With many consumers concerned about inflation and industry professionals concerned about a softening in cannabis sales since the end of 2021, some may expect the current financial situation to stunt sales. While a valid concern, Memorial Day weekend sales from 2020 paint a picture of a more resilient cannabis market. Even with the fresh impact of the pandemic, almost all cannabis markets still achieved a double-digit increase in daily dollar sales around the Memorial Day Weekend in 2020.
Cannabis is a “sticky” good, meaning it is consistently one of the last products consumers put down when looking to cut costs and one of the first things they pick back up when finances improve. Given many consumers are also cutting down on travel due to high fuel costs, it’s likely cannabis remains a fixture of the summer. Keeping rising fuel, food and housing costs in mind, cannabis purchases from regulated supply chains may soon hit a breaking point due to the higher expense that comes with the inclusion of taxes and regulatory fees.
When looking at consumer insights in adult-use states, the top three influences on product choice are THC content, taste and flavor, and low price. Approximately 27% of consumers cite the importance of pricing when choosing which products to shop for, and 35% consider price important when deciding where to shop. Even though price isn’t the top factor, and product-related attributes and trustworthiness of the retailer influence consumers’ behavior very highly, the U.S. is beginning to experience declines in cannabis sales due specifically to price concerns.
After legal cannabis sales softened in Q4 2021, many held high hopes that the new year would bring a resurgence of legal cannabis markets as new market launches and rising consumer penetration in existing markets foreshadowed the potential for gains in 2022. It is now clear these wishes did not materialize. BDSA Retail Sales Tracking shows total dollar sales declined from Q4 2021 to Q1 2022 across mature markets, emerging markets and even most new markets.
Additionally, there has been less interest and activity surrounding hemp-based products. However, consumers in states with limited access to cannabis are turning to CBD and hemp-based products rather than illicit cannabis. This category has a massive opportunity to achieve growth in legal markets this year due to prices being more accessible compared to the tax burden legal cannabis presents. Mature markets such as California, Colorado and Oregon are limiting access to delta-8 and hemp-based THC analogs, likely because this is perceived as a threat to tax revenue by the legal cannabis industry.
The most established markets tracked by BDSA saw some of the most dramatic declines in the first quarter of 2022. Across California, Colorado, Nevada and Oregon, total dollar sales fell ~10% between Q4 2021 and Q1 2022. While some of this decline is due to falling average retail prices (ARPs), with the equivalent ARP falling ~5% between Q4 2021 and Q1 2022 across these four markets, all markets also experienced a decline in unit sales.
The Nevada market suffered some of the most dramatic losses, with dollar sales falling 12% from Q4 2021, indicative of the current economic situation’s effect on the heavily tourism-dependent Nevada market. It is also important to highlight competition from the illicit market in these states.
To Read The Rest Of This Article By Brendan Mitchel-Chesebro on Natural Products Insider
Published: July 13, 2022
Founder & Interim Editor of L.A. Cannabis News