often carry brand name cannabis products, but they also carry lower-end, less expensive private label products as well. Having several tiers of products for consumers provides options for each demographic frequenting cannabis storefronts. Dispensaries saw the same type of consumer behavior in terms of consumers purchasing more private label products starting mid-March and going throughout April. According to BDSA’s COVID-19 Impact on Cannabis Webinar hosted on May 7, 2020, “cannabis products priced under $20 a unit (or gram) thrived during the month of March.” These products include private label and cannabis flower. This switchover illuminates consumers who were willing to go the cheaper route in order to maintain their stockpiles during the pandemic — the same buying behavior demonstrated during purchases of other household goods.
Back To The Basics
In the wake of COVID-19 hitting U.S. soil, Americans quickly understood the magnitude of what could happen. And while things moved swiftly across the country, citizens began preparing for the very worst potential outcome, something only seen in movies: long-term quarantine. According to the Nielsen article Covid-19 Forces Recalibration Of Priorities As World Embraces New Habits, at around mid-March retailers experienced a spike in “pantry stockpiling of shelf stable foods, store visits and growing basket sizes.” Much of the shelf stable foods include basic items like canned goods and dried foods.
Cannabis dispensaries saw the same “back-to-basics” spending behavior throughout this period as well. According to BDSA’s COVID-19 Impact on Cannabis Webinar hosted on March 27, 2020, even before COVID-19 struck, “consumers were already strongly influenced by familiarity of products.” But with the limited face-to-face interaction with budtenders and other purchase influencers brought on by social distancing, consumers were left to their own devices and fell back on product familiarity. During a retailer survey conducted by BDSA released on March 20, 2020, retailers reported “significant increases in the sale of flower, including more consumers purchasing flower, in larger quantities than ‘typical’ and some of those who reported strong flower sales indicated CBD heavy flower moving faster than usual.”
The COVID-19 Insight For Cannabis Adoption
While medical and adult use states provided opportunity for cannabis sales during the pandemic by deeming cannabis essential business, the consumer adoption indicators go much further than that. By studying the behavior of consumers during crises for regular household goods, and then comparing those behaviors to the behaviors exhibited by cannabis consumers, the parallels are telling. During a crisis, consumers primarily purchase goods that are most impactful to their survival — that’s why you tend to see stockpiling of critical items like long shelf life foods, batteries, first aid supplies, water, and over-the-counter medications. The purchasing of the most important goods during the COVID-19 crisis might have been even more critical to the average consumer considering long-term unemployment was on the horizon for many Americans. To see the same spending patterns and overall consumer behavior within the cannabis space that you see in every other household good category means consumers consider cannabis an important part of their daily lives. Moreover, BDSA cited cannabis retail data throughout the first quarter of 2020 demonstrating an overall increase in sales year over year despite the additional challenges and stresses on the market from the COVID-19 pandemic. Does this mean cannabis is becoming a staple in consumers’ lives? Ongoing tracking will likely determine this as an evident truth.