Executive Summary
How can a person enjoy cannabis without inhaling unnecessary tars and poising his or her lungs and blood with carbon monoxide? Wouldn’t it be better to merge marijuana with the most outstanding bakery products instead of having only a boring gummy option? We offer our customers to combine the best side of the bakery and cannabis by removing pointless lung damage. We are better than our competitors because we do not mix marijuana with other drugs, such as caffeine, and we do not put THC inside overpriced gummies. The dessert shop is guaranteed to grow because the market is about to boom, the legal environment is welcoming, and competition is weak. The project will become an Instagram star that provides relatively cheap and high-quality bakery products. In our dessert shop, you will leave full, your taste buds will be delighted, and your mind will feel relaxed. In addition to these numerous advantages, the business will become profitable astonishingly fast without losing the advertisement budget.
Situation Analysis
Market Trend Analysis
The name of the industry is the cannabis edibles market, which promotes a healthier way of marijuana consumption. In regards to the market size, the article states: “A recent Deloitte report suggests that edibles and alternatives will be worth $2.7 billion a year in Canada – making up 60 percent of the legal cannabis market.” The trends are in favor of edible cannabis because the drug has a solid research base on its safety and increasing popularity. The research suggests: “A total of 12.9% of respondents reported smoking marijuana, 6% reported using edibles, 4.7% reported vaping, 1.9% reported using concentrates, and 0.8% reported using topicals. Overall, 6.7% reported using multiple forms in the past year.” Therefore, it is evident that the industry will grow due to the negative health ramifications of smoking marijuana, such as CO and tars. The sector will be comprised of edible marijuana products, which will come in the form of cookies, gums, sweets, and other foods with cannabis.
The sales are increasing because of the overall expansion of the market, and edible marijuana is a healthier alternative to smoking. The current market trends indicate that cannabis edible spending is on the rise with the estimation of the number reaching $4.1 billion in 2022 in both US and Canada. Therefore, one can expect steady growth in the industry due to the constant escalation of the total spending among consumers. Market entities are independent commercial organizations that are oriented to profit, and all elements of the structure of subjects work for a common goal. Resources are limited and distributed centrally, thus, there is no competition between the items for the resource. In the framework of the established restrictions, one can observe competition for the position, for a place in the hierarchy.
Environmental Analysis
To analyze the environmental factors, it is important to consider both regulatory and demographic influences. Any organization, regardless of small or large, is in contact with the external environment which is a source of means for a small enterprise, necessary to maintain its internal potential. Today, in the country, a complex political and economic situation has formed regarding marijuana. At that point, the external environment has become more stable and predictable, which will not affect the small business to a large extent. Therefore, it is important to discuss environmental factors affecting the development and organization of small businesses. It is stated that: “Under the new ‘Cannabis 2.0’ rules, there is a 10 milligram THC limit per package of solid and drinkable edibles.” In other words, Canada imposes specific regulatory measures which limit the amount and concentration of THC in a product. In addition, demographic factors, such as provinces, are critical in understanding the environmental forces. The article claims that: “Saskatchewan, British Columbia, Manitoba, and Newfoundland are all fairly quick movers, with the first cannabis edibles beginning to appear on shelves and online.” Therefore, a number of provinces are more eager to consume edibles than the others, which means that competition and consumer demand will differ depending on the given demographic factor.
Features of the external environment of the small businesses, such as the dessert shop, lie in its complexity, mobility, and a high degree of uncertainty. In this regard, with the transition of cannabis to market relations, the external environment of commercial organizations has changed significantly. Unlike other countries where the market system has been developing for many decades, the cannabis business had to join the new system in a short period and learn to withstand the effects of environmental factors. However, the gradual increase in spending will inevitably result in edibles becoming popular among all Canadian provinces. Both regulatory and demographic factors are major environmental influences that will directly impact the edible cannabis industry.
Competitive Analysis
The three main competitors are Tasty THC, Cannabis and Coffee, and Cannabis Growth Corp. The former two are the direct rivals because each of them sells an edible form of marijuana in Toronto. The justification is based on their relative market share and observations, where Tasty THC holds 4% of the industry, Cannabis and Coffee holds 3% of the industry, and Cannabis Growth Corp holds 5% of the total cannabis market. These are the direct competitors because they are the major edible sellers in Toronto. The Tasty THC’s key products are Sour gummy series, Cannabis and Coffee’s key products are coffee drinks with THC, and Cannabis Growth Corp’s key product is pure marijuana.
