Cannabis Industry Market Research Gains More Credibility

By: Chuck Epstein

As more states move towards legalizing cannabis for medical or recreational use, it has created a greater demand for accurate, quality information focused on demographics of the cannabis market on a state-by-state and national level.

The problem is that accurate, timely information about the size of this fluid and less-than-public market is difficult to obtain and expensive.  The increasing number of states considering legalizing in 2016 is attracting the attention of investors, entrepreneurs, policy makers and public interest groups that need rigorous information in order to make critical decisions.

While some research firms now provide information about cannabis market trends at the state level, questions have arisen about the analytical rigor of this data and its timeliness.  To elevate the quality of this new research, Eric Hollowaty, a Harvard Business School and Yale University alumnus with a 20-year track record of success in technology consulting, corporate strategy and operations, startup advising and investment research, has formed Hollowaty Group LLC, an independent market research and consulting company focusing on the legalized cannabis space.

Based in Chicago, Hollowaty observed that most cannabis market research companies try to estimate the retail market size in a state, but do so only at a relatively high level such as the overall market’s dollar size.  His approach is more specific, relying on data from actual marijuana user surveys among other sources to arrive at market size estimates as measured in dollars, number and types of users, and mass of marijuana flower consumed.

“You have to know the various assumptions used to generate an estimate and without those inputs, you don’t really know what you’re measuring,” Hollowaty said.  His models are built so clients can see the inputs that create each market size estimate, and that is “of tremendous value compared to competitors.”

Hollowaty said his three main client targets are investors looking to invest in private companies (angel investors, private equity) and publicly-traded companies; the public interest community including affinity groups and policy makers at the state level; and companies, including entrepreneurs at start-ups as well as more mature companies looking to expand.

Customized Models

In practice, Hollowaty said a client who buys his state-level research model receives a single Excel spreadsheet that quantifies the medical and recreational market size for that state.  (All 50 states are available.)  Market size is a function of the number of people using cannabis times the amount of use times the price.  A consolidated national research version is available for every state in the union that contains tabs for each state in the research database. The national version sells for about $1,100. “This is an ideal amount, for investors or businesses considering getting involved in one or more states and who need an easy way to help them prioritize their efforts,” said Hollowaty.

“What we have tried to do here is make professional, institutional quality research available to those who might not otherwise be able to access it.  Our models break out estimates of the number of casual and serious recreational marijuana users, relevant medical conditions (Crohn’s, hepatitis, cancer, etc.), medical use market size, recreational user age segmentation and sensitivity tables that allow clients to see ranges of market size outcomes at a glance.”

“We think it’s important to make our models available to people in a user-friendly way, so we provide them in an Excel format, but we make only some of the cells changeable by clients.  This allows some customization of inputs within the model without being intimidating Excel novices,” he said. “Also, while the estimates in our models are meant to stand on their own, we are not so arrogant to believe clients will agree with our assumptions 100% of the time.  As a result, we built our models so clients can change select inputs to fit their own perspectives if desired, as well as see how real-time market changes affect the analysis.”

For example, Hollowaty said changes in qualifying medical conditions happen relatively frequently in medical marijuana states and that can impact market size and usage patterns. Washington state, for instance, recently added post-traumatic stress disorder (PTSD) as a qualifying condition for medical marijuana.  Since his model comes in an electronic format, clients could see with literally a single keystroke how this change affected the state’s medical marijuana market in dollars of additional retail business potential and number of potential new medical marijuana users.

Each state model presents this consolidated data (equivalent to four landscape-sized pages when printed) for a decade starting in 2015. Prices for each state model range from $99 to $199.  Complete pricing is available at http://www.hollowatygroupllc.com/offerings.html.

Chuck Epstein is an award-winning writer, who has held senior-level marketing and communications positions at the New York Futures Exchange, Chicago Mercantile Exchange, Lind-Waldock, Zacks Investment Research, Russell Investments and Principal Financial.  He has won national awards from the Mutual Fund Education Alliance (MFEA) and his site, www.mutualfundreform.com, was named best small blog in 2009 by the Society of American Business Editors and Writers (SABEW).