The State of Cannabis Sales in 2022 and Why Advertising Matters

The cannabis industry is unpredictable. While sales skyrocketed in 2020, 2021 presented a mixed bag for both dispensaries and brands. 

A lot of it came down to the regional market. In Massachusetts, which legalized recreational cannabis in 2016, sales more than doubled in 2021. Maine has kept breaking sales records, too. In other markets, the story is different. California cannabis businesses struggle with taxes at every point in the process, from cultivation to sale. With limited locations for retail and low wholesale prices, it’s been difficult for dispensaries to compete with the prices on the illicit market. We’ve seen a winter slump in other markets - sales in Illinois dropped 15%  in January when compared to the holiday season. Sales in Michigan dropped by 9%. 

 When budgets get tight, advertising spend is often the first to go. It’s tempting to cut any costs that aren’t clearly focused on the bottom line. But during down times, advertising matters more than ever. Turning off advertising completely can only compound the issues that businesses face in a softening market.

Here’s why you should keep your campaigns running:

1. Quiet Markets Make Categories.

 Slower markets can present an opportunity to get in front of more consumers for one big reason: less noise. If your competitors stop advertising, there’s an open space for you to grow your business.

This is how we got Rice Krispies. During the Great Depression, Post cereal cut back on ad spend and Kellogg’s took the opportunity to ramp up ad spend with a new cereal featuring “Snap,” “Crackle,” and “Pop.” Kellogg’s profits rose by almost 30% and the company took the leading position in the cereal space that it maintains to this day. 

For cannabis companies, this is a chance to rethink how you launch products, locations, and experiences. If you can target the customers of your competitors and build a campaign around something new and exciting, you could take market share during a quiet time. When ads are are scarce, there are new opportunities to reach consumers. A study from Bain & Company found that during the 1990-91 recession, twice as many companies rose from the bottom of their respective markets to the top when compared to the years before and after. 

 2. Advertising Creates Customer Lifetime Value.

 In some markets, like Illinois and Michigan, what we’re seeing isn’t necessarily a lack of demand for cannabis. We’re seeing what we can call “seasonal softness.” After the holiday season, when we see cannabis sales spike between Green Wednesday and New Year’s, there’s less of a demand for cannabis. Also, it’s cold. 

The winter season is the time to start building awareness with new customers, but it doesn’t happen overnight. The cardinal rule of advertising is “The Seven Times Rule” - customers need to see an ad seven times before buying.

 The market is also changing. As more states legalize recreational cannabis, you might see a drop in what used to be seen as cannabis tourism. But by building an ad campaign that connects with consumers during slow months, you can create a customer journey that helps drive more sustainable sales in the long run. The key is to stay committed to your campaign plan to make sure there’s enough time for the ads to have an effect. 

3. If You’re Not Reaching Loyal Consumers, Others Might. 

It wasn’t difficult for Kelloggs to step into the space left behind when Post stopped advertising. The same happened in the fast food industry. During the recession of the early 90s, McDonald’s cut back on ad spend. Pizza Hut and Taco Bell took advantage of the decision and spent heavily on advertising, reaching key customers. 

The move worked - Pizza Hut sales increased by 61% and Taco Bell saw a 40% increase. Meanwhile, McDonald’s sales declined by 28%.

It’s a noisy world in the cannabis industry. You don’t need to spend your entire budget on advertising, but staying active in the local markets that drive most of your business is a must, especially if things are getting more competitive. 

4. Seasons Change.

You might be seeing a slow winter, but without always-on advertising campaigns, it might be too late to get in front of cannabis consumers to drive sales during big sales days. Take St. Patrick’s Day, for example - our data found that cannabis sales are 54% higher on March 17 than the average sales day in March. 

If consumers don’t know about your business when they’re in the market to buy, they’ll go to a more familiar name. But by building the right customer journey a few weeks in advance, you can make sure that when the day comes, they’ll think of you first. 

This is the perfect time to start ramping up ad spend. If you can connect with consumers on St. Patrick’s Day, they’ll already be familiar with your business by April. And that’s when cannabis sales start to rise higher than any other time in the year. 

5. Without Advertising, There’s No Customer Journey. 

Harvard Business Review estimates that acquiring a new customer costs 5 to 25 times more than keeping existing customers. In cannabis, you could end up constantly losing customers if you don’t keep in touch on a regular basis and build a reliable customer journey that keeps them coming back. \ The first step is to figure out your customer churn rate overall. That’s the rate of customers that don’t come back after visiting or buying the first time. With the right cannabis advertising campaigns, you can target shoppers who abandon carts or lapsed customers who haven’t been back in a while. 

Advertising for the Future

When you run ad campaigns that really deliver the products that your audiences want, you’ll get the results you want - but it can take time to build the funnel.

A marketing funnel has three stages: awareness, consideration, and conversion. As we’ve seen, if an average consumer needs to see an ad seven times before making a purchase, the key is to build the ramp early and keep in touch. 

At the end of the day, advertising is still a relationship business and cannabis is personal. The more personal your ads and the more you know your customer - from discovery to purchase - the more effective your ad campaigns. Even in the off season.