It’s 2023, and some form of cannabis use is legal in the vast majority of states. Market analysts still predict big growth for the industry, and legalization is supported by a healthy majority of American adults.
But, somehow, something just feels off about the current state of the market. The industry still struggles with many of the same issues that have plagued it since day one, especially when it comes to banking access and business taxes. Many predicted a seismic shift in federal policy would have happened by now—nearly thirty years after the country’s first medical marijuana program launched—but significant progress at the federal level is taking much longer than anticipated. And last year, legal sales in the key states of California, Washington, and Colorado declined for the first time ever. While there is no denying the industry’s progress overall, there always seem to be headwinds counteracting growth.
Nevertheless, Gary Allen, chief executive officer at cannabis data, analytics, and technology firm New Frontier Data, believes the industry’s best days lie ahead. Allen has been engineering innovative market solutions in technology since the 1990s, including the creation of a mobile banking app in 1997—way ahead of its time. His decades of success are linked to his dedication to using data as a guide and understanding how to leverage analytics to deliver what markets need. In fact, data and business performance form the bedrock of all his decisions.
Allen also is a dedicated collaborator, maintaining cordial relationships with even direct competitors. After all, in a well-oiled cannabis market, there should be more than enough slices of the pie to go around.
With his corporate leadership record, Allen easily could have retired young and ridden off into the sunset to bask on tropical beaches somewhere instead of taking the reins of a company laboring to help a quasi-legal industry find itself. But the cannabis industry’s unique challenges drew him in. We sat down with him to get his views about the current state of the market, the importance of working together, and how technology may impact the industry going forward.
How did you become so deeply involved with technology and data science?
I started my corporate career at Dutch bank ABN AMRO, leading the wireless-banking division. In 1997, I created the first mobile banking and trading app for Nokia, RIM Blackberry, and Palm devices. By today’s standards, it would be considered “analog,” but in 1997 it was bleeding-edge.
From there, I went on to a company that became known as Performics and served as chief technology officer, leading the creation of I-Search. It was one of only two bid-management platforms created at the start of the auction-based paid-search-advertising market on search engines including Google, Yahoo, and Overture. Eventually, Performics was purchased by DoubleClick, which then became Dart Search before being sold to Google in 2008 for $3.6 billion.
You’ve accomplished quite a bit in your career. What drew you to the cannabis industry?
When I first looked at the industry, to be honest, I had very little interest, but after meeting Giadha A. DeCarcer, the founder of New Frontier Data, I saw an opportunity to put my expertise in large data sets, emerging market needs, and business platform creation to work. After putting my stamp on two other emerging-technology markets, I wondered, “How many people get the opportunity to do it three times in one career?” So I jumped in with both feet.
What do you think a successful cannabis industry will look like in the future?
I get asked this question a lot, and there are so many different facets of the industry that New Frontier Data touches that I could go down a rabbit hole on any one of them. But to sum it up, there are two visions I bring to the industry every day.
First, cannabis has the capability to change the world in many different verticals: textiles; computers; graphene, graphite, and silicon; construction; fuel; and food, just to name a few. The non-consumption market eventually will far surpass the retail consumption market we all talk so much about.
Second, the retail market will end up like other very sophisticated retail sectors, such as quick-serve restaurants. If we think about the dispensary like a Starbucks location, we can use data to determine the best locations in any market, consumer counts and purchase behavior, as well as the location’s growth trajectory months before opening the doors. We need to—and eventually will—make cannabis retail less complicated, more accessible, and safer for operators and customers.
Can leaders in the industry work together to improve the landscape for everyone?
I believe not only that we can, but we must. At New Frontier Data, we have made a concerted effort over the past year and a half to establish mutually beneficial partnerships across the industry. We started 2022 with two strategic partners but are now up to fourteen, twelve of which generate revenue for both parties.
For the industry to reach the heights we believe it can, we need to work together to provide the best possible consumer experience. If we can do that, all vested parties benefit. Finding those strategic partnerships where each party brings something unique to the table builds a cohesive industry where consumers can have a safe, enjoyable experience that meets their expectations and needs.
Will artificial intelligence play a large role in data analytics going forward?
It already is. New Frontier Data has utilized machine learning and AI for years. From our early days, we deployed machine learning and taught our platforms how to ingest an amazing amount of data from hundreds of sources. We’ll continue to utilize machine learning and natural-language-processing capabilities with AI to inform the market.
AI also is impacting the industry well beyond New Frontier Data’s deployments. From lighting, watering, and feeding systems in [cultivation operations] to sophisticated inventory prediction and buying systems, machine learning and AI play a major role in helping the industry understand vast quantities of data from many different sources.
Are there other tech advances you believe will impact how data is analyzed?
AI and its application in the ingestion process absolutely can provide benefits, but before widespread adoption, the industry must develop a standard method of data categorization. Once this is in place, then broader tech adoption that utilizes those standards to unlock their full potential would be more impactful than tech advances operating in the current unstructured environment.
How can advanced data analytics help dispensary operators increase revenue?
Data can help dispensary operators understand their consumers, including the optimal inventory based on consumer purchase habits, and deliver what consumers want from the retail experience as well as the products they buy. And that’s just for retail operations. Advanced analytics and AI already are used in the cultivation and manufacturing verticals to optimize operations for peak efficiency. There is not a facet of this industry that data can’t help.
