Like in any major industry, pricing is complicated with cannabis, especially given how the cannabis industry and cannabis consumers are quickly evolving. Price differentiation in the cannabis industry has traditionally been driven by several factors, such as potency and brand pedigree, but with consumers and brands becoming more sophisticated, we expect the drivers of price differentiation to change in the coming year. As the biggest brands continue to expand their product lines, price differentiation driven by product features, benefits, technology/innovation, and quality will emerge in a bigger way.
One way in which quality cues are already driving prices higher at retail is with premium inputs, such as live resin. In California, for example, live resin is accepted as having a higher quality than other vape cartridge-extraction methods. As such, BDSA Retail Sales Tracking shows live resin carts to represent over a third of total vape sales in the state in January-November 2021 (up from ~10% in 2019). AND these products ALSO make up over three-quarters of the top priced items in the category. What BDSA is anticipating in 2022 is to see price differentiation extend even further. In this example, live resin vape carts are a premium tier within cartridges, but we expect to see emerge are tiers within this tier. We can compare this to Beverage Alcohol. Across spirits categories you have differing average retail prices, but even within a spirits category, say Whiskey, there are major price tiering and differentiation. This is what is to come in 2022 in cannabis. We expect to see true price differentiation emerge at a sub-sub-(maybe sub) category level.
Much like with vape products, consumers of edibles are willing to pay a premium for additional functional benefits or ingredients in gummies. Gummies that also contain CBD are, on average, priced ~20% higher and their sales have increased ~40% between 2020 and 2021. This trend of higher prices for specific quality cues is also present regarding minor cannabinoids. The addition of CBN and CBG gives brands the permission to price up to ~20-25% higher within their category in the CA market.
Retail trends also suggest that these minor cannabinoids translate to greater dollar sales at retail. When specifically looking at gummie edibles (the dominant edible subcategory), top products increasingly have consumer-facing claims of CBN or CBG content. In California, six of the top twenty gummie products by dollar sales for September-November 2021 contained CBN or CBG, up from just three of the top twenty gummies in Q1 2021.
Here Are Some Brands That are Already Seeing Success with Quality-Cue Messaging:
- Plus Products: A top five best-selling candy brand by dollar sales in California for January-November 2021, Plus Products is one California brand that has launched several successful products featuring minor cannabinoids. One such example is their CBN-infused Cloudberry Sleep Gummies, which were a top-20 best-selling edible product in California for January-November 2021.
- 710 Labs: 710 Labs has been a dominant brand in the concentrate category since the launch of California’s adult-use market. The number two best-selling dabbable concentrate brand by dollar sales in California for January-November 2021, 710 Labs product portfolio heavily features both live resin and “live rosin” products, with average retail prices that range between ~$50/gram and ~$70/gram, well above the ARP (Average Retail Price) for all dabbable concentrates in California (~$30/gram).
- Level: The number one best-selling pill brand by dollar sales in California for January-November 2021, Level has seen enormous success in the California edible market. Level’s sales in California are driven in part by their innovative ProTab line of pill products, which include products that heavily feature CBN, CBG and other minor cannabinoids.
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