Priceonomics

 

This post is adapted from Headset Inc. Cannabis Intelligence, a Priceonomics Data Studio customer. Does your company have interesting data? Become a Priceonomics customer.

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There are a lot more ways to get high than there used to be. 

Due to the legalization movement and proliferation of cannabis dispensaries, if marijuana users don’t feel like rolling themselves, they can pick up something pre-rolled. And if they don’t feel like smoking at all, they can get their high by eating a cookie or drinking a soda.

So which products are most popular? And will Edibles or drinks ever become the primary way users get high? 

We explored these questions using data from Priceonomics customer Headset, whose cannabis retailer transaction dataset accounts for about 25% of legal marijuana transactions in Washington state. We used Headset's data to understand which products consumers are buying most—and the dispensaries’ profit margins from these sales.

According to the data, Flower, which is “traditional” marijuana bud, is still the most popular product with 49% of transactions compared to only 13% for Edibles, the next highest. But many non-traditional products like Live Resin, a special type of concentrate, and Carbonated Beverages are on the rise. 

We also found that while Flower is the most popular product, it is the least profitable product category for retailers. Edibles in the form of brittle and cake, pre-rolled blunts, and THC in pill form are the most profitable product types.

Accounting for essentially half of all purchases, Flower remains an overwhelming favorite among consumers. But the growth of several new products, which exceeds 20% per month, could herald a shift in the market.  

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We began our analysis by asking which dispensary products are most popular. We grouped approximately two years of transactions by product category (using the broadest categories) and calculated the percentage of total transactions involving a product from each group.

Note: Data via Headset Inc.

Included in just under half of all transactions, Flower is by far the most popular product category. Edible and Pre-Roll are next at about 13% and 11.5% respectively. Concentrates and Vapor Pens, which are newer crazes among marijuana users, are in the middle of the pack. While we can attribute this mostly to preference, it is possible that some of this difference is driven by the need to buy concentrates or oils less frequently due to their higher potency.

Each category can be broken down further into product types, so we conducted a similar analysis with more specific categories.

Note: Data via Headset Inc.

Unsurprisingly, the top three products are all of the Flower variety. Hybrid Flower, which accounts for over 25% of all transactions, tops the list. Indica Flower, weed that gives users a “body high”, is next at 11%, and Sativa Flower, weed that gives users a “head high”, follows at 10%. Cartridges for Vapor Pens and Wax, which is typically consumed using a vapor pen but can also be consumed out of a bowl with Flower, round out the top five.

A few surprising products crack the top 20 as well. Edibles such as Chocolate, Cookies and even Truffles rank above the famous weed brownie. Carbonated Beverages, a literal take on herb-infused drinks, which hit the shelves just two years ago, are the 13th most popular product.

We also wanted to see if any products are growing in popularity. To examine this, we looked at the average monthly increase in product transactions over the last year.

Note: Data via Headset Inc.

Live Resin, a concentrate made from fresh, frozen cannabis flowers rather than buds that have been dried and cured, grew the most at 29% each month on average. Carbonated Beverages have the next highest growth rate at about 24% per month followed by Tanker/Applicator, Candy, Lozenge & Gum and Shake and Trim, which each grew by 20% on average.  

Note: Data via Headset Inc.

While all of these items grew significantly, they each took off at different times. Live Resin fell quite a bit from .31% of transactions in June 2015 to only .15% in July 2015, but started seeing steady increases starting in November of 2015 to grow to .82% of transactions in May 2016. Carbonated Beverages started with just .79% of transactions and took off in September 2015 to grow to 1.68% of transactions in May 2016.

All of the analysis thus far considers the cannabis market as a whole. But how do all of these sales translate into revenue for dispensaries?  

To check, we looked at the distribution of revenue over the last year for 13 dispensaries that had over one year of data available. The median revenue per store in the last year was $3.1 million. The smallest grossed $700,000, and the largest hauled in $21.9 million.  

Below is a chart of how this revenue was distributed over product category for each of the 13 dispensaries.


Note: Data via Headset Inc.

Flower is the highest grossing item at each of the 13 dispensaries, ranging from 49% of revenue to 81%. Depending on the store, the second highest grossing product is Pre-Rolls, Vape Pens, or Concentrates.

But what does all of this mean for the retailers? Which products bring in lots of profit, and which are barely worth the effort? 

The table below show the average profit margin by product category.


Note: Data via Headset Inc.

At the extremes, margins have an inverse relationship to popularity. While all product categories have very high margins, Flower, the most popular product, has the least at 53.5%. Capsules, the least popular product, have the highest margin with 58.0%.

You can see the margins for all product types in the below chart. 

Note: Data via Headset Inc.

Vapor pens are the product that best combines popularity with high margins. Vapor pens are the fourth most popular product as well as one of the fourteen most profitable.

Eight of the fifteen most profitable products are either edibles or pre-rolls. The margins on making cannabis easier to consume is high. Among the least profitable products is “shake & trim”, the leaves and bud that fell off the cannabis stalk when they were being cut for Flower.

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So how are today’s marijuana users consuming their weed?

Despite a wide variety of products, Flower remains the overwhelming favorite for users. From the retailers’ perspective though, Flower products are less profitable. That’s why they are probably glad, if not encouraging, the rising popularity of alternatives. People are increasingly likely to leave a dispensary with baked goods, candies, gum, and vape pens.

This may hint at a shift in marijuana habits. Or these alternative products may just be the dispensary equivalent of impulse buys at the cash register.

Note: If you’re a company that wants to work with Priceonomics to turn your data into great stories, learn more about the Priceonomics Data Studio 



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