Category Archives: Marketing

What’s in a Name? A Cannabis Strain Word Cloud

The number of cannabis strains reviewed on Leafly exceeds 2,200. As amazing as this is to those unfamiliar with the industry, even more amazing is the number of new strains added weekly. In April, information on 2,232 strains was web-scrapped from the Leafly site. For marketers, the branding of cannabis deserves further investigation. The purpose of this post is to start that conversation.

Before exploring branding, the initial question is what type of cannabis do consumers prefer – hybrid, indica or sativa? To determine the answer to this question requires us to assume that the total number of strains available reflects consumer preference. While this assumption may not be true, it serves as a surrogate for attributes that consumers find appealing.

Based on the above, and given the data available, it appears that consumers prefer hybrid strains. Of the 2,232 strains listed on Leafly in April, 1,128 are hybrid (50.54 percent), 665 are indica (29.79 percent) and 439 are sativa (19.67 percent).

What are the most popular brand names or components of brand names for existing strains? To find out, we developed a Word Cloud. Word Clouds are visual representations of text data with the size of the text indicating the frequency of word use. Thus, larger words in the cloud are used more frequently. All existing strain names were input into a Word Cloud generator and the resulting graphic is presented below.

Some results were expected, some were a surprise. Prior to this analysis, the researchers didn’t know that 110 strain names began with the word Bhang. Other popular strain branding names include OG, Kush, Haze, White, Purple, Diesel, Blue, Sour and Skunk. Colors, fruits, tastes and/or effects dominate current branding efforts.

One issue of concern is that strain naming isn’t standardized. Thus, it’s possible for the same strain to have two different names depending on where and when it was developed. For instance, LA Cheese (strain name in Amsterdam) is known as Confidential Cheese on Leafly. Until a master list of strains that includes genetic testing exists, there is no guarantee that what you’re purchasing is what is being advertised.

Cannabis branding, both for medical and recreational purposes, is an exciting area of study for marketers. As the industry expands, consistency in branding becomes more critical and important.

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The Case for Business Schools to Focus on the U.S. Cannabis Industry

Like it or not, the U.S. marijuana industry is expected to grow at an annual compound rate of 25 percent over the next 5 years (Forbes, January 3, 2017). Estimates of gross industry sales (medical plus recreational) by 2020 range from $11 billion (Marijuana Business Factbook 2016) to $44 billion (CBS News, March 18, 2016) with the general consensus falling in the $20-25 billion range assuming that no additional states pass medical marijuana and/or legal recreational marijuana laws (a very conservative assumption, at best).

To date, 28 U.S. states plus the District of Columbia (29 total) have legalized Medical Marijuana. The percent of U.S. citizens living in areas with Medical Marijuana is 63.49, as illustrated in the table below. The average number of medical marijuana patients per 1000 people is 8.795 with a minimum of .1 per 1000 (Delaware) and a maximum of 19.8 per 1000 (Colorado) according to Statista.com.

The Medical Marijuana States and Populations (March 2017)

State Population (2017)
Alaska 741,204
Arizona 7,026,629
Arkansas 3,000,942
California 39,849,872
Colorado 5,658,546
Connecticut 3,583,134
Delaware 965,866
Florida 21,002,678
Hawaii 1,454,295
Illinois 12,815,607
Louisiana 4,714,192
Maine 1,327,472
Maryland 6,068,511
Massachusetts 6,873,018
Michigan 9,935,116
Minnesota 5,554,532
Montana 1,052,343
Nevada 2,995,973
New Hampshire 1,335,832
New Jersey 8,996,351
New Mexico 2,084,193
New York 19,889,657
North Dakota 790,701
Ohio 11,646,273
Oregon 4,144,527
Pennsylvania 12,819,975
Rhode Island 1,059,080
Vermont 624,592
Washington 7,384,721
Washington, D.C. 697,012
Total 206,092,844

Legal recreational marijuana is available in eight states plus the District of Columbia, covering 21.46 percent of the U.S. population.

The Legal Recreational Marijuana States and Populations

State Population (2017)
Alaska 741,204
California 39,849,872
Colorado 5,658,546
Maine 1,327,472
Massachusetts 6,873,018
Nevada 2,995,973
Oregon 4,144,527
Washington 7,384,721
Washington, D.C. 697,012
Total 69,672,345

Based on estimates developed by New Frontier Data, as reported in The Cannabist (February 22, 2017), my projections for medical marijuana sales and legal recreational marijuana sales for the 2017 through 2020 period are presented below. These projections are limited by two broad assumptions: 1) no additional states will pass medical or legal recreational laws in this period, and 2) state populations will remain constant for the period 2017-2020.

