Quality In, Quality Out: A BDSA and IRI Comparison of Premium Product Trends across Mainstream CPG and Cannabis Packaged Goods

I had the chance to connect with BDSA’s partner in crime at IRI, Larry Levin, EVP Consumer and Shopper Marketing. In our partnership with IRI, BDSA brings cannabis and cannabinoid market data and insights to IRI and its clients, and IRI brings a wealth of experience, data, and insight coming from mainstream retail and CPG to BDSA. We thought it would be a fun exercise to assess what is happening within premium in mainstream retail and compare that to what is going on within cannabis. Are the trends and behaviors similar?

Coming from my conversation with Larry, I took away that premium consumer products have been making huge inroads across several industries, appealing to shoppers’ desires for high quality goods, functional ingredients, an appealing experience, and superior inputs. This trend towards premiumization accelerated during the pandemic, with many consumers looking to “bring the party home” by purchasing premium grocery and personal care products to treat themselves to a luxurious experience while social distancing.

NOTABLE MAINSTREAM RETAIL/CPG PREMIUM TRENDS FROM IRI’S LARRY LEVIN:

In mainstream retail, among upper income consumers, 30% bought super-premium and premium products, but even 23% of lower income consumers bought super premium products, up significantly from before Covid.
“Confident Cooks”, consumers who are confident in the kitchen and eager to try quality ingredients and new techniques, represent 8% of the market, but have brought in 12% of meat and seafood dollar sales and drove 44% of the growth in meat and seafood, grocery segments that sit at the forefront of premiumization.
Sustainability continues to play a big role in CPG. 16% of CPG products are sustainably marketed, whether that means organic, antibiotic-free or made with renewable energy. Sustainability-marketed products, more importantly, contribute about 60% of growth in the CPG industry.
Consumers are willing to pay upwards of 30% more for sustainably marketed products, demonstrating the benefits and importance of organic, non-GMO and environmentally friendly products.

With more attention being given to the connoisseur market in every sector of the cannabis industry, from organic flower brands to solventless-based extracts and edibles, the trend of premium consumer goods has found its way into the cannabis industry. While there will always be a demand for value brands, budget products, and mainstream “go-tos” in cannabis (and in all industries), the cannabis consumer landscape also includes discerning consumers, a segment that if catered to correctly can generate substantial wins for brands and investors.

In the cannabis industry, the ever-growing consumer pool is flush with shoppers who demand quality and will not hesitate to pay a premium for it. While income doesn’t always tie directly to premium purchasing behavior, BDSA’s Consumer Insights data shows that high-income shoppers do in fact spend more on each cannabis shopping trip than lower income shoppers. While low price still drives purchasing decisions (even among higher income consumers ~20% claim low price influences purchase choice), high income shoppers are MUCH more likely to choose products because of favorable product reviews, lab testing information and premium packaging compared to their lower income counterparts.

As we consider more detailed product features or attributes, a desire for natural ingredients also ranks as a prevalent purchase influencer in BDSA’s Consumer tracking for high-income cannabis consumers. AND we see high-income inhalables consumers much more likely to seek ORGANIC than lower income. Per the conversation with IRI’s Larry Levin, it is not surprising to see Organic and Sustainable designation being an important purchase influencer among a substantial portion of the cannabis consumer population just as it is seen in mainstream retail/CPG.

PREMIUM TRENDS ACROSS CPG AND CANNABIS ALIGN. WITH BDSA CANNABIS MARKET DATA AS THE SOURCE, WHAT PREMIUM CANNABIS BRANDS ARE STANDING OUT?

Per BDSA’s Consumer Insights, ~65% of consumers in adult-use markets consume flower and ~45% prefer flower, the flower category is an obvious target for cannabis brands looking to capitalize on the consumer demand for enhanced features, benefits, or attributes that result in premium products. Many cannabis brands have already leveraged the demand for high-quality flower to great success, becoming top brands while selling flower at a price that far exceeds the average retail price in their respective states. Notably, some of these brands have risen to the top of BDSA’s brand ranking during Covid, mirroring the mid-pandemic shift towards premiumization seen by IRI in the CPG industry.

Cannabiotix: One boutique flower brand making big waves in the California market is Cannabiotix, a company that heavily markets their natural cultivation techniques and commitment to quality throughout the production process. Cannabiotix has thrived, and per BDSA’s Retail Sales Tracking,sells flower at an average consumer paid price of over $16/gram (calculated based on all weights purchased equivalized to a single gram), significantly higher than the statewide average price of $8.43/gram. The brand has risen to be the number two flower brand by dollar sales in California, seeing almost $24 million in sales in California between January and July 2021 per BDSA’s Retail Sales Tracking.

LOWD: An up and coming brand in Oregon, LOWD launched into the already well-developed adult-use market and has quickly risen to become a BDSA top 10 OR flower brand by dollar sales through July 2021. Billing themselves as “craft cannabis” producers, BDSA is tracking their flower price to be over twice the average retail price per gram for flower in Oregon.

As seen across BDSA tracked markets, the trend towards premium products is also evident in cannabis ingestibles and concentrates. One example of a product benefit commanding a premium price is the move towards products made with solventless inputs. These benefits cater to the consumer desire for more natural ingredients. The rise of solventless products is evident in the California concentrate market, which BDSA tracks from having just 18 brands offering rosin dabbables in Q2 2019 to 57 brands in Q2 2021.

710 Labs: A brand that made its name with premium live resin and solventless concentrates, 710 Labs has risen to the number two ranking in dollar sales for dabbable brands in California through July 2021. According to BDSA’s retail tracking of sku-level sales, the brand has brought in almost $9.3 million in dabbable sales in California for the first seven months of 2021, despite the average retail price for their dabbable products ($61.53) coming in at almost twice the average CA retail price for dabbables ($30.89).

DabLogic: A subsidiary brand of Colorado cultivator Verde Natural, DabLogic built their brand in the Colorado market on premium solventless extracts and have recently expanded to California. The brand offers a diverse line of extracts, including “full-melt” hash, rosin, and solventless vapes. BDSA’s tracking of SKU-level sales shows that DabLogic brought in over $6 million in concentrate sales in Colorado from January to July 2021, with the average retail price of their concentrate products coming in at almost twice the average retail price for Colorado concentrates in 2021. This premium price tag has not hampered their growth, as the brand is ranked in the top 20 among ALL Colorado concentrate brands, and number one among Colorado solventless vape brands.