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Rising High: Exclusive talk with cannabinoid market research firm BDSA
The Fly

Rising High: Exclusive talk with cannabinoid market research firm BDSA

BDSA CEO talks 2023 cannabis predictions, challenges, opportunities and more

In this edition of "Rising High," The Fly conducted an exclusive interview with Roy Bingham, chief executive officer of BDSA, a Colorado-based cannabinoid market intelligence and consumer research firm. Here are some highlights:

2023 CANNABIS MARKET:  BDSA shared its predictions on where the cannabis industry is headed in 2023, based on analysis of findings from 2022 sales data and market forecast projections. As competition continues to ramp up in the space, Bingham said companies looking to succeed will have to have a very clear idea of their target consumer.

“Not just demographically, but how they think, how they behave, what interests them, what influences them and their decision-making process,” he said, adding companies also need to ensure that thy understand their strengths. “Identify what are the most interesting categories or subcategories of products to your target consumer and where you can, as relative to the competition, stand out of the crowd. “

BRAND SHARE CONSOLIDATION: BDSA forecast that continued price compression and competition from the illicit channel will drive brand share consolidation in mature markets in 2023.

“It’s a continuation of a trend that became very strong in 2022,” the CEO said. “Average retail prices in the mature markets like Arizona, California, Colorado, Nevada and Oregon declined on average about 13% year-on-year, and those markets in general declined as well, overall by about 10%.”

He said the lower prices were not sufficient to drive more unit sales in those markets, resulting in a drop in wholesale prices as well as retail prices.

“This is partly because the illicit operators are able to continue to operate without the additional costs of both taxes and regulatory burdens that the legal industry has to deal with,” Bingham said.

SOLVENTLESS PRODUCTS: The company also predicted that solventless products will represent the new wave of premiumization in the edibles and concentrate categories in 2023.

“When we think about the dab-able and vape-able rosin, for example, those sales grew very strongly in 2022, up anything from 15% in markets like Colorado to several hundred percent in markets like Illinois and Massachusetts,” the CEO said. “Clearly that is something that has caught the attention of the consumer.”

BDSA has seen similar growth in rosin-based cartridges as well, but not quite as dramatic, he said.

“We’ve also seen solventless products come into the edible gummy category, which is a very competitive segment,” Bingham said. “Why solventless? It seems that consumers prefer it because it only contains natural inputs, no chemicals, and some people think the flavor profile is better. Where live resin in 2021 really zoomed up, now we’re seeing these solventless and edible concentrates holding their price while growing very rapidly.”

MINOR CANNABINOIDS, TERPENES: As the cannabis space develops, BDSA expects more brands to focus their education and marketing on newer minor cannabinoids and terpenes, emphasizing the consistent, predictable experiences that these compounds drive.

“We have been tracking minor cannabinoids and terpenes for a long time, looking to see when there would be substantial growth,” the CEO said. “More and more companies are choosing to either feature terpenes and minor cannabinoids on their label or feature them as a characteristic of the product. For example, the top ten gummy brands all have a product that includes CBN or CBG.”

Consumers are also beginning to hear more about these other cannabinoids and terpenes, he said, and are selecting product based upon their knowledge of those cannabinoids.

“Leaning into the development of products that appeal to consumers because they are carefully selected for their minor cannabinoid and terpene composition is a good opportunity for companies,” Bingham said.

CANNABIS RETAIL: BDSA predicted that the cannabis retail experience will shift away from traditional dispensaries, and move toward a premium CPG shopping experience, even with the stringent regulations placed on cannabis retail across legal markets.

“It’s a state-by-state type of process and we always have to remember to be careful about generalizing, because some markets and regulatory authorities have allowed more in the way of pickup and delivery than in other markets,” the CEO said. “Those that have allowed it already, have gradually eased the regulations in 2021, updating their rules to make it easier for companies that want to engage in delivery.”

He noted those existing states already have the ability for order online, pickup and delivery and other states will adopt those capabilities as well.

“As more and more people consume cannabis in their general lives, they will expect to get product through a simple order online and deliver,” Bingham said.

MARKET GROWTH: As mature markets out west continue to struggle with price pressure and regulatory issues, BDSA sees international and East Coast markets representing the biggest growth opportunities in legal cannabis.

“Over the last several years that we have been working in this industry, a tremendous amount of growth came from the expansion of the earlier markets out west,” the CEO said. “What has happened over the past three or four years is this gradual shift towards the Northeast and the Midwest and a contraction in the markets out west.”

The Northeast region is driving the majority of growth in the U.S., he said, pointing to New Jersey’s implementation of an adult-use market, Pennsylvania likely to be a rapid growth market and New York coming upstream.

“Within the Northeast region, suddenly you have 50M adults across 11 states,” Bingham said. “We’re expecting growth of 13% in that region in 2023 and it will more than double in sales between 2022-2026.”

He noted BDSA has not seen a lot of excitement in international markets in the past, but now expects Germany and Mexico to contribute significantly to the global picture moving forward.

NEW YORK:  The company forecast the New York market will be the biggest single opportunity for growth in the U.S. cannabis industry in 2023, but the delay of adult-use sales, limited licensing, and illicit competition will blunt growth in the early stages of the state’s adult-use market.

