Flower, Where Have You Gone?

The recently launched industry intelligence publication, The State of Legal Marijuana Markets, 6^th Edition, points out in its sweeping analysis of worldwide cannabis markets one trend that is likely to continue — the slow, but inexorable decline of flower’s reign on legal retail.

When adult-use sales began in Colorado, on January 1, 2014, flower immediately dominated. By the end of that year’s first quarter, flower commanded 67 percent of all cannabis sales in the state. However, four years later in 2018 sales of flower during the first quarter sunk to 44 percent. During this same period the share of concentrates in the cannabis market expanded from 15 percent to 31 percent.

Meanwhile, in Colorado alone, sales of all cannabis products during the first quarter ballooned from $149.53 million in 2014 to $372.43 in 2018. The broad cannabis market continues to explode, even as flower’s hold over retail sales dips every year. We can thank concentrates, in particular, for such rapid expansion. And to a lesser extent, edibles. As more newbies become consumers, they naturally are turning to the least harsh – and trendiest – way to get their high on.

Examining Oregon during Q1 2017 reveals flower holding 54 percent of dispensary sales, compared to 21 percent for concentrates and 11 percent for edibles. A year later during the same quarter, flower’s market share fell to 44 percent while the share for concentrates rose to 27 percent and edibles climbed up to 16 percent.

Finally, even during just the first four months of adult-use sales in California we witnessed flower’s hold on dispensary sales diminish from 43 percent of sales in January to 40 percent in April, while concentrates rose from 30 percent to 31 percent.

The slow erosion of market share for flower sales, of course, does not portend diminishing demand for growers or ounces of Blue Dream. The entire industry rests on a foundation of the plant; no flower, no industry. It’s worth remembering that growth of flower by the gram has expanded with significantly more oomph than by the dollar: While the difference between Q1 2014 and Q1 2018 in dollars is 62 percent growth, for grams it is 133 percent. Falling prices for cannabis explain the divergence; during Q1 2014 flower sold for an average of $7.12 a gram, but during the last quarter the average price of a gram was $4.94. A significant dip.

Either way, the erosion of flower’s market share, and the rise of concentrates and edibles, speaks to a trend familiar to many involved with agriculture (which at its heart describes the cannabis industry).

Consider corn. For a long time, farmers grew corn so that local people could eat fresh corn when harvested. The only variation on fresh corn was dried corn, and early on people realized they could feed dried corn to livestock; today, animal feed is the No. 1 use of corn worldwide. At some point, people figured out how to mill that dried corn into flour, and the process gave birth to a whole other industry: corn flour, corn meal, masa and the many other variations of milled corn. Over time, ancillary businesses galore sprouted from milled corn including manufacturers of tortillas, chips, breads and thickeners (corn starch). Using technology to withdraw sugars from corn fostered yet another corn-related industry: sweeteners like corn syrup and high-fructose corn syrup. Corn hatched its own kinds of alcohol — hello, Bourbon, as well as not-for-human-consumption alcohols — and now is even turned into fuel, in the form of ethanol. Meanwhile, fibers from the corn plant get used in a variety of industries, and the chemicals industry uses corn to create different compounds.

Drilling fluids. Paper products. Antibiotics. Cosmetics. Fireworks. Crayons. Tires. What began as an extravagantly large grain providing ample food to tribes has transformed in less than 200 years into a octopus-tentacled agricultural monstrosity. And its original use — fresh food for hungry humans — represents but a minor slice of the broad corn pie today.

The evolution of cannabis remains in its infancy, although the related hemp industry is well on its way down the corn path, with chemicals, dietary supplements, fuel, textiles and more.

As the industry continues to rapidly evolve, and with state laws prohibiting cannabis falling away, as well as federal laws possibly loosening, expect to witness more and more dynamism as entrepreneurs find new ways to take advantage of all the cannabis plant has to offer.

The State of Legal Marijuana Markets, 6th Edition was co-produced by Arcview Market Research and BDS Analytics. To purchase, click here.