Rising High: Exclusive talk with market research firm Brightfield Group

Brightfield MD talks cannabis form factors, midterm elections, opportunities and more

In this edition of "Rising High," The Fly conducted an exclusive interview with Bethany Gomez, Managing Director of The Brightfield Group, a consumer research firm for emerging markets including wellness, CBD and cannabis. Here are some highlights:

2023 CANNABIS MARKET: Brightfield Group is a cannabis market and consumer research firm that utilizes a multi-source methodology integrating artificial intelligence with research expertise into a single platform for deeper and more responsive insights. As competition rises in the cannabis space, Gomez said companies should put their focus on the heavy consumer in 2023.

“In the past, we’ve seen a lot of companies spend a lot of resources trying to attract new consumers into the category,” she said. “While there is a time and a place for that and I’m not suggesting it be dropped entirely, what we’ve been seeing in the cannabis space is that continued development of heavier and heavier users that make up a larger percentage of the overall cannabis population.”

The managing director noted data now shows over 75% of cannabis users are using product at least five times per week.

“This is really where the greatest revenue opportunity is coming from,” she said. “Also, heavier consumers have different, more refined palettes than a lot of the newer consumers and may be looking for different type of products.” Products that have been most successful in the targeting of the consumer segment include a mix of flower, heavier concentrates, and vapes, Gomez said, adding more varied cannabinoid profiles can also allow brands to stand out.

“We see we’re really getting to the stage right now of the cannabis industry where consumers understand that brands matter,” she said. “Consumers’ loyalties are not at all solidified yet. They are open to trying new brands, using a lot of different formats and open to new ideas. It’s really that time to drive trial and solidify that brand positioning and that brand loyalty with consumers.”

PRODUCT INNOVATION: In its 2023 predictions, Brightfield said product innovations to keep regular, experienced cannabis consumers happy will be key, especially as the proportion of newbies in the market declines. As technology evolves and delivery systems for cannabinoids become more diverse, the managing director noted that the percentage of consumers using flower continues to increase quarter-over-quarter.

“We’ve been tracking this industry for about eight years now and I remember in our early days, people were hypothesizing that flower use would decline and eventually fall out of the industry as it evolves into more sophisticated product types,” she said. “We are absolutely not seeing that happen.”

Gomez said 80% of cannabis consumers are still using flower according to the most recent data towards the end of 2022.  “Most cannabis consumers are also consuming other products as well,” she said. “Almost 70% are consuming edibles and almost 60% are consuming either vapes or concentrates. There is a variety of usage.”

The managing director added high-THC products in general have had a magnetic effect on many consumers and infused pre-rolls continue to become increasingly popular with heavy THC users.

“As heavy consumers are using more and more, companies targeting these users particularly through concentrates and higher dosages of THC into the products is continuing,” she said. “We see infused pre-rolls have skyrocketed over the past 12 months and instances of live resin in concentrates, vapes, even edibles have increased dramatically. It’s not becoming that one category is declining at the expense of another, we’re really seeing how consumers are open to using many different types of formats.”

CONCENTRATES: Additionally in its predictions, Brightfield stated concentrate use peaked in 2Q22, with 29% of consumers saying they’ve used a concentrate, and the company expects more concentrate innovations in 2023.

“We have seen concentrate usage continue to increase quarter-over-quarter over the past two years,” Gomez said. “Not only has usage of concentrates overall increased, the primary consumer segment for concentrates is heavy cannabis users. As the rate of consumers using on a heavy basis continues to go up, the appetite for concentrates goes up.”

Demand for concentrates may also increase as consumers face pricing sensitivity in the current market, she said. “We have been in a time of high inflation over the past year and consumers are concerned and looking to save money,” the managing director said. “They’re looking for products that they love, but are also going to be a very cost-effective way for them to be able to continue to use cannabis at a high level at a very significant rate. Concentrates provide a very cost-effective way to do that.”

She added innovation in the concentrates category has also really transformed the segment, particularly in the last couple of years. “That has continued to accelerate and we’re convinced of perfect market conditions of an increasing consumer base of good candidates for this product type,” Gomez said. “And with the price sensitivity, we’ll see how this will drive further demand and improved product selection available. This is really going to continue to contribute to the increasing level of concentrates usage for the year ahead.”

HEAVY USE: Along with its 2023 views, Brightfield Group said heavy, frequent cannabis use is at the highest recorded since 2019 with 50% of users saying they enjoy cannabis multiple times a day. 