“The New York market is a very large and dense population and therefore we’re expecting a proportional takeup from consumers to drive a lot of that growth,” the CEO said. “It won’t be without challenges though because you now have many unlicensed operators who are comfortably selling cannabis in the market and there will have to be a gradual transition to the legal market there. But it’s obviously a market with tremendous potential just based on the scale and opportunity.”

LEGALIZATION: In the U.S. midterm elections, voters in Maryland and Missouri approved legalization for recreational use, while similar proposals were rejected in Arkansas, North Dakota and South Dakota.

“It’s worth bearing in mind that Maryland and Missouri are much larger states in terms of population than North and South Dakota,” Bingham said. “There seemed to be some local factors that were at work there and Arkansas, I think it’s a relatively new concept for them.”

He noted the the two states that were expected to approve recreational use enthusiastically embraced cannabis consumption.

“We’ll see that continue to play out state-by-state over the next few years, which is why federal legalization is not so fundamentally important,” the CEO said. “The states are legalizing in accordance with the voters anyway.”

CHALLENGES: When asked about the largest hurdles facing the cannabis space, Bingham said he believes creating brand loyalty is going to be a challenge for many years to come.

“That is what will define the winners ultimately,” he said. “It’s about trying to find drivers for consumers so that they will select one product over another, even if it involves paying a little bit more for the product of their choice.”

Many brands have not yet managed to differentiate themselves that way, the CEO said, adding that will be the key to success in the space.

“In 2023, there will be progress made in that direction with a bit more brand loyalty being created,” he said.

OPPORTUNITIES: As the cannabis industry develops and matures, Bingham said he sees one of the biggest long-term opportunities in targeted health benefits for particular products.

“Consumers are finding that cannabinoids help them with their health issues in one way or another through trial and error and word of mouth,” he said. “What were actually seeing then is targeted health interventions of people actually doing double-blind placebo-controlled trials using cannabinoids.”

The trials elevate the research around cannabis and the quality of the products as a result, the CEO said, as well as the ability to identify specific health care problems that can be helped and addressed much more efficiently with cannabinoids.

“It’s about time that companies and institutions are able to do a high-quality of research on cannabinoids,” he said.

Bingham added companies looking to be prosperous in the space also need to use a blend of consumer insights gathered qualitatively, quantitatively, analytically and intuitively.

“They need to use data like the kind that BDSA provides in order to understand market share, market size, market opportunity, categories, subcategories and attributes like terpenes and minor cannabinoids,” he said. “You need to understand those trends and move quickly in your product development and marketing. The best way to do that is to be very quick and efficient with your process and with your absorbing of the data that BDSA can provide.”

CANNABIS/PSYCHEDELIC STOCKS: Publicly-traded companies in the space include Acreage (ACRHF), Akerna (KERN), Aleafia (ALEAF), Atai Life Sciences (ATAI), Audacious (AUSAF), Aurora Cannabis (ACB), Awakn Life Sciences (AWKNF), Avant Brands (AVBTF), Ayr Wellness (AYRWF), Body and Mind (BMMJ), Canopy Growth (CGC),  Cannara Biotech (LOVFF), Chicago Atlantic (REFI), Clever Leaves (CLVR), Compass Pathways (CMPS), Columbia Care (CCHWF), CordovaCann (LVRLF), Cresco Labs (CRLBF), Cronos (CRON), Curaleaf (CURLF), CURE Pharmaceutical (CURR), CV Sciences (CVSI), Cybin (CYBN), Delic Holdings (DELCF), Delta 9 (DLTNF), Entourage Health (ETRGF), Fire & Flower (FFLWF), Flora Growth (FLGC),  The Flowr Group (FLWPF), General Cannabis (CANN), Greenlane (GNLN), The Green Organic Dutchman (TGODF), Green Thumb (GTBIF), Goodness Growth (GDNSF), GrowGeneration (GRWG), Hemp (HEMP), HEXO (HEXO), High Tide (HITI), India Globalization Capital (IGC), Indiva (NDVAF), Innovative Industrial Properties (IIPR), InterCure (INCR), IM Cannabis (IMCC), Khiron (KHRNF), Wellbeing Digital (KONEF), Lowell Farms (LOWLF), Lotus Ventures (LTTSF), MediPharm Labs (MEDIF), MedMen (MMNFF), Neptune Wellness  (NEPT), NewLake Capital (NLCP), Organigram (OGI), Planet 13 (PLNHF), Reunion Neuroscience (REUN),  Revitalist (RVLWF), RIV Capital (CNPOF), Relmada (RLMD), RYAH Group (RYAHF), Safe Harbor (SHFS), SLANG Worldwide (SLGWF), Sproutly (SRUTF), Stem Holdings (STMH), Small Pharma (DMTTF), Skye Biosciences (SKYE), SNDL (SNDL), Sunniva (SNNVF), TerrAscend (TRSSF), Tetra Bio-Pharma (TBPMF), Tilray (TLRY), Trulieve (TCNNF), Tryp Therapeutics (TRYPF), The Valens Company (VLNS), Verano Holdings (VRNOF), Village Farms (VFF), Wesana Health (WSNAF), Zynerba (ZYNE) and 4Front Ventures (FFNTF).

Keywords: cannabis, weed, stocks, marijuana, cultivation, legalization, CBD, THC, hemp, psychedelics, ketamine, psilocybin, LSD, MDMA

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