The cannabis market is estimated to reach $32 billion by 2024, with many new formats such as creams, gels, dried teas/powders and inhalers. As the rising number of cannabis brands and products outweigh available retail shelf space, retailers are profiting from the competition by implementing traditional slotting fees for premium shelf space.
According to a recent article at mjbizdaily.com, cannabis brands - particularly in Colorado and Washington - are paying fees between $500 and $15,000 per month for premium retail shelf space 3 to 5 feet high, or end-caps. These “pay-to-play” slotting fees are an established retail practice since the 1980’s, in stores such as grocery, Target, Walmart, etc.
Growth of cannabis retail stores has not kept pace with the quantity of new products, and according to some consumers, it is hard to have a brand preference because supply is not consistent.
A New Frontier Data survey shows that in the U.S. only 52% of respondents deem branding important to their cannabis purchase, while price (80%) and quality ingredients (72%) are the most important factors, with lab testing results (70%) and dosage (68%) following suit.
In Canada, a January 2020 report by the Brightfield Group said that one-third of Canadian cannabis users were unsure which brands they purchased. Bethany Gomez, managing director at Brightfield Group, told The Toronto Sun federally mandated marketing restrictions are part of the problem. “Three-quarters of the (legal cannabis) packaging is warning labels…there is “no real reason why Canadian consumers would remember (any) brand.”
An article on cannabis.net argues that cannabis is a commodity, and low pricing is the key to successfully capturing market share, along with gaining valuable shelf space and even offering a rewards program to tie in brand loyalty with a return for the consumer. Another key factor mentioned in this Packaging World article “Catch 22s and Opportunity in Cannabis Packaging,” is the relationship with the person selling your product to the consumer.
Read more Packaging World coverage of the cannabis market, and download a free cannabis industry PDF below.