Flower still king of US marijuana market, though supremacy waning

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Charts showing the slow down in marijuana flower sales.

Flower remains by far the most sought-after product in the U.S. marijuana market, but that dominance is slipping as other adult-use products gain in popularity.

Flower prices are dropping, too, across six recreational cannabis markets tracked by Seattle-based Headset: California, Colorado, Michigan, Nevada, Oregon and Washington state.

Flower-buying habits, meanwhile, are shifting.

As consumers become increasingly sophisticated in more established state markets, retailers report less of an emphasis on buying for potency in favor of other characteristics of the plant, including terpenes and minor cannabinoids.

According to retail sales data from the six states Headset tracks, marijuana flower sales grew from $4.92 billion in 2020 to $5.49 billion in 2021.

But flower’s share of the overall market fell.

Cooper Ashley, Headset’s senior data analyst, noted last year’s 11.5% increase in flower sales was less than the 18% jump in overall marijuana sales.

By comparison, sales of pre-rolls rose from $1.02 billion in 2020 to $1.42 billion last year, an increase of 38.9% across the six states Headset tracks.

Sales of edibles increased from $1.14 billion to $1.37 billion over the same time period, up 20.4%.

Flower was the third-slowest-growing product category, ahead of topicals (up 2.5%) and tinctures and sublinguals (down 7.5%).

Overall, prices for cannabis flower continued to slide as more production hit the market and cultivators expanded their facilities.

Headset data shows the price per gram of flower tumbled through 2021, dropping 14% from $6.78 in January to $5.82 in December in the six adult-use markets the firm tracks.

Obsessed with potency

According to marijuana retailers, consumer purchases of flower vary by market.

On the East Coast, flower consumers in newer markets continue to shop based on the amount of THC on offer, said Mike Bibbey, vice president of Ethos Cannabis, which is based in Philadelphia and has marijuana retail and cultivation operations in Massachusetts and Pennsylvania.

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Months ago, his company experienced flower shortages: Every strain the company offered sold out.

Now that more product is available, consumers are picky for potency.

“The one thing that’s consistent is that the primary purchase decision is potency,” Bibbey said.

Flower that tests at 25% THC or higher flies off the shelves, he added.

As the East Coast markets mature and consumers become more advanced in their purchasing decisions, Bibbey expects the potency obsession to ebb.

When educating consumers, his staff attempts to bust the myth that high THC means good quality. Instead, budtenders highlight terpenes, freshness and cannabinoids.

Pennsylvania requires cannabis companies to include terpene profiles on labels, and Bibbey said that helps to educate budtenders, who pass their knowledge along to consumers.

Wholesale flower prices have been falling gradually, according to Bibbey, as more production comes online. He estimates prices for flower have fallen 5%-10% from last year.

“With more competition and availability, it’s only a matter of time before brands become more important,” he added.

Mature, sophisticated

On the other side of the country, in more mature markets such as California and Colorado, flower consumers are becoming more sophisticated, said Steve Gutterman, CEO of Falcon Brands, a vertically integrated cannabis company based in Irvine, California.

“As markets mature and more competition comes on and customers get more sophisticated, there’s more differentiating between products,” he added.

That’s when quality comes into play.

According to Gutterman, high-end flower is less vulnerable to falling prices.

Savvy consumers who are shopping for more than THC content will pay a premium for terpene and cannabinoid content.

“Customers are increasingly sophisticated – if they want something on the high end that’s been really well-produced and tastes good, they’re willing to pay up,” he noted.

Gutterman sees high-end, indoor-grown flower in California wholesaling at $1,700-$2,000 a pound, which is slightly down from this time last year.

“There’s this niche of high-end indoor that’s stayed price-inelastic,” he added.

Overall, Gutterman expects flower to remain the single-biggest product category.

“At its core, flower provides a social experience that other things don’t,” he said, adding that every other product tries to replicate what flower offers.

THC is king of the north

Outside the United States, potent flower wins out in Canada, said Nick Sosiak, chief financial officer of Quebec-based vertically integrated cannabis company Cannara Biotech.

However, some consumers are looking for quality, which includes freshness as well as terpenes and cannabinoid content on labels.

The market might be shifting to a “second wave” of cannabis cultivators who focus more on the craft side of growing than the large companies that control the bulk of the market, Sosiak added.

With continued falling prices across all categories of cannabis products, he has seen flower prices slide from a low of 2 Canadian dollars ($1.58) a gram last year to around CA$1 a gram this year.

In the end, THC reigns supreme, Sosiak said.

Flower testing at 29%-30% THC will fly off the shelves, he added.

“If you have the highest THC, you’ll beat all your competitors,” Sosiak said. “You can put it in a baggie and write 35% THC on it, and it’ll win out.”

Bart Schaneman can be reached at bart.schaneman@mjbizdaily.com.