Medical and Legal Recreational Sales 2017-2020 ($US Billions)

Year Medical Legal Recreational Total ($Billions)
2017 6.11 3.74 9.85
2018 7.95 5.39 13.34
2019 10.35 7.76 18.11
2020 13.46 11.18 24.64

During the period 2017 through 2020, medical marijuana (MMJ) sales will grow from $6.11 billion to $13.46 billion annually. The average total of sales per capita for MMJ, given the assumptions above, will be $65.31 by 2020.

For legal recreational marijuana, sales are expected to grow from $3.74 billion in 2017 to $11.18 billion in 2020 for average sales per capita of $160.74. Total gross industry sales (MMJ plus Recreational) are expected to grow from $9.85 billion in 2017 to $24.64 billion in 2020 equating to $119.56 sales per capita in the combined MMJ and Recreational markets.

Graphically, the two tables below present total sales and percent of total sales trends for 2017 through 2020. Sales will reach categorical equilibrium (50/50) just after 2021.

Finally, estimates of total industry employment by 2020 range from 255,000 (The Cannabist) to 300,000 (High Times). Thus, the average expectation is that 277,500 industry jobs will be created by 2020. Based on my estimate of total industry sales in 2020, this translates into 1 job created per $88,793 in total industry sales.

It is time for business schools to engage and embrace the marijuana industry as an economic catalyst. My colleagues and I are developing an active research agenda to focus on consumer habits and preferences in the nascent legal recreational marijuana industry in Massachusetts, expected to reach combined sales (MMJ and Recreational) of over $1 billion by 2020. Join us as we embrace this opportunity.

 

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Predicting U.S. E-Commerce Growth Through 2013

How quickly is U.S. e-commerce expected to grow in the near future? In an earlier post, we looked at total U.S. e-commerce sales for the period 2000 through 2009. As illustrated at the end of that post, it is clear that growth in e-commerce plummeted from 2007 through 2009. Total U.S. sales via e-commerce in 2010 reached $166.5 billion, growing 15.28 percent over the previous year. As impressive as that is, it represents only 4.28 percent of total U.S. retail sales. While e-commerce as a percent of U.S. retail sales continues to grow, as illustrated in the table below, it accounts for less than five percent of total U.S. retail sales.

E-Commerce as a percent of total U.S. retail sales In a recent article co-written with Dr. Godwin C. Ariguzo (@ariguzo), we predict that by the end of 2013, total U.S. e-commerce sales will reach a level of $254.7 billion. This represents a compound annual growth rate (CAGR) of 52.94 percent for the period 2010-2013. Overall, the CAGR for the period 2000-2013 is projected to be 18.65 percent, which is less than the CAGR for the 2000-2010 period (19.70 percent). The table below presents the quarterly growth of U.S. e-commerce since 2000 and the projected growth per quarter through 2013. The projected growth was calculated using a Holt-Winters technique in time series analysis.

Holt Winters Projection U.S. E-Commerce Sales Through 2013Graphically, the projected annual growth for U.S. E-Commerce sales looks like this:

US E-Commerce Sales Trend Line through 2013

How does this compare to the overall growth rate in U.S. e-commerce reported in the earlier post? For consistency, the same summary tables were developed for this investigation (but are not included in the article with Dr. Ariguzo referenced above). The table below presents the actual growth rate through 2010 and the projected growth rate through 2013.

US E-Commerce Growth Rate Projected Thru 2013The recovery in U.S. e-commerce growth from 2009 to 2010 is impressive. We project the trend to continue through the end of 2011 and then to begin to decline slightly. The actual and projected growth rates are presented graphically below.

Charted Projected US E-Commerce Growth Rates Thru 2013

Please keep in mind that the figures presented are predictions based on a linear trend line obtained via time series analysis. As with any projections of future sales based on the history of past sales, the results are speculative at best. In addition, we believe that the rapid diffusion and adoption of mobile commerce (including via iPads and Tablets) may lead to higher than projected growth rates.

At what rate do you think U.S. e-commerce will grow over the next two years?

Citation:

White, D. Steven and Godwin C. Ariguzo (2011), “A Time Series Analysis of U.S. E-Commerce Sales“, Review of Business Research, Volume 11, Number 4, pp. 134-14o.

The full paper may be downloaded from the Social Science Research Network (SSRN) by clicking on the hyperlink above.

 

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