Tag Archives: wine

What Wine and Tobacco Know About Their Consumers That Cannabis Does Not

By Tony Ciovacco
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Cannabis tracks its products more closely than most consumer categories. State traceability systems follow regulated plants and packages from seed to sale, and many states publish monthly sales totals.

The industry knows far less about the person at the other end of the sale: who that customer is, why they bought, and what they will buy next. Mature categories spent decades building that knowledge. Here is what three of them learned, and what cannabis operators can put to work without waiting for anyone else.

 

Wine learned there is no typical customer

In the mid-2000s, Constellation Wines U.S. surveyed 3,500 premium wine consumers for a study it called Project Genome. It concluded that “there is no typical wine consumer.” Drinkers fell into six segments defined by motivation rather than demographics: Enthusiast, Image Seeker, Savvy Shopper, Traditionalist, Satisfied Sipper, and Overwhelmed.

The largest group, at 23% of respondents, was the Overwhelmed, people who “find shopping for wine complex and worry about making a mistake.” When Constellation repeated the study a decade later with roughly 7,000 consumers, the segments had changed, but the Overwhelmed still made up 19%.

The cannabis lesson is direct. A menu built for the most engaged shopper can quietly lose the one who is afraid of choosing wrong, and that shopper may be a large share of the room. Operators can start segmenting by motivation with one optional question at loyalty sign-up or checkout, such as what the customer is shopping for today. Sales data alone cannot produce that segmentation.

 

Packaged goods learned to follow the same household

Packaged goods companies do not rely on store totals alone. NielsenIQ’s consumer panel, as described by the Kilts Center at the University of Chicago Booth School of Business, has 40,000 to 60,000 U.S. households that use in-home scanners to record their purchases from any outlet. Because the same households report over time, analysts can see trial, repeat purchase, and switching directly instead of inferring them.

A cannabis loyalty program sees one customer at one retailer, but it can still answer the most important question. Measure repeat at the product level, not just the visit level. Of the customers who bought a product for the first time last quarter, how many bought it again? A product that sells well but rarely repeats is a merchandising problem hiding inside a good sales number.

 

Tobacco learned to watch change over time

The Population Assessment of Tobacco and Health Study, a collaboration between the National Institutes of Health and the Food and Drug Administration that started in 2013, is a national longitudinal study. About 49,000 people ages 12 and older participate, and the study contacts each of them once a year or every other year. Following the same people is what lets researchers see how individual habits change.

Cannabis has serious consumer research too. The International Cannabis Policy Study, led by professor David Hammond at the University of Waterloo, has surveyed consumers in Canada and the United States every year since 2018. It uses a repeat cross-sectional design, recruiting new respondents for each wave. That design shows how the market changes from year to year, but not how any one consumer’s habits change.

Format shifts are where this matters for operators. Customers move between flower, vapes, edibles, and beverages, and most stores see that shift only in the category mix after it happens. In your own data, group customers by the format they first bought and see what the same group buys six months later.

 

Share what can be shared

Wine also learned that some knowledge is cheaper to build together. Wine Market Council, a nonprofit funded by member companies across the wine industry, started in 1996 because industry leaders realized they needed more data to understand U.S. wine consumers. Its history notes that this mattered most to small family wine businesses without the resources for an in-house research department. Its benchmark segmentation study has run since 1997.

Independent cannabis operators face the same problem at a smaller scale. State trade associations could commission anonymized, pre-competitive consumer research the way wine’s member companies do, so that a single-store operator gets the kind of segmentation only large brands can afford on their own.

 

What to do this quarter

Cannabis operators don’t need to wait for a federal study or national consumer panel to start learning more about their customers.

  • Ask why. Add one question about purchasing motivations where customers already share information.
  • Measure repeat purchases. Track whether customers return to the same product, not just the store.
  • Follow changing preferences. Group customers by their first purchase format and see what they’re buying six months later.
  • Pool research resources. Work with state trade associations to develop consumer research that smaller operators cannot afford on their own.

Cannabis already collects enormous amounts of sales and product data, but most of it tells operators what sold, not why someone bought it or whether they’ll buy it again.

Wine learned to understand customers by their purchasing motivations rather than demographics alone. Packaged goods companies learned to follow the same households to measure repeat purchases and changing preferences. Tobacco researchers learned the value of tracking consumer behavior over time.

Cannabis can learn from all three. The industry doesn’t necessarily need more market research. It needs research that explains why customers buy, what brings them back, and how their preferences change over time.