“It’s been interesting to see consumers adding cannabis to their basic habits,” the managing director said. “We initially saw cannabis usage skyrocket at the beginning of the pandemic, which makes a lot of sense.” As many people worked from home or lost their jobs at the height of the coronavirus outbreak, the industry saw cannabis sales and usage surge, she said. “We saw the spend on cannabis decrease as payments diminished, but we have seen that usage continue,” Gomez said. “Cannabis consumers, once they start realizing how effective it is for so many different conditions that are part of their life, it becomes more and more common for consumers to use on an ongoing basis.”

She said Brightfield is seeing quarter-over-quarter trends in consumer data showing absolutely no signs of slowing in heavy cannabis usage. “We do expect the consumers to continue to use more and more often,” the managing director said. “It will be very interesting to look at the quarters ahead, as many of us are expecting that job market to soften, whether the flow will correlate with subsequent increases in cannabis usage again."

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.

“States like Maryland and states like Missouri, who are not exactly the most liberal states that are out there by any stretch of the imagination, voted overwhelming in favor of adult-use cannabis,” Gomez said. “It definitely shows the appetite for this among the voters particularly in the larger, more populous, moderate states along the East and the Midwest.”

She added the space saw pushback in the midterms in states that are generally considered deeply conservative.

“It was very clear from the results from this election and the opposition to cannabis that lead to those proposals being defeated that staunch conservatives dominate the political landscape in the South,” the managing director said. “Conservatives were really picking up the torch against cannabis and pushing back hard against liberalization. That’s a pretty clear sign that cannabis has its limits.”

She said the results also signaled that the South isn’t ready for adult-use cannabis yet and the most conservative politicians are not ready to embrace the space.

“We see this expressed in the opposition that we’re seeing to SAFE Banking right now at the federal level,” Gomez said. “However, as we look at 2023 and we look forward to the landscape of legalization, I’d be surprised if we don’t in the next couple of years see adult use programs in states like Ohio, Delaware and Pennsylvania that are more moderate, populous states.”

Additionally in the midterm elections, Republicans won control of the House of Representatives while Democrats retained control of the Senate.

“If we’re seeing this level of pushback from most conservative Republicans that are starting to take over the party, it unfortunately doesn’t spell great things for what we can expect in terms of cannabis liberalization in the next couple of years,” the managing director said. “If a Democratic-controlled Congress couldn’t even get banking passed over the last two years, I think when we’re looking at more a split congress, it’s unlikely that we are going to get significant federal reform.”

CHALLENGES: When asked about the largest hurdles facing the cannabis space, Gomez pointed to the intense competition in the industry as well as lack of capital.

“So many companies are tightening their belts, searching for that EBITDA positive, to help delight their investors,” she said. “Depending on the state that you’re in, competition with the illicit market is very fierce and with the current tax structures it is a challenging environment to be operating in.”

The managing director added the space is also facing obstacles from the legal hemp-derived THC market.

“Many are rarely taking it into account or factor it in as an impact that the cannabis industry is underestimating but given the very rapid distribution and growth of the Delta-8, Delta-9 and Delta-10 hemp-derived THC phase with products that are being sold outside the regulated channels, this provides a lot of competition for the cannabis space,” she said. “Between the true illicit market, the Delta 8 market and the regulations that are put in place on cannabis companies, it can become very challenging to be successful. “

OPPORTUNITIES: As the cannabis industry develops and matures, the managing director said she sees a lot of benefits within the space including continued topline growth and increased usage among a growing pool of consumers.

“The addressable market for cannabis just continues to grow year-over-year-over-year,” she said. “There’s a significant opportunity and there are a lot of great brands going into the market from a demand standpoint. Albeit at this juncture, brands willing to win the hearts and minds of consumers rather than just be the first person to plant their flag somewhere.”

Gomez noted Brightfield is excited to keep an eye on Gen Z consumers, the first generation of consumers that have really come of age in an era of legal cannabis.

“The generational shift that we see amongst us in the consumer segment is really, really striking,” she said. “They are a very strong-willed, strong-minded generation that are coming of age and they are really reconsidering their relationships with alcohol at a very dramatic rate. They very much have strong opinions around pharmaceuticals, are embracing a plant-based type of lifestyle and really including cannabis alongside that. It’s a very significant shift and Gen Z is really going to change the industry a lot as they continue to age in and take over more and more of the category.”

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