HQ CEO, The Statement Group founder talk Gen Z, millennial cannabis trends
In this edition of "Rising High," The Fly conducted an exclusive interview with Daniel Abrahami, chief executive officer of strategic advisory firm Headquarters, and Cory Jones, founder of brand strategy consulting firm The Statement Group, on their “HQ Cannabis Brand Affinity Report”. Here are some of the highlights:
AUDIENCE INTEREST SOFTWARE: The “HQ Cannabis Brand Affinity Report” by Headquarters was conducted in collaboration with The Statement Group to decode the top interests in 2020 for Gen Z and millennial cannabis consumers, which currently make up 38% of cannabis consumers in fully legal states. The report leveraged proprietary “Audience Interest Software” to analyze millions of real-time social media and online connections across 56 categories including music, podcasts, apparel, athletes, politics, automotive, food, wellness, celebrities, influencers, TV personalities, entertainment, technologies and gaming. “What we have are a proprietary series of algorithms that allow us to analyze the millions of connections a brand, a person, a celebrity or an influencer have across their social media followings,” Jones said. “That allows us to really understand who a brand, influencer or celebrity’s followers are and what makes them tick.” He added the analysis enables the company to discover followers’ hobbies, media consumption habits and passions. “It allows us to go beyond the sort of age, sex, location kind of data that a lot of companies have to really get an understanding of what makes your targeted consumer tick and how to reach them on a deeper level,” he said.
MINDSHARE, VALUE SCORES: Based on the report’s findings, hip-hop and R&B, fashion, influencers and gaming had the highest overall percentage of Gen Z and millennial cannabis consumers’ interest across the 56 categories. The report assigned each category a unique “Mindshare Score”, which measures the importance of the category in relation to all 56 categories and interests. The more accounts in a specific category a consumer follows and engages with, the higher their Mindshare tier. “For the Mindshare Score, we take an aggregate of what everyone’s following and put everything they’re following into a category,” Jones said. “For example, for this report hip-hop was the most followed category so the most number of things that they were interested and engaging with were in the hip-hop category.” The report also assigned “Value Scores”, which identify medium and micro-sized brands, publishers, celebrities and influencers that over-index with consumers and present high-value opportunities to reach a target audience at a lower cost. “It’s great to know that Travis Scott, Wiz Khalifa and Snoop Dogg are important to your audience, but those big, huge names are not always actionable for brands,” Jones said. “They’re rather expensive if they do get into the marketing at all. We devised the value score as a window of micro and mid-tier influencers, celebrities and brands that are more actionable.” He added this allows brands to identify people they can actually reach out to, start a partnership with, do some paid media rounds and incorporate them into their marketing strategies.
2020, 2021 TRENDS: The report found that hip-hop and R&B is 2300% more important to Gen Z and millennial recreational cannabis consumers than the average internet user and 38% of Gen Z and millennial total interest accounted for all categories of music when combined. After music, digital platforms, influencers, gaming and fashion received the highest Mindshare. “In 2020, because everything that has happened, digital has been the big mover,” Abrahami said. “Digital marketing is more important than ever before and it’s going to only be amplified in 2021.” He noted digitally-focused categories are becoming more popular including music and video streaming as the Gen Z demographic comes of age. “Their spending power is increasing so this is where a lot of brands will start to focus,” Abrahami said. “Along with cannabis being one of the fastest growing industries, gaming is also a massive industry that is growing at an extremely fast rate.” According to a Whistle study, 84% of millennials and 91% of Gen Z play video games regularly. “What we saw reported is that for millennials and Gen Z, gaming is of huge importance to them,” he said. “It’s a dominant of their Mindshare score and it has a big effect on their consumption.” The CEO added the emergence of micro communities focused on specific passions or hobbies was another trend in 2020. “As people went digital, they’re associating themselves with these micro communities,” he said. “If you’re talking about gaming or a specific gamer, they’re building communities around them that are superfans that are highly engaged.”
