MCN’s partner New Frontier Data explores the effect of COVID-19 European cannabis demand, including consumer trends and the economic future.
Despite inevitable regulatory delays due to the COVID-19 pandemic, European cannabis demand remains strong and continues to evolve, moving towards greater interest in infused products. In April, during the Global Cannabis Town Hall hosted by New Frontier Data, Chief Knowledge Officer John Kagia detailed how the European cannabis market serves an estimated 42.6 million people (5.9% of the population) throughout 28 European countries. Those regular consumers of cannabis are projected to spend 62.7 billion euros (USD $68.5 billion) this year between both the regulated and unregulated markets.
It is expected that the COVID -19 pandemic may hamper legalisation efforts across Europe, leading to delays which will likely drive some consumers toward the unregulated market – concerns which are detailed in a special report from the European Monitoring Centre for Drugs and Drug Addiction (EMCDDA).
Covering three active darknet drug markets from January to March 2020, the EMCDDA report identifies an increase in the number of sales of cannabis flower products among common purchase-weight categories between 1g and 28g (1oz). It appears that as concerns about COVID -19 grew and countries began initiating lockdown measures, consumers stocked up on cannabis products. The estimated value of cannabis products sold via Cannazon, a market devoted to cannabis products, reached approximately €4.3m between January and March 2020, representing a volume of 1.6 metric tonnes.
A similar spike in sales was seen in the USA as consumers also stocked up in anticipation of government-mandated sheltering in place. While dramatic early spikes subsequently plateaued, cannabis consumers may be driven to further stockpile cannabis products.
Understanding consumer demand in a crisis
Unlike alcohol, which is generally considered a social drug, cannabis is widely consumed alone, with the majority (52%) of cannabis consumers opting to consume by themselves. As such, behaviours around cannabis consumption may not be drastically disrupted during prolonged social isolation, so cannabis demand may predictably persist throughout the pandemic. That said, and despite flower being the most common form of cannabis consumption, pandemic-induced concerns could pull consumers away from combustibles and toward newly developed alternatives such as edibles and other infused products.
Cannabis consumption via inhalation allows THC to enter the lungs and pass into the bloodstream quickly, leading to the consumer’s feeling the associated psychotropic effects much more rapidly than via the ingestion of an edible. The effects of the former are felt almost immediately and with relative consistency; conversely, edibles are often deemed less desirable due to inconsistencies affecting the onset of effects and the consumer’s overall experience. Advancements in scientific development and product innovation have begun to overcome some of those drawbacks to edibles, which had initially impeded their commercial adoption. Newer forms of infused products include topicals or sublingual products designed to be absorbed through the skin or under the tongue.
Challenges in quality stem in part from cannabinoids themselves, which are hydrophobic and lack solubility, requiring additional processing for the body’s absorption. This biological obstacle may contribute to misgivings about the ‘pot brownie’, a traditionally popular choice of cannabis edible otherwise notorious for its inconsistent effects with equally unpredictable onset. That said, contemporary manufacturing methods allow for specific cannabinoids to be strategically extracted and infused into a variety of products for more desirable defined effects.
Evolution and innovation in cannabis production
Today’s extraction relies primarily on one of two techniques: solvent-based or nonsolvent-based methods. Solvent-based techniques involve dissolving cannabinoids in a removable solvent for extracted cannabinoids to be utilised. Nonsolvent-based techniques can vary from rudimentary mechanical techniques to the utilisation of machinery for producing precise levels of heat and pressure.
Once the desired cannabinoids are extracted, modern technology allows for the active ingredients to be infused with improved consistency. Through glycosylation, for example, hydrophobic molecules are transformed by directly changing their chemical composition. Another advanced technique is emulsion, whereby utilising an emulsifying agent allows cannabinoids to be suspended in an aqueous solution to improve their surface area and enhance the body’s ability to absorb the desired cannabinoids, ultimately accelerating the onset of effects (along with providing additional nutritional and/or medicinal benefits).
The new techniques allow for greater consistency in effect but also more accurate dosage.
Approximately three-quarters of European CBD consumers cite quality as a concern in choosing their products, and an important factor when considering where to purchase them. A majority of European consumers surveyed reported the most influential factors in their purchasing decision-making to be dose per serving (79%) and dose per product (77%), closely followed by the quality of non-cannabis ingredients (73%). Those behavioural indicators highlight the potential for infused products to gain further traction in the European legal cannabis market.
Lastly, the most popular reasons cited by cannabis consumers as a whole when purchasing cannabis-based products included as the most prominent desired effects relaxation, stress relief, and stress reduction. European CBD consumers likewise cited similar reasons for consumption, selecting for pain management, relaxation, and stress relief. As cannabis consumers worldwide have now been in lockdown for months, both cannabis and CBD can be expected to remain in high demand among those seeking relief during lengthy heightened isolation.
As New Frontier Data continues to evaluate and measure the impact of the current economic and social crisis onto the global, regional and local cannabis markets, it is expected that the legal cannabis industry may offer relative stability, if not a potential hedging mechanism, for both private and public investors, as well as a promising source of additional revenue for countries and states.. Despite the recent increase in unregulated market activity, it is further expected that the pandemic may ultimately benefit legal cannabis markets, with the added benefit of triggering more advances in medical and even adult use research and development.
As Mitchell Baruchowitz, managing partner at New York-based Merida Capital Partners, a leading cannabis-focused investment fund, recently noted: “What we do know is that people who are going to be locked up in their houses would prefer cannabis to alcohol if they consume both as one of their vices.” Likewise, he said, “We’ve found out some fundamental things about cannabis: people will stock up if they feel like they might not have access to it. They’re deeply concerned about their access to good flower.”
New Frontier Data’s research begins to show how this uncertainty has caused a shift from illicit markets to legal dispensaries as consumers doubt illicit suppliers’ ability to meet demand for preferred products, much less any viable quality control. Cannabis investors and financial stakeholders are becoming as similarly bullish as Baruchowitz in concluding that the legal cannabis industry is “not only recession-proof, but global-crisis-proof”.
New Frontier Data does not take a position on the merits of cannabis legalisation. Rather, its mission and mandate are to inform cannabis-related policy and business decisions through rigorous, issue-neutral, and comprehensive analysis of the legal cannabis industry worldwide.