 

 

 

The CalCannabis Appellations Project Is About to Spark a New Chapter in Place-Based Branding

By Amy Steinfeld, Jack Ucciferri
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Connoisseurs know that pairing a fine cut of steak with a Napa Valley cabernet sauvignon is a sure winner. But how many are aware that pairing strawberry cheesecake with a certified Santa Cruz Blue Dream cannabis strain creates an equally delicate palatal synergy? Thanks to the California Department of Food and Agriculture’s CalCannabis Appellations Project (“CAP”), premium cannabis regions will soon have the potential to capitalize on such newfound awareness among discerning consumers.

For decades, cannabis connoisseurs have been willing to pay a premium for flower said to have been grown in certain regions or with certain techniques, but because of cannabis’ legal status, supply chains have been opaque. As a result, cultivators of distinct cannabis strains struggled to capture the full market potential of their products. That has begun to shift with implementation of California’s Cannabis Track-and-Trace System. The costs associated with implementation of the METRC1 system have been bemoaned by many in the industry, but there is also tremendous potential value in having the most transparent supply chain in the world. The CalCannabis Appellations Project is the vehicle through which brands will be able to harness that value.

The underlying premise behind the CalCannabis Appellations Project is that the distinctive qualities of a cannabis product are often attributable to where and how the plant is grown. Through this project, CalCannabis is developing a statewide appellations system2 that will allow qualifying licensed cultivators to effectively communicate information about their cannabis crops (i.e., the standards, practices and/or varietals used) through labels, advertisements and other marketing techniques. It will also prevent disingenuous cannabis cultivators from making inaccurate claims about where and how a product is grown, which protects the integrity and value of the appellation.

What is an appellation?

In general terms, an appellation is an identifying name, title or label that can be legally defined and protected. Appellations are most commonly used in the wine industry to geographically identify the origin of grapes in a particular bottle. This place-based identification system comes from an understanding that certain regions have unique environmental and growing characteristics, which result in a product that cannot be produced from other regions even when the same varietals are used. Famous wine appellations or American Viticultural Areas (AVAs) in California include the Napa Valley and Santa Ynez AVAs, and sub-AVAs such as the Russian River Valley AVA, located within the larger Sonoma County AVA.

Recognizing there are also growing regions that produce uniquely distinctive cannabis, CalCannabis is developing a process for:

  1. Establishing an appellation (i.e., identifying regions that produce distinctive cannabis and defining standards, practices and/or varietals that must be used in those regions to qualify for an appellation); and
  2. Qualifying to use a particular appellation once they are established (i.e., determining the cannabis cultivators that can legally label or market themselves as belonging to a particular appellation).

While the state has not released program details, it’s likely that cultivators will have to demonstrate their outdoor-grown cannabis is distinctly unique.3 CalCannabis has until Jan. 21, 2021,4 to establish these processes, but a draft is expected to be released by early January 2020.5 This is an opportunity for cultivators to organize and participate in the process to define and create unique local appellations.

What are the benefits of an appellations system?

Napa wine country
Image: James Faulkner, Flickr

Appellations benefit both cannabis cultivators and consumers. It allows small farmers to capture the value that consumers place on unique and local cannabis products. Allowing for product differentiation through an appellations system will prevent cannabis from becoming a commodity—a situation that could result in indistinguishable products and a single market price for cannabis regardless of how or where it is grown. Thus, an appellations system protects not only local economies and farming communities, but also consumers that care about the origin and growing practices of their cannabis.

A criticism of appellations, particularly in the wine industry, is that they can disincentivize innovation and industry growth when strict growing practices and standards are required to be a part of an appellation. This will be an important consideration as CalCannabis establishes its appellations system.

County of Origin

In addition to setting up an appellations system, the CalCannabis Appellations Project will expand upon current county of origin regulations. Unlike an appellation designation, the county of origin designation is designed to be much more inclusive—it can currently be used on any cannabis product as long as 100% of the cannabis is grown within the designated county.6 Whereas an appellation will communicate information about the quality of a cannabis product and how it was produced, a county of origin designation is more like a “Made In” label. For example, a county of origin designation can be applied to indoor cannabis whereas an appellation will likely only include sun-grown cannabis.

There is also a desire to allow city of origin designations in addition to county of origin designations, which would enable products grown wholly within the political boundaries of a city to further differentiate themselves.7 As the legal cannabis landscape changes nationwide, it may also be important to have a statewide appellation allowing products to be marketed as “Grown in California.”