GEN Z, MILLENNIAL PURCHASING BEHAVIOR: When asked about what drives the purchasing behavior of Gen Z and millennial cannabis consumers, Abrahami said the cannabis space is interesting as it can have a lot of subcultures with clear intersects. “Hip-hop, gaming, fashion, a lot of consumers who have followed these industries and are engaged with these industries, are also cannabis consumers,” he said. “The cultures have these clear parallels and these industries are very authentic.” He added as Gen Z is a digital-first generation and millennials are the first generation to experience the digital shift, the biggest categories are on the digital side. “If you think about it, gaming is purely digital,” Abrahami said. “In fashion, you’re interacting with all these brands on Instagram and Facebook and then hip hop, the whole streaming side of things that has really unlocked a lot of new artists. Gen Z is highly engaged on the digital side.” He said as consumers that are constantly surrounded by content and media, Gen Z wants to associate themselves with authentic brands, influencers or people that resonate with them. According to a Kantar report, 44% of Gen Z has made a purchase decision based on a recommendation from a social influencer. Abrahami also said that the emergence of micro communities has resulted in consumers becoming highly-engaged with not only A-listers, but smaller figures. “These smaller figures have a real impact on their purchasing behavior,” he said. “Being around content 24/7 is going to have that influence on you.” Jones added when conducting the report, the depth of immersion that the generation has with fashion and gaming was a little bit surprising. “It’s not just the top tier they were interested in, they were all the way down from the big, big names to the granular much smaller names within these communities,” he said, “I think that really tells us that both of these categories are going to be a big part of these generations for years to come.”
LEVERAGING DATA: As Gen Z and millennial cannabis consumers continue to take share of the market, Abrahami said brands can leverage this data in multiple ways. “If a brand is first starting out, this really helps build that blueprint for them and helps them understand their consumer,” he said. “When you understand your consumer, then you understand your brand positioning and how to develop your marketing strategy.” He added another way that brands can use the data is when they are scaling. “In cannabis, you’re kind of limited to your marketing capability and most brands are working with a very small marketing budget,” he said. “If you put in $100,000 for a marketing budget, you need $1M to come out. Brands where they develop a marketing strategy around influencers and build up brand awareness that is highly targeted is one of the key ways cannabis brands can differentiate themselves.” Jones added the data also opens up “aha moments” for brands, citing an example of an analysis they conducted for a rock band which found that a bath bomb brand was very important to their audience. The band ended up collaborating with the brand on a bath bomb, which they sold out of in their merch store, he said. “When you have all this data and you’re able to translate it, parse it out and understand what it means and how you can put it into action, a new world of opportunity opens up,” Jones said.
CONSUMER ENGAGEMENT: When asked about what cannabis companies can do to keep Gen Z and millennials engaged, Abrahami said they should be authentic and understand their audience. “If you don’t know your consumer, you’re going to miss the mark on your positioning and messaging,” he said. “One of the focuses for brands engaging with Gen Z and millennial consumers is to really try and build a community out of their brand. This consumer wants authentic relationships, they’re thinking digital first and they want to engage with other fans of the product.” He added it’s important for companies to leverage data to work with the right influencers and channels. “Targeting and reaching the right people is extremely important as a brand,” he said. “You’d rather have 10,000 superfans, extremely loyal fans, than 100,000 casual fans that can really drop off at the launch of the next product.”
CANNABIS STOCKS: Other publicly-traded companies in the space include Akerna (KERN), Aleafia (ALEAF), Aphria (APHA), Aurora Cannabis (ACB), Auxly Cannabis (CBWTF), CannTrust (CTST), Canopy Growth (CGC), Canopy Rivers (CNPOF), CordovaCann (LVRLF), Cresco Labs (CRLBF), Cronos Group (CRON), CV Sciences (CVSI), CURE Pharmaceutical (CURR), Delta 9 (VRNDF), Driven Deliveries (DRVD), Emerald Health (EMHTF), FluroTech (FLURF), General Cannabis (CANN), Greenlane (GNLN), Green Thumb Industries (GTBIF), GrowGeneration (GRWG), Harborside (HBORF), Hemp Inc. (HEMP), HEXO (HEXO), India Globalization Capital (IGC), Indiva (NDVAF), Indus Holdings (INDXF), Inner Spirit (INSHF), Innovative Industrial Properties (IIPR), Khiron Life Sciences (KHRNF), Liberty Health Sciences (LHSIF), MediPharm Labs (MEDIF), MedMen Enterprises (MMNFF), Mjardin (MJARF), Neptune Wellness (NEPT), Omnicanna (ENDO), Organigram (OGI), Planet 13 (PLNHF), Sproutly (SRUTF), Stem Holding (STMH), Sunniva (SNNVF), Supreme Cannabis (SPRWF), Valens (VLNCF), Tetra Bio-Pharma (TBPMF), Tilray (TLRY), Trulieve (TCNNF), Valens (VLNCF), Village Farms (VFF), Vireo Health (VREOF), Wayland Group (MRRCF), WeedMD (WDDMF), Wildflower Brands (WLDFF), YSS Corp. (YSSCF), Zynerba (ZYNE) and 4Front Ventures (FFNTF).