Medical vs. Recreational Cannabis: What’s Your Niche?


Licensing is likely one of the most important things for a legal cannabis business in California. Acquiring the right licenses gives you the green light to operate manufacturing and retail cannabis businesses within state compliance requirements.

In California, there are 20 different types of cannabis licenses that can be issued, depending on activities, and which segment of the market a business operates within.

The most common licenses are retail licenses, and those are divided up into two classes A-Class for adult use (recreational), and M-Class for medicinal cannabis retail.

Activities such as cultivation, manufacturing, processing, testing, and distribution must also obtain the proper licensing to be able to operate within the regulations of the licenses, which are managed by The California Department of Food and Agriculture, The Bureau of Medical Cannabis Regulation, and The Office of Manufactured Cannabis Safety.

Since California recently fully legalized cannabis in the state, business owners have had an important decision to make: stay with medicinal markets, work solely for adult-use purposes, or combine the two into one premise.

Finding Niche Markets

Cannabis businesses thrive on finding and serving niche markets. With high brand saturation, businesses are engaging in targeted marketing towards segmented parts of the cannabis industry.

Take Sue Taylor as an example. An African-American retired Catholic school principal, she is in the process of opening the first cannabis dispensary for seniors, offering medical cannabis as an alternative to strong prescription drugs. Taylor has identified a gap in both medical services and a target demographic that will help her succeed in her business.

Cannabis businesses today can’t just decide to throw a bunch of spaghetti against the wall hoping it sticks. They need to find a niche and acquire the proper licensing, that will ensure their success, with products and services that meet customer demand.

With a world of possibilities in cannabis retail, what is your niche? What are the underlying values of why you do business?

Will you decide to focus on the medical needs of Californians, or participate in the new recreational market, or perhaps both?

Here are a few considerations on discovering your cannabis market niche:

Read the Data

Data that is provided by POS systems and statistical analysts can give cannabis business owners a pretty good breakdown of who is buying cannabis, and where.

Localized data sets, that are downloadable and accessible from organizations like Headset and Baker Technologies can reveal demographic patterns based on a geographical section. For instance, perhaps your geographic area reveals that Gen X women are purchasing more cannabis in retail stores – there may be an interesting niche market for the modern women, mother and professional. Recent Headset data showed that more Baby Boomers are purchasing cannabis and that they like concentrates and vaping, showing a new, and unexpected niche of cannabis emerge.

Consider Your Intentions

What is your intention for being a manufacturer, distributor or retailer of cannabis? In his infamous book The Cannabis Manifesto, Steve DeAngelo, founder of Harborside Clinic argues that “cannabis has always been a medicine”, and that it should always be treated in regarded in that way. “Decades from now, historians will describe the current renaissance of cannabis medicine as the most important medical development since germ theory,” he writes, “Some of us think that’s a good thing”.

Choosing to dedicate your cannabis business to medical cannabis means that you want to make a change in health care. You want to see people using cannabis as an alternative to often-damaging prescription drugs. You want people to be able to see the affordability of cannabis in comparison to the pill bottle. You want to bring healing and a sense of hope to those who thought they had lost it.

In comparison, the recreational market was created for a reason. Adult use legalization normalizes cannabis consumption as part of the American experience: simply some prefer to toke on a joint at the end of a tough day rather than reach for the wine bottle or six-pack. Legal adult use or recreational cannabis strengthens the whole industry; through rigorous regulations, testing, distribution processes, and reporting, recreational cannabis is highly regulated and helps cannabis rise above its black market past.

Let’s go back to Steve DeAngelo and what he says about cannabis for intoxication (or recreational purposes): “[Cannabis] has a wide range of more unique benefits that are frequently overlooked, or mistakenly characterized as "getting high,” he writes, “These include its ability to extend patience and promote self examination; to awaken a sense of wonder and playfulness, and openness to spiritual experience; to enhance the flavor of a meal, the sound of music, or the sensitivity to a lover's touch; to open the mind and inspire creativity; to bring poetry to language and spontaneity to a performer; to catalyze laughter, facilitate friendship, and bridge human differences." This definition of adult use certainly elevates the meaning, and purpose of recreational cannabis.

Consider Both

Cannabis businesses that operate under an A-Class and an M-Class license can operate within the same premise. This means that you may not have to make the distinction between medical and recreational cannabis at all.

Despite this, choosing to offer both medical and recreational cannabis puts the entrepreneur in the position of having to continue to support the medical needs of their customers while recognizing that people are truly into cannabis for the recreational aspect of it. Store design, cannabis education programs, and budtender training remain at key importance when serving people with both medical and adult use interests and needs.

Choose Your Adventure

Deciding on whether to go the medical or recreational niche and even segment into a smaller niche could make or break a cannabis business. No matter which way you go, always be reminded that licensing is a lengthy, and expensive process. When applying for a license, be 100% clear with your intentions for your business, and your niche market segment to increase your chances that you will be awarded your cannabis license.