Who are the consumers actually driving the legal recreational marijuana industry’s growth? That’s exactly what a new and insightful study set out to find. Spoiler alert: it’s not just the cliché of deadbeat millennials living in their parents’ basements or college kids partying away from home that you see in movies. It’s actually far from it.
Independent research firm DHM and communications and public relations firm Quinn Thomas wanted to better understand cannabis users on everything from their demographics to consumer behavior. Therefore, they surveyed 900 marijuana users in Colorado, Washington and Oregon and also conducted two focus groups in Portland and Seattle. They chose those three states because Colorado was the first to allow recreational sales over five years ago, followed by Washington and Oregon, so they have the longest track records. Their research also notes that “Oregon has the highest percentage of monthly cannabis consumption in the country among its adult population – 20%”.
The report is packed full of information, so today we will focus on a few areas of importance and revisit the rest in the future. As more states like New Jersey and New York try to legalize retail marijuana sales, these findings give unique and helpful insight into marijuana users’ preferences and behavior post-legalization. They are what fuel the industry’s revenue and growth, after all. That said, here are the results:
Cannabis User Demographics:
- Gender: Male (60%), Female (40%)
- Age: 22-34 (30%), 35-54 (+35%), 55+ (35%)
- Household Income: Less than $25k (24%), $25-50k (23%), $50-75k (19%), $75-100k (14%), $100-150k (14%), Over $150k (6%)
- Relationship Status: Single (33%), Married (51%), Cohabiting with long-term partner (11%)
- Party: Democrat (35%), Republican (26%), Independent (32%), Other (7%)
- Education: Less than high school (30%), Some college/2-year degree (33%), College (19%), Graduate degree (16%)
- Rent or Own: Rent (32%), Own (60%), Something else (8%)
The upshot: “It is a population that has much more in common with a typical middle-class resident than with the caricatures created in Hollywood movies…” Cannabis users “generally match the U.S. average educational attainment, household income levels, and the political composition and race and ethnicity breakdown of the three states we researched.” This includes everyone from young-single renters to middle-age homeowners with kids to retired seniors.
Two caveats: men consume marijuana more than women and frequent users cluster at the lower end of the income scale. For example, 35% of regular users (who consume almost daily) have household gross incomes of under $25k per year compared to 11% of infrequent users.
Cannabis and Alcohol Use
- How has your consumption of alcohol changed since cannabis was legalized? Drink less (38%), Drink about the same (58%), Drink more (4%)
What reasons do you use cannabis? As an alternative to alcohol (24%)
- Our take: over one-third of marijuana users drinking less post-legalization is a significant stat, especially since that’s across the board in terms of frequency of use. Of course, it’s truest for regular users (near daily) with 58% drinking less since legalization. But 32% of occasional cannabis users (7 to 8 times a month) and 26% of infrequent marijuana users (2 to 3 times a month) report drinking less as well.
- Comparing cannabis use before and after legalization:
Regular consumers who consume daily: Pre-legalization (48%), Post-Legalization (74%)
Occasional consumers who consume a few times a month: Pre-legalization (11%), Post-legalization (27%)
- In what situations do you typically use cannabis?
On weekdays, during the work week: Yes, often (29%), Yes, occasionally (34%), No (37%)
On weekends and holidays: Yes, often (39%), Yes, occasionally (46%), No (16%)
By yourself: Yes, often (39%), Yes, occasionally (35%), No (27%)
We’ll wrap up with three investment takeaways:
#1 – Recreational marijuana legalization has led to greater demand across the board, from regular users to even infrequent users. If you’re invested in public marijuana companies, or want to do so, this is clearly a positive for the industry’s growth rates.
That said, one blind spot in the report was its lack of mentioning the black market. We keep emphasizing that the legal cannabis industry’s total addressable market hinges on appropriate regulations and reasonable tax rates. Marijuana taxes in California and Washington, for example, are too high and support illegal sales. Since the black market has existed for decades, it’s already entrenched and efficient across the US. Regular users, in particular, likely already have “a guy” and won’t want to incur high tax fees even if they can buy it from legal dispensaries.
#2 – The more cannabis people consume, the less they drink. We also continue to note this important substitution effect because it has a meaningful impact on public liquor companies. Many have already been vocal about this risk. Liquor and beer sales are slowing or declining and further marijuana legalization across the US will likely accelerate these trends. That’s why liquor companies, such as Constellation Brands and Molson Coors, have either taken a stake in a Canadian marijuana company or have partnered with one to make non-alcoholic, THC-infused drinks.
If you’re invested in the liquor industry, it’s important to understand that large public companies in that space haven’t just taken notice, but are already taking action to diversify their product offerings or business models. Those who don’t will likely lag behind.
#3 – The report noted that their focus groups associated alcohol with “going out” and marijuana with “staying home”. This is likely because consuming marijuana in most public places is illegal. We think this will change as laws loosen, the cannabis stigma fades, and more legalization rolls out across the US. The industry has already started developing an entire new distribution channel similar to bars and lounges. Consumers can go to marijuana cafes in Washington, for example. It’s still early days, but marijuana is creating a platform where eventually consumers don’t have to go to a bar for liquor, but can go to a cannabis club, marijuana bar, or of course just consume the drug at home.