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[17 comments]

Will Grocers Get a Contact High From New Recreational Pot Sales?

January 2, 2014

Depending on their positions on the matter, residents of Colorado and Washington have either been dreading or highly anticipating (sorry, the puns are impossible to avoid) the debut of the nation's first legal recreational marijuana stores opening in those states in 2014. The Associated Press reported that 24 stores opened in Colorado to long lines yesterday, and that sales activity went smoothly.

While supporters point to the potential for increased tax revenue and the benefits of taking pot off the black market, detractors predict increases in DUI cases, easier access to the product by underage consumers, and even increases in drug trafficking as out-of-state smugglers descend on the locales.

The truth is, no one knows for sure what the initial impact and long-term repercussions of open sales to 21-and-over adults will be. In Colorado, about 350 licenses have been issued for shops that will be allowed to sell up to 28 grams of pot to each of-age customer. Although marijuana sales for "medical" (ironic quotes intentional) purposes is legal in 19 states, this is the first time that getting a buzz on will be a legally sanctioned objective and not a side effect of the medication. In other words, adults will be able to smoke for the fun of it, albeit only on private property.

The overall take from medical marijuana in 2013 is estimated to be around $1.4 billion by Arcview Market Research. With the new "legalize it" initiatives, that figure could hit $2.34 billion this year, according to the firm. And that's just from sales of the weed itself. Consider the other possibilities.

For Colorado, ski-and-toke tourism is reportedly a budding industry with travel marketers no doubt incorporating phrases such as "Lift Ticket" and "Rocky Mountain High" to great effect. Food retailers and restaurants will also see tie-in opportunities that they'll be loath to see wasted (sorry). As those who have inhaled know, getting toasted typically increases one's enjoyment of a host of worldly pleasures, notably jam band music, sophomoric humor, and — particularly — sweet and salty snacks. Yes, Colorado grocers and restaurateurs are surely kneeding their hands in anticipation of waves of potheads afflicted with the munchies.

As they redesign their menus, restaurant owners might consider a list of top munchie recipes published a few years back by Bon Appetit magazine, led by a nacho macaroni and cheese casserole; candy bar-topped brownies; grilled cheese and short rib sandwiches; brown-sugar glazed bacon; and chocolate chip and banana ice cream sandwiches.

For grocers ... well, it's not like Colorado just invented pot. CPG food manufacturers have been on the bandwagon since the Reefer Madness era. It could be argued that without the munchie phenomenon, the snack category would be considerably less prosperous. Complex City Guide's list of "The 25 Greatest Stoner Snack Foods of All Time" includes such mainstream favorites as Nutella, Bar-B-Q flavored Fritos, Twinkies, Oreos and Cheez Whiz. And fortunately for those shoppers with impaired judgment that need help making a decision, Frito-Lay has a pothead-inspired potpourri on the market made up of Doritos, Cheetos, Rold Gold and Sun Chips. It's called "Munchies Cheese Fix."

Discussion Questions:

Do you expect Colorado and Washington state grocers to build "Munchies" sections and end-cap displays, or will they choose to remain less conspicuous in catering to stoned customers? What new menu additions would you recommend for restaurants in those regions?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

How big of a boost to revenue will the coming of legal recreational marijuana sales bring to local grocers and c-store operators?

Comments:

Munchies end-cap displays are the norm for c-stores and I don't see that changing in Colorado and Washington or any other state. I can foresee that some supermarkets will move some of their snacking SKUs from that shelving to an end cap.

However, I think it would not be advisable to be too obvious in attempting to capture the "stoned" customers. First, no one is yet sure of the size of the market. Second, the supermarket would run the risk of alienating its non-stoned customer base. Bottom line, I don't think is a good business for a mainline supermarket to be known as a place stoners go.

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Steve Montgomery, President, b2b Solutions, LLC

Although I would hope that most CPG marketers will steer clear of the obvious tie-in opportunities in the short term, tag lines like Anheuser Busch's "Grab some Buds" will take on a whole new meaning. Do grocers really want to cater to this group? The risks are not worth the higher basket ring. Sorry.

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Zel Bianco, President, founder and CEO, Interactive Edge

A few independent retailers may add munchies sections for a lark, but this won't have any real impact on grocery sales. A small amount of sales may be moved from Category A to Category B, but total sales volume should not be affected. Adding in munchies sections might also turn off some shoppers badly enough to make them go elsewhere.

It brings to mind, in a loose way, how Macy's refused to advertise in the New York Post, arguing that "Your readers are our shoplifters." I can't add anything to the list of menu items for restaurants beyond what's in Bon Appetit and the Complex City Guide, except for an old favorite of mine back in the '60s - brownies with hashish chips. But that would pose another problem entirely.

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Warren Thayer, Editor & Managing Partner, Frozen & Refrigerated Buyer

Okay, first of all, this is a GREAT start of year article. A budding business indeed! Starting with a chuckle is always good.

Having said that, I really don't believe we'll see a rise in the number of pot smokers or munchie eaters as a result of the legalization. People have done what they are going to do with regard to pot for a very long time. The end of prohibition just takes away a certain stigma and legal irritant for casual users.

I hope Colorado enjoys its increased tax collections, and I look forward to RSR's Denver-based partner, Nikki Baird's on-the-scene reportage (caveat: this is not to say she'll be a participant, just an observer).

