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Big Data: Driving the Next Wave of Cannabis in 2019

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In our technology-enabled world, data is everything and information is the currency of choice, separating the best of breed companies from the rest. Google and Facebook have amassed so much data that they have sparked governmental inquiries into whether they constitute threat to democracy in and of itself. Artificial intelligence and machine-learning, two of the most visible and promising data-backed industries, saw patents grow by 34% between 2013 and 2017, spawning doomsday comments from the likes of Elon Musk and Bill Gates. It’s not all doom and gloom, though. Advances in machine learning, data science, and computing power can turn vast amounts of data into value-creating insights, and data can help solve larger problems around healthcare, poverty and energy demand. Its use isn’t restricted to solving system societal issues, though it can also help understand product pricing, churn prevention, cross-selling and upselling, and promote product optimization to drive growth.

Talk to any prominent CPG, beverage, food or pharma brand, and they’ll say that data is the key component to successfully marketing their brand. Data is used to survey entire industry and brand landscapes – it allows you to see what products are selling, what market share looks like, how competitors are positioned, and how price and promotion are impacting sales in real-time. In the CPG, food and beverage world, the leaders (and the only two significant players) in driving traditional data offerings are Nielsen and IRi Research, and they have managed to create barriers of entry over the data they capture and sell. The value created by this type of data barrier is, to risk understatement, substantial. Nielsen, the market leader, reported US$3.2 billion in sales through its data offerings, representing ~50% of the company’s total sales.

The importance of data in the rapidly unfolding and brand-intensive cannabis economy will be no different in this respect, and early market leaders in the data industry are already emerging. Canopy Rivers (TSXV: RIV), a cannabis venture capital company focused on (among other things) nascent and emerging verticals in the space, recently expanded its portfolio into the cannabis tech and data vertical by investing in US-based technology platform Headset, the world’s leading real-time cannabis business intelligence software. Headset has captured significant market share and valuable data in this growing niche, where the larger incumbents have been slow to participate due to regulatory concerns and the perceived social stigma that still attaches to cannabis in some quarters.

Headset’s product suite integrates into existing retail point-of-sale (POS) systems, pulling data on what consumer are buying, where they’re buying and at what price point. Headset’s technology and data set provides brand managers and marketers with the tools they need to see how their product is selling, what brands are leading the segment and how the four Ps of marketing (price, product, promotion and place) are affecting sales.

The utility in the cannabis industry is clear and will continue to grow as the space matures over time. Large licensed producers can use the data to create a kill-zone around them, where they can spot, assess, and buy companies that demonstrate growth within whatever segment they are targeting. Other industry participants, such as investment funds, venture capital companies (such as Canopy Rivers) and hedge funds, can use the data to see how the cannabis market is moving in real-time, helping them with due diligence. It is a multi-faceted tool, offering those who properly wield it potentially significant competitive advantages in such a dynamic, fast-moving industry.

Grand View Research predicts that the global legalized cannabis market will grow by a compounded growth rate of 34.6%, and is estimated to be worth a staggering $146.4 billion by 2025. Right now, many companies in this nascent sector are experiencing growth, not because of any particular differentiation, but almost because the growth rate is so high that existing players can capture double digit growth by just riding the wave of legalization.

This will change as the market starts to mature and begins to sift participants into winners and losers. Data will be key to this sifting process. Investors will be able to focus on operational execution rather than news flow, brands can begin to develop dominance by targeting specific demographic groups and customer profiles, and growth in ancillary technologies and industries will mushroom to service the maturing market. Marketers, brand managers, and distribution platforms could be one of the fastest growing and talent rich segments within this new industry. Their weapon of choice here, as it is in all industries BIG DATA.

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