Cannabis retailer marketing strategies and regulatory compliance: A surveillance study of retailers in 5 US cities

Despite federal prohibition of cannabis, 21 states and 3 territories (including the District of Columbia) have legalized recreational use, and ∼40 states and 4 territories have legalized medical use as of November 2022.[1] Cannabis retail sales have rapidly increased in the US, from ∼$10 billion in 2019 to over $20 billion in 2021,2 and are estimated to be ∼$25 billion in 2025.3

Marketing efforts (i.e., product offerings, pricing, promotions) are critical for consumer uptake, attracting new users, promoting continued use, building brand loyalty, and shaping consumer perceptions, particularly for novel products.[4] Tobacco and alcohol research shows robust associations between exposure to retail marketing and use;[5], [6], [7], [8], [9] similar findings are emerging regarding cannabis.[10], [11], [12], [13], [14], [15] Marketing surveillance tools have been critical in informing tobacco and alcohol retail, and early cannabis surveillance protocols and tools are increasingly relevant and necessary in public health research[16], [17], [18], [19], [20] and practice[17] to address cannabis retail.

A major component of retail surveillance is monitoring products and their attributes, such as packaging and price. Cannabis retailers offer products diverse in their effects, depending on CBD vs. THC levels, strain (i.e., indica, sativa, hybrid), and mode of use (e.g., smoked, vaporized, ingested, applied topically).[14], [19], [21], [22], [23], [24] Product packaging promotes product attributes and articulates proper use (i.e., serving size, potency).[25], [26] Influential product attributes include higher CBD (among users and nonusers), higher THC, higher quality, and lower price.[27], [28] Relatedly, product pricing and price promotions impact consumer purchasing behaviors and are commonly used among retailers.[22], [23], [29] For example, prevalent price promotion strategies at cannabis retailers include coupons, price reductions, daily/weekly deals, “buy one, get one free” promotions, giveaways or free samples, loyalty club memberships, and promotions via social media.[22], [24], [30]

A major regulatory issue is underage access and marketing exposure. While some research indicates high age verification rates among cannabis retailers,[22], [23], [31], [32] a 2019 California-based study found that only 12% of retailers checked ID before entry,33 and more than one-third marketed youth-oriented items,33 particularly prominent among cannabis retailers near schools,16 coinciding with other evidence.32 Also, a 2016 study of dispensaries across 10 states found that ∼30% offered online ordering, and 21% offered delivery services,24 which may facilitate underage access.34

A related concern is the targeting of certain subpopulations. Evidence suggests that licit drug retailers[35], [36], [37], [38], [39], [40] (including cannabis retailers35-37,39,40) cluster in neighborhoods with high proportions of young adults, racial/ethnic minorities, sexual/gender minorities, and low-income individuals, and may vary their marketing strategies to target these subpopulations.[21], [38], [41], [42], [43] These strategies impact substance use.[44], [45], [46], [47]

Another concern is that the diversity and nature of products has implications for advertising messaging, particularly related to health claims.[18], [22], [23], [24] For example, a 2019 POS audit study in California found that ∼40% of retailers promoted the health benefits of cannabis.33 Other studies of cannabis retail websites found that over half (61-67%) made inaccurate health benefit claims while omitting potential side effects.[18], [24]

Cannabis regulatory frameworks are evolving and require additional sophistication based on the nuances of cannabis retail.[21], [48], [49], [50], [51], [52], [53], [54], [55] This work can be informed by prior work in licit drug retail,21 as well as the early experiences of US recreational cannabis retail.[21], [48], [49], [50], [51], [52], [53], [54], [55] Based on these experiences, state laws address various factors; for example, they may prohibit/restrict marketing targeting those underage and using health claims, online sales and/or delivery, and/or customer discounts.55 However, the literature highlights concerns related to noncompliance and underscores the need for cannabis retail and marketing surveillance to inform regulatory and enforcement efforts. Thus, this study examined regulatory compliance and marketing practices among cannabis retailers in 5 cities in different US states with different recreational cannabis regulations.

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