Bring on the cookies-n-cream ice cream!

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Paula Rosenblum, Managing Partner, RSR Research

All I'm going to say is who needs more stoners in their stores? It is like the "Dawn of the Dead" movie watching these people trying to navigate through the store looking for whatever they can munch on.

I went to OSU, and spent a few early hours seeking out donuts on High Street, and I'm sure the poor clerks weren't thrilled to deal with a bunch of idiots. With the new laws coming out, the number of fools out there will increase, and the scary part is they have to drive cars, which is a big problem, as they go down the streets doing 5 miles an hour trying to act sober.

I pray for common sense, but there will be problems as community standards are hitting a new low, and the children seeing this frightens me, as who are the role models for them to emulate? Scary stuff happening out there.

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Tony Orlando, Owner, Tony O's Supermarket & Catering

Just reading these comments makes me want to dash out for some Fig Newtons and Frito's....

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Cathy Hotka, Principal, Cathy Hotka & Associates

I don't think the number of pot users will change that much just because the law changed. Growing up in a rural area where pot was our main cash crop, it was always and everywhere all the time. I suspect that is still true. Therefore grocers really don't need to change anything.

Hy Louis, Tea buyer, Wong Imports

Hmmm. Maybe there's a new opportunity for home delivery of a big bunch of munchies. Safer for all concerned. Where are those drones, anyways?

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Peter J. Charness, SVP America, Global CMO, TXT Group

I'm pretty sure mainstream CPGs and retailers will stay in the background on this one. But Amazon might just have a field day - could be a great way to kick off the pantry refill program they are launching to Prime members.

Backlash benefit? A "highly relevant" opportunity for anyone in weight loss or exercise products!

Happy New Year to all!

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Anne Howe, Senior Vice President, Shopper Solutions, part of Acosta Mosaic Group

Retailers have been catering to this segment for years.

Jack in the Box has been promoting to this segment for several years (just look at any of the taco or value menu advertising), and there are some creative food delivery services in Denver (as I found out after a past-midnight hotel arrival and the only place that would deliver was Mary Jane Pizza).

The segment that would favor a "munchies" section is not the mainstream segment. For years they have created a subtle language and icons that need to be incorporated into merchandising for them. The end-cap display and other current mainstream options might be a turn-off.

Ultimately, any retailer that wants to seriously cater to this "emerging" or "out-of-the-shadows" consumer segment needs to perform proper marketing to gain insights on how to properly sell to them.

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Carlos Arámbula, Managing Partner, MarcasUSA LLC

"Bring on the cookies & cream ice cream."

No way, Paula!

It's Doritos all the way. And while Nacho Cheese is the classic solution, there's a reason we developed Cool Ranch Doritos in the '80s!

(Note to Cathy, Fritos are still the original - but most of us who know that were at Woodstock!)

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Ben Ball, Senior Vice President, Dechert-Hampe

Speaking as a capitalist and an avid supporter of a free market economy, I fully expect grocers to take full advantage of any new sales opportunities that are presented.

Speaking as an embarrassed Colorado native and resident, I hope grocers will review their core values and corporate mission statements before making changes to accommodate the whims and cravings of drug users.

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Eric Chester, Keynote Speaker, Author, Reviving Work Ethic, LLC

Well, not sure about regular stores but for anyone running one of the new outlets, you can bet they would be crazy not to have a large amount of space allocated that way. Which brings up another thought - could this be the advent of stores allocated to snacking? Thank goodness Twinkies are back ....

Andy Casey, Senior Partner, Loyalty Resources

Grocery stores should stay the course of their merchandising plan-o-gram, and 99% of restaurants that are successfully in operation should stick with their current menus.

Those merchants will have a better fix on consumer patterns as they see how consumers at the new "Colorado recreational centers" react to prices of $70 for a product that can and will be sold at the street for $25 - $50. Economic marketplaces operate in a rational manner. Give it time, as we all will be reading about it in about 8 weeks.

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Roger Saunders, Managing Director, Prosper Business Development

Although some marketers may be wary of targeting products to marijuana consumers, the fact remains that marijuana is now legal. We have seen chips and dips being sold next to beer for decades, so there is no reason why retailers should not capitalize on a new product offering that appeals to a newly enabled target audience.

As long as these offerings do not damage the brand or alienate existing consumer base, then there shouldn't be any problems.

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Jesse Karp, Omnichannel Consulting Manager & Loyalty Practice Lead, Cognizant Business Consulting

All I can add to this discussion, as the "on the ground" Colorado resident, is that the food truck vendor who parked outside the line waiting to get into the Medicine Man dispensary (now retail seller) was ecstatic over his sales - "50 burritos in 30 minutes!"

I heard somewhere that the state of Colorado is predicting that pot sales will be $600M this year, with a 15% tax on the sales. If that's true, simple math would help you figure out the halo sales on that - 10%? That'd be $60M if true. But to Paula's point, how much is incremental? Seemed like 1 out of 5 people in the line were newbies or there for the novelty rather than as experienced past buyers.

Take it for what it's worth!

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Nikki Baird, Managing Partner, RSR Research

The latest and greatest fast food retailers win this one.

'gjarnoldjr'

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