Do cannabis consumers really care about ESG?

I have been skeptical that most cannabis consumers will put their money where their mouth is when it comes to selecting brands making ESG-related claims.

Despite expressing concern for issues like the environment and human rights consumers frequently don’t vote this way with their wallets.  This intent-action gap is unsurprisingly a function of the human condition.  Secondly, there is a lack of credible evidence that ESG positioning drives higher unit sales and delivers price premiums.

The headline question matters:  cannabis firms are struggling to hit cash flow positivity and profitability. Developing and promoting ESG-friendly products is expensive, time consuming and carries significant volume and brand risk (via embarrassing greenwashing accusations, for example).   

New research from McKinsey a consultancy and NielsenIQ offers some import insights on this question - and goes some way to reduce my skepticism.

The joint study looked at five years of sales data, from 2017 to mid-2022. It covered 600K SKUs across 44 name and private label brands in 32 CPG categories. A caveat: cannabis products were not part of the study.

Some of the key findings were:

> Products making ESG-related claims averaged 28% cumulative spending growth in the 2017-2022 period, versus 20% spending growth for products that made no such claims;
   
> Spending growth was a function of higher trial, achieving premium pricing and consumer loyalty;
 
> Products making ESG-related claims now account for nearly half of all retail sales in the categories examined;

> Both large and small brands making ESG-related claims saw growth, with private label brands outperforming CPG brands;
  
> No single ESG-related product claim outperformed all others.  However, less-common claims drove bigger sales impacts.

Implications for cannabis firms

These findings are important if you believe a cannabis buyer is also the typical consumer in the study and the cannabis category is not too dissimilar from the CPG categories studied.   (I accept both suppositions.)

The research also found that ESG-style positioning did not suit every brand and category.  We all know cannabis is a different beast than jeans and shampoo.  For example, cannabis regulations will hinder the ability of producers to make ESG-friendly products and claims, and for consumers to choose these brands. Secondly, many cannabis consumers have different purchase drivers and needs than traditional CPG products.

Nonetheless, the above findings illustrate a significant shift in consumer purchases beyond conventional needs like price, performance and convenience.  I'm getting convinced.

Send me a DM if you want to discuss how to leverage these shifts for your cannabis brands.

#ESG #branding #marketing #sustainability #socialequity #humanrights #strategy