In the case of the marketing mix, it is important to understand the key difference in terms of price, promotion, positioning, and place. Price values for each competitor vary, where one piece of products of Sour gummies is equal to CA$25. It is significantly more expensive than cannabis coffee and plain marijuana. However, the gummies are sold in packs, which means that the value of a single gummy will be also different. The place is primarily concentrated in Toronto because further expansion will be only considered if the launch is successful. The positioning of all three competitors is focused on affordability and low prices, and therefore, there is an opportunity for quality-oriented products. Lastly, Promotion among all three competitors is predominantly reliant on online platforms, and Cannabis Growth Corp also utilizes offline advertisement. To compete with the competitors effectively, the promotion for the shop needs to occur on social media platforms.
In conclusion, the main competitors are sour gummies and other edible products. THC coffee might also pose a serious threat due to the overall popularity of coffee beverages, and thus, combining these two popular drugs can be seen as attractive to some consumers. In addition, plain marijuana is an indirect form of competition because the entire cannabis market is not reliant solely on edible alternatives.
Summary
To sum up, the edible cannabis industry is primarily influenced by regulatory and demographic forces, where dosage restrictions can limit the possibility of products being available. However, the market trends show solid and gradual growth with strong projections for future expansion. Such an increase is mostly due to the general public interest regarding marijuana. In addition, edible cannabis can be perceived as a less harmful way of taking THC due to smoking being associated with tars and carbon monoxide.
Plan
Target Segment
Main consumers of cannabis edibles in Canada are young citizens of the country in their 20s and 30s who want to find out new formats of cannabis consumption. Traditional smoking of cannabis is known to be the not healthiest way to enjoy it due to smoke that irritates and damages the respiratory tract. The main approach is to utilize a demographic form of segmentation. The edibles format of cannabis consumption avoids such a problem and allows buyers to enjoy not only the relaxation but also interesting and tasty desserts that will be produced.
In addition, this market segment includes future cannabis users who were previously classified as non-consumers. The development of this field in the future decade may recruit a large number of people because of the better methods of cannabis use. It is important to indicate that according to the report made by Deloitte on Cannabis 2.0, the market shares of the cannabis edibles worth $2.7 billion. The consumers reported using cannabis edibles multiple times a week, mainly with a group of their friends and less frequently with family members or alone. Having fun and relaxation are reported as the main reasons for the use of cannabis-infused edibles. Consumers prefer to try out new formats of edibles, which include candies, caramels, brownies, and cakes. Edibles market development would recruit new cannabis consumers because this format is more comfortable and possibly may be used as a substitute for alcohol. The reason for that is a similar usage occasion and age category of consumers.
Positioning & Mix
Positioning
The business will position itself as a dessert shop with a wide range of bakery options and affordable prices. The position of a commercial organization on the market is the position of a business organization in the market space, which determines the nature of its actions, which, in turn, forms the attitude of a commercial organization to other elements of the market environment. Positioning is not what is done in the product and service, but what is done in the mind of a potential buyer. There are two approaches to considering the concept of positioning. The primary positioning approach will be focused on the benefits and symbolism of healthiness and recreational cannabis consumption. One can take positioning only as a marketing weapon, giving it a place in the methods and means of promoting goods on the market.
In addition, positioning is a necessary condition for the normal functioning of a commercial organization in the modern market. It is impossible to exist for a commercial organization and its goods, services, works, or develop in time. Only a constant determination of the place of a commercial organization relative to consumers and competitors can be the key to success. Although they are all just different sides of the same coin, it would be more appropriate to give frequently encountered definitions of positioning.
Positioning will go through the aggressive branding of products in the local market. Branding is now an integral part of e-commerce, and e-commerce is closely related to branding. It allows companies to expand the scope of the original product with new services. Easy-to-remember domain names of company websites, a beautiful logo in the address bar create a more complete picture in the consumer’s head. This is especially true on an international scale. Thus, firms and stores that are not represented in any country become popular through blogs, banners on different websites of online stores with the delivery of goods abroad, sales through intermediaries in the country of residence, that is, the brand penetrates the consciousness of consumers throughout to the world. Branding can create such an important asset of the enterprise as a good reputation. If the company does not possess it or possesses it to a lesser extent, then this can be corrected with the help of branding. It can build a system of customer expectations related to a particular product or service, can justify them, and especially exceed it, creating better and more memorable products, thereby increasing interest in what this company creates.
