Legal Marijuana needs Big Data to Grow
Cannabis-specific data services are optimizing business and educating consumers
When it comes to growing a plant-based industry, big data and technology may be more valuable than fertilizer.
As the legal marijuana industry continues to expand, so has the need for data services to increase efficiency and consumer education. But companies like SAPSAPGF, +0.18% and NetSuite N, -1.39% that typically provide data collection and organization to more traditional industries aren’t extending their business to the legal cannabis industry, creating an opening for new companies catering just to the marijuana market to fill the space.
“They’re bringing normal business processes into the cannabis industry,” says Alan Brochstein, founder of 420 Investor, an investor community for publicly traded cannabis companies. “It’s about time.” SAP and NetSuite didn’t respond to requests for comment.
With the legal cannabis market expected to reach $6.7 billion in medical and recreational sales in 2016, industry experts expect data to play a primary role in accelerating this growth. These data services track everything from plant cultivation to consumer purchasing trends, helping marijuana retailers comply with state regulations and optimize their inventory to meet demand.
One of those services, Flowhub, was founded in late 2014 as a cannabis-tracking software to help marijuana growers operate in compliance with state regulations. Before that, many manufacturers had a blind spot when it came to supply chain management, opening them up to potential missteps like missing plants or pesticide use, says Kyle Sherman, the company’s chief executive. “We wanted to provide tools to help people so we can legalize [cannabis] responsibly,” Sherman says.
About 100 companies in Colorado and Oregon are signing onto the Flowhub system, according to Sherman. The software system also allows for other data applications to be incorporated with it, similar to how mobile apps work within smartphones.
One of these data applications is Headset, which launched nearly two months ago but is already tracking $65 million worth of cannabis transaction information, according to Cy Scott, the company’s chief executive. Scott described Headset as “the Nielsen of cannabis,” providing market intelligence data for marijuana sellers including guidance ranging from how to stock inventory to how to price products. “It was almost obvious,” Scott says. “Every other retail industry has this service.”
The Headset application can tell retailers specific details which they can use to base inventory decisions off, like if granola edibles are outselling caramel edibles, and overall trends, like the decline in popularity of marijuana flowers — the smokable form of the plant — Scott says. “Our customers range from the largest retailers to the newest retailers in the industry,” he adds.
There are also data resources for consumers. Leafly, a cannabis information resource website, uses crowdsourced data to provide reviews of strains and dispensary directories to help customers navigate the legal marketplace. The gradual legalization of the industry has brought a new source of community-based feedback, says Zack Hutson, director of public relations at Privateer Holdings, a cannabis private-equity firm that owns Leafly, adding that the site had about 9 million unique visitors in February.
Cannabis Reports also provides a comprehensive database for the strains of cannabis on the legal market. The company’s chief executive, David Drake, says he brought the website online after noticing the absence of tech services within the legal cannabis industry. The database includes more than 30,000 strains of marijuana, the companies that produce them, the lab tests performed on them, medical studies and other information gathered from online research.
“It’s a really big responsibility to have that amount of data, and we’re making it available in a very open fashion” Drake says. “We’re looking to try and serve anybody trying to find out about cannabis.”
The company provides free information for consumers on its websites, and businesses can pay a monthly fee for customer insight data and data organization like charts and pricing information. “It makes people a lot more comfortable about the industry when you know all the data is there and it’s all transparent,” Drake says.
This transparency may be crucial for the industry as legalization movements across the country continue to gain steam. Much of the negative reputation marijuana has garnered in past decades has been drawn from “false data,” says Flowhub’s Sherman. “What we really need to squash prohibition is great data.”
Original article here.