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Price matters most to cannabis consumers

Published on November 5, 2021 by David Wylie

Photo: Contributed

When it comes to buying cannabis, a new report has found price matters most.

Titled, “Price. It’s Complicated. How Cannabis Pricing Differs From Other Consumer Goods,” the new pricing analysis was released by three top names in cannabis forecasting and data, BDSA, Deloitte Canada, and Hifyre.

One of the key findings they say is cannabis customers are consistently considering pricing as a primary factor.

“As existing markets mature and new markets come online, cannabis pricing is expected to remain extremely volatile,” says Hifyre president Matthew Hollingshead, who is also chief innovation officer at Fire & Flower.

“Though there are some similarities in trends to traditional Consumer Packaged Goods (CPG) markets, like consumers willing to pay a premium price for superior products or services.”

BDSA found in its surveys that low price is the leading influencer of product choice in Canada, with 34% of consumers stating it matters the most.

Meanwhile, Deloitte Canada found in its latest study of Canadian cannabis consumers that 70% of respondents who shop illicitly do so for the lower prices.

Photo: David Wylie/the oz.

Discerning customers will pay a premium

That said, people will pay more for the good stuff. In Canada, craft dried flower commands a price premium ranging from 16% to 41%, depending on its THC level. People are willing to pay more for unique ingredients in gummies. And in California, live resin is generally perceived as having a higher quality than other vape carts, and is rapidly gaining market share.

Kelly Nielsen, vice-president of insights and analytics at BDSA, says understanding the role of pricing will be imperative to maximizing potential for brands and retailers.

“In order to be competitive, it is important to understand how pricing plays a role in the decision-making process, and how pricing and product benefits can be leveraged to maximize potential,” he says.

  • RELATED: Download the full report here

The report offers a glimpse into similarities and differences between cannabis and traditional CPG markets.

Sid Hathiramani, partner, risk advisory at Deloitte Canada advises to analyze data closely, stay informed on market and competitive activity, and contain costs.

“Strong, data-driven business practices will set cannabis companies up for success,” says Hathiramani.

Other findings from the report:

• Global legal cannabis sales reached nearly US$21.6 billion in 2020, an increase of 50% over 2019 sales of US$14.4 billion, due largely to legalization. BDSA forecasts global cannabis sales will continue to grow quickly, to US$62.1 billion in 2026, more than double the 2021 estimated global sales of US$30.6 billion, at a compound annual growth rate (CAGR) of more than 15%.
• Through dispensaries alone, cannabis sales in the United States reached US$18.0 billion in 2020, and are forecasted to reach US$24.9 billion in 2021. BDSA expects U.S. sales to reach US$47.6 billion in 2026, the result of a CAGR of 13.8%, with growth coming from both the opening of new markets and the expansion of existing ones.