All politics -- and cannabis marketing -- are local
Washington, Colorado provide insight for California
December 14, 2017
Science Daily/University of California - Davis
California's legal cannabis market, opening for business on Jan. 1, is expected to quickly grow to be the largest in the nation and worth more than $5 billion a year.
County voting on Proposition 64 that led the state here -- to legalizing sales for recreational use -- can offer insight into how medical marijuana dispensaries will now market themselves, according to research from the University of California, Davis.
"The way that communities vote and the values they have are going to have an impact on how this industry's going to evolve over time," said Greta Hsu, a professor at the UC Davis Graduate School of Management and lead author on the paper, soon to be published in the journal Organizational Science.
Hsu draws her conclusions from the experiences of Washington and Colorado. She and her co-authors from Yale and Emory universities examined county voting patterns in the 2012 referendums that legalized marijuana sales in the two states and how medical marijuana dispensaries responded.
In communities where the majority voted against such initiatives, medical marijuana dispensaries maintained a more traditional approach, accentuating the therapeutic benefits of marijuana as an alternative medicine.
However, where the majority voted in favor of legalizing recreational marijuana sales, medical marijuana dispensaries adopted marketing strategies that de-emphasized the medical orientation and sought to attract recreational customers.
Analysis of dispensary reviews, descriptions
The researchers analyzed information, reviews and descriptions of more than 1,000 medical cannabis businesses, using WeedMaps.com, a crowdsourcing website that is considered the "Yelp of cannabis" for dispensaries and other retailers. The researchers developed a coding system for the language in order to track trends across the two states.
"Some of these dispensaries, when you look at them, they emphasize medicine a lot, and they emphasize their ties to the local community," said Hsu. "Others just emphasize convenience and price."
Marketing recreational vs. medical marijuana
Some clusters of dispensaries were more conservative in their marketing, with statements like: "We aim to educate our patients about cannabis treatments and other alternative health approaches to supplement their medicine."
Despite legalization's substantial disruption to their industry, these businesses continued with their original identity focused on therapy and the patients, said Hsu. They tended to be in counties where the majority voted against legalizing recreational marijuana.
Dispensaries that embraced the new recreational market took more risk by advertising to a broader, emerging consumer class, which has been bolstered by a growing tourism industry.
Supporters for these cannabis businesses emphasized the benefits to the local economy, public health and social justice, casting marijuana as less harmful than alcohol. Dispensaries with this more recreational-oriented marketing tended to be in counties that voted in favor of legalizing recreational use.
Legalization and regulation in California
Communities hold a great deal of power in affecting how dispensaries decide to market themselves, according to Hsu.
In 2009, California was the first state to legalize medicinal marijuana, and Proposition 64 legalized recreational marijuana in the state beginning on Jan. 1, 2018. The state has unveiled a new licensing process for the cultivation, manufacturing and sale of marijuana, which is divided into both medicinal and recreational (or adult use) branches.
However, the law gives local municipalities flexibility in deciding how easily dispensaries can operate within their boundaries. Some counties have chosen to ban all dispensaries. Others are carefully regulating sales and businesses through zoning and taxes.
While 57 percent statewide voted in favor of Proposition 64 in 2016, a majority of voters in 18 counties did not. This included Kern County, which recently announced a ban on all marijuana businesses, including existing medicinal dispensaries.
Other applications for research
Hsu said the research contributes to understanding about how local conditions or cultural changes drive dynamics in a broad range of markets including rise of organic agriculture and the growth of energy and wind power.
"Organizations in these changing markets have to think very carefully about how they want to position themselves and about the strategic choices they make," said Hsu.
The paper is titled "Co-opt or Co-exist? A Study of Medical Cannabis Dispensaries' Identity-based Responses to Recreation-use Legalization in Colorado and Washington." The co-authors are Balázs Kovács, assistant professor of organizational behavior at Yale, and Özgecan Koçak, associate professor of organization and management at Emory.
Hsu, who is an expert in organizational behavior and theory, is continuing related research. She is also studying how cannabis dispensaries in several states are adjusting to changing markets.