Product
The product will be a bakery item, such as cookies, cakes, buns, and crepes. In particular, the product relates to soft pastries such as cakes containing a large number of slow carbohydrates. It is important to understand that pastries containing slow carbohydrates and, therefore, characterized by a slow release of energy, have a positive effect on the health of the consumer. The presence of slowly assimilated glucose in these products provides a slow release of the energy contained in them. One should be aware that the content of gradually absorbed glucose in baked goods decreases during cooking. The number of elements usually decreases during baking due to the gelatinization of starch. In part, gelatinization is due to the presence of water in the dough. Gelatinization is understood as the partial melting of the crystalline structure of starch, which increases its digestibility. During the heat treatment of the wet mixture, starch grains first swell, then increasingly lose their crystalline structure, eventually breaking up and releasing polysaccharides contained in the grains. Cakes and pastries are well-known examples of soft pastries and include, for example, biscuits, brownies, and muffins.
Price
Bag of cookies and many other products will have an estimated price of CA$10. The pricing strategy will be based on the framework for innovative products. In a cannabis market economy, the commercial success of any enterprise or entrepreneur largely depends on the right strategy and tactics for pricing goods and services. The difficulty of pricing is that price is a market category. A set of political, economic, psychological, and social factors has a significant impact on its level. Today, the price can be determined by the cost factor, and tomorrow its level may depend on the psychology of customer behavior. For each innovative product, service, work, an individual contract price is established. The following types of contract prices are distinguished, such as fixed prices, cost-reimbursable prices, prices with guaranteed maximum payments, set prices, prices with periodic payments, and complex prices.
Payment for an innovative cannabis product will be carried out regardless of the actual costs of fulfilling the contract at a predetermined price. Firm prices for innovative projects are widely used in practice, often set by bidding. They create for the contractor sufficient independence, the opportunity to get more profit while lowering the cost of the work. Their main drawback is the possible risk of losses for both parties if the market conditions change. Cost-reimbursable prices will also be used; they assume reimbursement to the contractor of all costs associated with the implementation of the corresponding innovative project. In this case, the contract spells out all types of direct expenses, the methodology for calculating indirect costs, additional payments, allowances, margins. Such prices are applied for projects with an insufficiently developed planned structure, with parallel work, in cases of tight control by the customer over the progress of work. For a store, such a price reduces the risk of losses, but at the same time limits the ability to make big profits.
Promotion
The promotion strategy will be primarily based on online advertising, especially on Instagram. Instagram is a social network in which a store can very quickly get subscribers and increase sales. This is the best platform to show the product, and Instagram is ideal for creating and developing a business, as the social network guarantees maximum results with minimal effort and financial costs. It is important to understand that maintaining a personal Instagram page and promoting a brand with an Instagram account are two different tasks. To do this, first of all, an Instagram account is created competently, and one needs to develop it, fill it with content and promote it in special ways that will help not only make the Instagram account attractive but also well-selling. Any company strives for its logical development, and by no means, the last tool that pushes the company on the path to success is this advancement.
In today’s world, the Internet is one of the main channels of information. Social Media Marketing (SMM) is communication with an audience of social networks and forums on behalf of a brand or organization. Today, most progressive companies create their corporate pages and communities in many popular social networks, with the help of which they actively interact with customers, fill the pages with useful and exciting content, conduct quizzes and contests among users. Product promotion on the market begins, in fact, from the moment of its creation and implies the beginning of advertising activity before it entered the market. The distribution of goods is actively carried out at a time when it is well known to a potential consumer. Based on the above definitions, there are basic strategies for promoting a product on the market.
Financial Analysis
Opening a dessert shop that sells edible cannabis will require a three-year commitment because the initial two years will result in losses. The overall strategy will revolve around maintaining rent and salary expenses as constant values in addition to high advertising expenditures of CA$10000 each year. The estimation of customer purchase growth each year will differ based on the assumption that advertising costs will yield some results. A total of two employees will be used with a base salary of CA$1500 per month, which results in an annual salary expense of CA$36000. The rent is estimated to be equal to CA$3000 per month, which will also result in CA$36000 per year. Kitchenware purchase for the first year will be equivalent to CA$10000, but the subsequent years will require less money, such CA$1000. Utilities, maintenance, and insurance will remain as constants and based on general knowledge. The cost of goods sold will consist of basic bakery ingredients, such as flour, sugar, and other components, and cannabis. The resulting value will be equal to CA$5.2 for each CA$10 product. The annual revenue is based on the estimation that an average of 200 purchases will be made each week for 2021, 300 purchases for 2022, and 400 purchases for 2023. The respective annual revenue values are equal to CA$96000, CA$144000, and CA$192000.
Exhibits
Pro-Forma Income Statement 2021
Pro-Forma Income Statement 2022
Pro-Forma Income Statement 2023
Works Cited
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