What should cannabis cultivation regions be doing now?

After CalCannabis releases a draft process for establishing an appellation, the next steps will be clarified. However, not everyone is waiting. For instance, growers in Mendocino County have already started to organize.8 The Mendocino Appellations Project divided the county into 11 unique subregions based on regional growing conditions and practices that could potentially be turned into appellations in the future. The goal of the appellations outlined by the Mendocino Appellations Project is to protect cannabis products coming out of Mendocino County and preserve the region’s growing heritage.

A group in Sonoma County is also discussing the establishment of appellations with the hope that it will help differentiate their cannabis and draw attention to the unique microclimate and soil structure in parts of Sonoma County.9 The groups involved in these discussions also believe it will allow cultivators to develop strict growing standards and to protect certain strains, while creating new jobs and encouraging agritourism. Appellations will become increasingly important as sophisticated consumers begin to select quality cannabis that aligns with their preferences.


References

  1. METRC is the third-party-owned software contracted by California authorities to implement the commercial cannabis track-and-trace system “from seed-to-sale.”
  2. Passage of Senate Bill 185 calls for the use of the term “appellations of origin” instead of “appellations.”
  3. Based on comments made during the October 23 Cannabis Advisory Committee Meeting.
  4. Business and Professions Code Section 26063.
  5. Based on comments made during the October 23 Cannabis Advisory Committee Meeting.
  6. Business and Professions Code Section 26063(a).
  7. Based on comments made during the October 23 Cannabis Advisory Committee Meeting.
  8. https://swamiselect.com/mendocino-appellation-project/
  9. https://www.sonomacountygazette.com/sonoma-county-news/cannabis-appellations-the-small-cannabis-farmers-elyon-cannabis.

Cannabis-Infused Wine Comes to California in 2018

By Aaron G. Biros
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Rebel Coast Winery announced this week the launch of the world’s first cannabis-infused, alcohol-removed wine. The company’s THC-infused Sauvignon Blanc, available only in California, will hit dispensary shelves in 2018.

Co-founders Alex Howe and Chip Forsythe

According to the press release, they plan to be fully compliant with California’s new regulations for the cannabis industry, hence the lack of alcohol in the product, which is a requirement under the state’s new manufacturing rules. “Rebel Coast’s grapes are grown in Sonoma County – California’s wine capital – and fermented through a traditional winemaking process,” reads the press release. “Rebel Coast removes the wine’s alcohol and infuses each bottle of its premium Sauvignon Blanc with 16 milligrams of organic tetrahydrocannabinol (THC)…” In addition to the THC infusion, they also add terpenes to the final product, giving it the cannabis fragrance.

According to Alex Howe, co-founder of Rebel Coast, the winery is in Sonoma, but they’re waiting to see where they’ll be licensed to extract, infuse and package the final product. “The winery is in Sonoma, we make the wine, and remove the alcohol there,” says Howe. “We’re currently waiting for licensing transfer approval in two locations, one in San Bernardino, the other West Sacramento, and exploring an option to infuse in San Benito County with a currently licensed location.” They plan to co-package under a third party license and seek a Type N license for extraction with non-volatile solvents.

Rebel Coast has partnered with a fully licensed outdoor grower, and is looking for an extractor that will be able to handle their volume needs. With regard to their infusion and extraction process, Howe says they combine clear distillate with a surfactant to make the THC liquid soluble and fast acting.

He expects the full infusion and packaging operations to be up and running by early 2018. “The San Bernardino and West Sacramento locations were previously licensed for infusion, packaging, and manufacturing, but with purchase of the building, the change in ownership has caused us to wait for the license to change ownerships too.”

“We’ve continued our disruptive approach to craft the world’s first cannabis-infused, alcohol-free wine,” says Chip Forsythe, co-founder and chief executive officer of Rebel Coast. “We wanted to excite the rebellious spirit in Americans through innovation, so we took two world-class California products – marijuana and wine – and created a proprietary process that resulted in a delicious, crisp and elegantly crafted Sauvignon Blanc that’s teed up to be a game changer for the wine and cannabis industries.”

They plan to start shipping product in early 2018, as well as distribute to over 500 dispensaries throughout the state, via Green Reef Distributing, a licensed cannabis distributor that represents wine and spirit accounts for other CBD products. Later in 2018, Rebel Coast plans on rolling out cannabis-infused Rosé and champagne, as well as CBD-infused wines. In the press release the company teases their products will be available in other legal states in the coming months.