Link to video: https://www.youtube.com/watch?v=Mdg6js_BwT8&feature=youtu.be
Link to paper: https://gsm.ucdavis.edu/sites/main/files/file-attachments/cannabis_os_final.pdf
https://www.sciencedaily.com/releases/2017/12/171214153334.htm
Oregon's marijuana legalization prompted big drop in sales in Washington's border counties
Economists find a reduction of legally purchased pot products moving illegally out of Washington
September 5, 2017
Science Daily/University of Oregon
Three days after recreational marijuana sales became legal in Oregon, sales across the border in Washington, where retail availability already existed, dropped by 41 percent, reports a team of University of Oregon economists.
The study also suggests that illegal cross-border movement, or diversion, of legally produced marijuana sold at retail outlets across state borders is a real concern but not occurring at alarming levels.
The National Bureau of Economic Research published the study this week as part of its working papers series.
"We found that the majority of marijuana sold in Washington is actually staying there," said study co-author Benjamin Hansen, a health economist at the UO. "We found that prior to Oregon's legalization 11.9 percent was potentially being diverted out of Washington overall, and it dropped to 7.5 percent after Oregon's legalization."
The research tapped a naturally occurring experiment to explore the issue of small-scale trafficking due to cross-border shopping by Oregon residents in Washington, said Caroline Weber, a professor in the UO's Department of Economics.
Washington was one of the first states to legalize recreational marijuana. The state's regulatory and tracking requirements covering production to sales provided a wealth of data, she said. The UO team studied Washington's sales for the two months before and after Oregon's legal market opened on Oct. 1, 2015.
In doing so, researchers were able to address one of the key concerns of the Cole Memorandum issued in 2013 by then-Deputy Attorney General James M. Cole. It called for federal law enforcement officials to monitor the diversion of sales across borders as states moved to legalize medical and recreational marijuana.
"There has been a lot of debate about a federal crackdown on marijuana," Hansen said, referring to signals expressed by the Trump Administration. "Our study says that 93 percent of marijuana sold in Washington is probably staying there now. There's probably not a lot you can do about the remaining share that is being diverted at this point. This is just the likely consequence of partial prohibition."
The diversion data also included the flow of retail-sold marijuana in Washington to neighboring Idaho and to British Columbia.
Because federal law still classifies marijuana as a Schedule 1 drug, grouped with heroin and methamphetamines, illegal cross-border movement could be targeted by law enforcement. One such method is by using randomized traffic searches along state borders.
Prior to Oregon's market opening, an average of 1,662 retail sales transactions occurred daily in Washington's Clark and Klickitat counties, just across the Columbia River from Portland. Given that 293,840 vehicles went between Oregon and those counties daily in 2015, according to the Oregon Department of Transportation, "a policy of randomly searching border-crossing vehicles could expect to find diverted recreational marijuana in just 0.47 percent of stops," the researchers concluded.
"You might expect larger diversion when states around a legalized one are not allowing recreational or medical market sales," Hansen said, adding that California, based on this study, likely will experience far less diversion because all of its neighboring states allow for some form of legal marijuana use.
The analysis by the team, which also included UO economist Keaton Miller, also found that randomized searches along Washington's Spokane and Whitman counties with Idaho, where marijuana is illegal, might expect to find illegally transported marijuana at most 4 percent of the time.
In the two months prior to the opening of Oregon's recreational market, 5,624 kilograms (12,398 pounds) of marijuana were sold in Washington; 670 kilograms (1,477 pounds), or 11.9 percent, went across state lines. Factoring in the 41 percent drop in sales along the Oregon border and no decline elsewhere in Washington implies that only 7.5 percent is illegally leaving Washington today, the research team concluded.
"Given the data available, we've been able to study this natural experiment to speak to a question that a lot of people in law enforcement and government care about," Weber said. "If we had instead found that 60 percent of Washington's marijuana was being diverted, then it would have suggested a whole different approach to thinking about legalization moving forward."
Small amounts of illegal, small-scale trafficking is to be expected as long as the U.S. does not have uniform policies, Hansen said.
Based on the data, the researchers concluded, people seem to prefer purchasing recreational marijuana in legal recreational markets instead of through the black market or as medical marijuana or growing their own.
"People value being able to go to a store, seeing the variety of products that are offered there and purchasing it in a retail store," Weber said.
Paper access: http://www.nber.org/papers/w23762
https://www.sciencedaily.com/releases/2017/09/170905134452.htm