Whether legislation has it on the ballot, or has it tabled until next session, one thing is clear – legalization is coming. As rest of the nation look to legalize recreational cannabis use, what product and revenue trends can the marijuana businesses in these states expect? By analyzing data from the states like Colorado, California and Oregon that have now been legalized for up to five years, businesses can now forecast these trends and position themselves to capitalize on their emerging markets.
BDS Analytics examined over a billion retail sales transactions from the cannabis industry in 2018 to help forecast what 2019 has in store.1 At a glance, it looks like we can expect evolving consumer preferences, falling prices and the building of brands. You can read the findings from BDS Analytics’ entire study here: https://bdsanalytics.com/top-10-trends-in-cannabis-for-2019/
Consumer Driven Trends
As cannabis consumption has expanded to the broader public, users are making their preferences known. In 2014 when Colorado became the first state to legalize recreational marijuana, flower made up 67% of all cannabis product sales.2 Five years later and Colorado’s cannabis industry has grown from $683,523,739 to $1,545,691,080 annually – an increase of 79%!3 But even as the industry continues to grow, flower sales have dropped by more than 20% giving way to edibles and concentrates.2 Perhaps this shift is due to changing consumer demographics. Smoking has seen a decline in social acceptability in years past and is virtually condemned by health practitioners. Yet 71% of cannabis consumers use for social purposes and 67% of Baby Boomers use for their health.1 Also, more and more consumers are preferring more consistent and lower-dose product strengths which is much easier to achieve in edible form. Whatever the reasons, it is clear consumers are driving the evolution of cannabis products. While flower will remain a commodity to derive such products, retail will need to make room for more edible, finished products. Even cannabis beverage sales are expected to increase from $30M in 2018 to $374M by 2020.1
Consumer Driven Brands
When recreational cannabis first came on the scene it was virtually all unbranded. As stringent product standards and regulations have taken hold, the market has shifted almost entirely to branded products with 96% of the edibles market in Colorado being branded.1 Competition and increased grow outputs have driven the wholesale price of flower down, a cost savings that has been passed along to the consumer.2 As flower is the primary ingredient in any cannabis product, its price decline has resulted in lower prices in edibles and concentrates too. Though due to added production costs, R&D, etc., other cannabis products have not seen as sharp of a price decline as flower alone. As the industry grows, brands will have the ability to control pricing, however it will be the consumer that will solidify their market presence. Consumers will look to brands that build a positive, more affluent stigma, a wide array of consumption methods and consistent dose packaging.
Where does this leave a new retail business seeking entry into the market? Business will want to look to brands that are delivering high quality products, innovative consumption methods and can create a social impact. Location will also be important as 67% of consumers place convenience at the top of their preferences.1 Businesses that consider the impact of delivery services and online ordering as legislation looks to regulate eCommerce markets will also be positioned to immediately increase revenue while others build out online infrastructure. In the end, the consumer is king and getting behind a strong brand that they are following will lead cannabis businesses to the promised land.
By: Tim Montague – Co-Chief Operations Officer of C E Hutton
- BDS Analytics, California, Colorado, Concentrates, Demographic and Psychographic Cannabis Research, Edibles, GreenEdge, Knowledge Center – Top 10 Trends in Cannabis for 2019, January 30, 2019 https://bdsanalytics.com/top-10-trends-in-cannabis-for-2019/
- USA Today, Trevor Hughes – Pot smokers are setting aside their joints in favor of edibles, pills and extracts, July 24, 2018 https://www.usatoday.com/story/news/2018/07/24/marijuana-retailers-say-consumers-seeking-alternatives-smoking-pot/823668002/
- Colorado Department of Revenue, Office of Research and Analysis – State of Colorado Marijuana Sales January 2014 to Date, March 2019 https://www.colorado.gov/pacific/sites/default/files/0119_MJSalesCalendarReport_PUBLISH.pdf