Almost 90 per cent of revenue from edibles sold in Colorado, California, Nevada and Washington comes from products priced between $10 and $25, according to data collected by cannabis market research company Headset Inc. By contrast, products priced less than $10 make up 26 per cent of edible unit sales in those four states, but only account for 7 per cent of total edible revenues.
“They’re moving a lot of units at the cheap price point, which is understandable… but it’s not really helping with the top line revenue. So the sweet spot, if you’re thinking about pricing and what consumers are paying, it’s really between $10 and $25,” Headset CEO Cy Scott told a room full of edibles manufacturers and enthusiasts gathered at the MJBizCon trade show in Las Vegas last week.
Edibles won’t be legal in Canada until sometime in 2019, likely in the autumn. But licensed producers and traditional food manufacturers are already developing products or acquiring intellectual property from the U.S. and the Canadian grey market.
This next wave of Canadian legalization will create a market different than in the U.S., where edibles makers typically operate in only one state, due to restrictions on interstate cannabis commerce, but packaging and promotion rules are less strict than they’re expected to be in Canada. Nonetheless, there’s a lot Canadians can learn from the U.S. experience to date, as well as from consumer polling already being carried out in Canada.
Here are a few takeaways from presentations on edibles that happened in Las Vegas last week:
Relatively small market share
Edibles make up between 8 and 13 per cent of aggregate legal dispensary sales in the four states that Headset monitors. Around one third of legal cannabis buyers, however, tried an edible product in the last year. “Once they’re an edible consumer, we’re noticing that about one fifth of their total cannabis spend is going to edibles. So it’s all about getting that consumer introduced to edibles,” Mr. Scott said.
Gummies and chocolate popular, beverages not so much
In three of the four states monitored by Headset, gummies are the most popular edible format by a considerable margin. This is followed by chocolates and candies. “Over 50 per cent of edible sales is going to gummies, chocolate, candies, lozenge and gum,” Mr. Scott said. “Gummies really is growing. Across those states, on average, over 12 per cent growth, followed up by caramels and chews, and then mints.” Beverages, despite the buzz generated by several prominent partnerships between Canadian LPs and alcohol companies, make up only 10 per cent of edibles sales in Colorado and Nevada and only 4 per cent in California, according to Headset data. In Washington, they make up 15 per cent of edibles sales.
Long-lasting effects and discretion: top reported purchase drivers
More than a third of the 3,000 Canadian cannabis consumers polled by review company Lift & Co. said their main reason for buying edibles is to achieve longer lasting effects. (Although edibles are still illegal in Canada, they’re widely available in the grey market.) The next most significant purchase driver was discretion, 30 per cent, followed by a preference not to smoke or vape, 17 per cent. “From a business insight perspective, you would want to be able to communicate long lasting effects... and either discretion in your packaging, or perhaps your form factor,” said Matei Olaru CEO of Lift & Co.
Price and dose size: top reported reasons for choosing between brands
Twenty-nine per cent of people polled told Lift & Co. that affordable pricing was their number one reason for choosing between edibles brands. This was followed by 26 per cent who cited convenient size and dose as the main differentiator. Fewer than one per cent said branding and packaging was the main reason they choose one product over another. In general, consumers reported preferring high-THC, low CBD-products. Although, “when then segmenting by gender, we actually see a bit of a reverse, where those that identify as female tend to prefer a high-CBD, low-THC product more so," Mr. Olaru added.
Budtenders key to product development and sales
Communication with dispensary sales reps, the budtenders, is key for product development and sales, according to executives from several U.S. edibles brands. “It’s happened a couple of times where we’ve given out samples and they’re like, ‘hey, you probably shouldn’t do this.’ So we didn’t,” said Jillian Nelson, operations manager at Nevada edible maker Evergreen Organix. “Budtenders love to be able to say, ‘oh hey I saw the eta testing they were doing, I helped them pick out which flavours they were going to launch.’ I think that establishes a certain amount of pride and loyalty to your brand,” she added. Colorado edibles marker Dixie Brands even has what it calls its “Secret Society of Budtenders.” “Across the nation we have about 2,000 individual members, they take online surveys for us. So that’s where we can get mass data [on trending flavours and form types]… In exchange they get some promotional items, and they get first call on some of the products we’re releasing,” said Jay Denniston, Dixie’s director of science.
Beverages are a “throw-in” item
Headset data suggests that infused-beverages are infrequently purchased as stand-alone products. “It’s usually thrown in with something else,” said Mr. Scott. “So it’s always good to think about, is there anything you can do at point-of-purchase? When you’re negotiating shelf space with retailers, is there a way to get it right there at check-out so someone could quickly see it while they’re counting the money.”
It pays to be big
Of the 231 edibles brands that Headset tracks, more than half of total sales are captured by the five best performing brands. “It’s even more significant for beverages, where you have 64 beverage brands and the top five brands make up almost 80 per cent," said Mr. Scott.