The key to unlocking data’s potential lies in understanding what to do next with the data that’s been compiled. For example, a dispensary owner tracking consumer purchases with point-of-sale and loyalty programs needs a reliable tool to analyze the data quickly and output valuable insights like which customers have the highest return rate, purchase amounts, and lifetime value. They then can take those customer attributes and build lookalike audiences in their marketing suite to target similar individuals with compelling offers to draw them to the dispensary. Of course, none of that is possible without a way to analyze the data sets in an efficient and effective manner.
You’ve cited a study that found 91 percent of dispensaries have a market share of only 1 percent in their local market. What does this mean for the future of retail?
We jokingly call the answer to this question “our mission from God.” The best retail days in cannabis are ahead. There are about 160 million probable cannabis consumers in the United States. These are consumers who meet criteria derived from our survey and market-research data. We know there are approximately 52 million consumers currently participating in the legal market. If we can bring 8 percent of that delta—approximately 8 million consumers—into the legal market, we will increase the market by about $17 billion. Breaking that down, that’s only about 1,000 new consumers—or eighty-three new customers a month—per retail location.
This provides another example of the importance of knowing what to do next with the data. Attracting eighty-three new customers is an achievable number for almost any dispensary.
How can data help dispensaries do a better job of getting customers through their doors?
The most important thing for businesses is to know their customers and potential customers. Know where they are, how many are in an area, what their product preferences are, how they communicate, and what they want from a retail experience. Then use that information to engage them.
With the hyper-local capabilities of marketing and advertising, dispensaries can reach and create relationships with their communities. Since all retail is local, the dispensaries that can build and maintain these relationships are the ones that will see the most customers come through their doors. When customers trust a brand or location, they build loyalty and return to those businesses frequently. Cannabis retail is just like other retail: Deliver a positive experience that meets customers’ needs and expectations, and they’ll come back.
Does data say anything about Internal Revenue Code Section 280E’s impact?
Quite simply, [that IRS regulation] impacts cannabis businesses in every way. Section 280E forbids critical aspects of retail operations. Retailers need the capability to build their brands, nurture relationships with their customers, and procure the goods and services they need to accomplish those goals. Without the ability to have standard business expenses reduce their tax liability, many forego doing so, which is a recipe for disaster.
Imagine if the government restricted the ability of restaurants to market to their potential customers. I bet most of us can hum the McDonald’s jingle. It’s been firmly planted in our minds through repeat advertising on every conceivable platform. If they had been unable to reduce their tax liabilities for all of those ads, they very likely would be in a different place today. But that’s just one example of the difficulties the cannabis industry faces because of outdated laws related to federal prohibition.
How has New Frontier Data evolved over the years?
New Frontier Data started with one goal in mind: to professionalize the industry by identifying the right data, collecting and vetting that data, and producing gold-standard market reports trusted and used by investors, regulators, and researchers.
Over our nine years, we’ve taken that initial mission and evolved it to include consumer data and understanding for retailers and product manufacturers, as well as a deep investment in medical patient understanding to round out our 360-degree view of the industry. We have collected data from seventy-three countries, more than 7,000 retailers, and 60 percent of consumer shopping carts.
To sum it up, I would say New Frontier Data has evolved with the needs of the industry, and as cannabis has matured into a true consumer-packaged-goods market, the retail, consumer, and brand data and insights have come to the forefront.
What products and services offered by New Frontier particularly excite you?
The first of two divisions that are most exciting is our consumer-acquisition engine—we call it NXTeck—that brings together nine years of research, including more than 40,000 consumer interviews and live surveys covering CBD, medical, adult use, and the illicit markets. NXTeck contains detailed location data, consumer shopping and buying behaviors, and more than 160 million probable consumer profiles, all for one purpose: to bring new customers to cannabis retailers, who are the key to the success of this market.
The second division is our medical registration division, which enables us to interface directly with medical patients. By combining medical registration data with all the other market research we complete, we can help the industry in all facets of consumer and consumer-patient engagement, including education and safety.
Is political polarization impacting the way people relate to data? If so, what can be done about that?
The need for unbiased data hasn’t increased or decreased, but the availability and delivery of that data to broader audiences definitely needs to increase. New Frontier Data surveys show the political alignment of cannabis consumers leans left. Twenty-eight percent of independents are in favor of legalization, and conservatives are at about 29 percent.
Figuring out how we communicate unbiased data to all groups regardless of their political and philosophical leanings is critical to ensure they believe it’s unbiased. A few years back, New Frontier Data decided the way we would address this was simply to provide the raw data and let others do their own analysis. While we still publish reports with our own analyses of the data, we also enable customers—whether they’re cannabis brands, dispensaries, law and policy makers, or investors—to access the vetted data so they can examine it with their own tools and personnel to draw their own conclusions.
What’s your best advice for the industry as a whole?
It’s important for everyone in the industry to know we are in this together. Every aspect of the industry faces the challenges and benefits from the successes as one. At New Frontier Data, we hope our long commitment to providing unbiased data helps lead the industry to true viability and growth.
As we continue to expand our offerings and the ways our vast data repositories can facilitate interactions between companies and consumers, we do our best to operate with the understanding that a rising tide lifts all boats. While we appreciate healthy competition in the market, the greater the number of successes across the industry, the more trust we will earn from consumers and the more we will reshape outdated narratives around cannabis that linger from years of prohibition.
Operating as a neutral nexus of data, New Frontier Data’s mission is to inform policy and commercial activity for the global legal cannabis industry.
- Established: 2014
- Headquarters: Washington, D.C.
- Ownership: Privately owned
- Operations: North America, Latin America, Europe, Africa
- Reach: 100+ countries
- Products: Equio® business intelligence platform, NXTeck marketing platform