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The Colorado Market, Part 2: Colorado’s Array Of Cannabis Products Evolves Rapidly Since Legalization

March 19, 2019

When Colorado’s recreational marijuana industry opened for business in 2014, people were simply excited to get product. Five years later, the purchasing experience has changed considerably, with a broad array of different cannabis products available. The types vary from smokeable products to edibles, with a mix of potency levels.

“We used to talk about products as an indica or sativa (the two main cannabis strains), or a hybrid of those,” said Greg Shoenfeld, vice president of operations for BDS Analytics, a cannabis market intelligence and consumer research firm. “Now, we’re seeing a lot of branded products emerging talking about such intended impacts as ‘energy’ or ‘calm.’”

Recent estimates show the breakdown of Colorado marijuana product sales as follows:

•Flower: Traditional “buds” from marijuana plants that are smoked accounted for 43% of total cannabis spending in the 11 months through November, down from 63% in 2014.

•Concentrate: Products that refine flower into something more clean and potent (examples include hash, hash oils, and waxes) account for about 31% of the market, up from 17% in 2014.

•Edibles: Marijuana-infused products that are consumed orally such as food, beverages, or pills compose 16% of the category, up from 12% in 2014.

•“Shake/Trim”—used to describe the small pieces of flower that have broken off or the leftover leaves that are trimmed from the flower—and non-edibles such as ointments account for smaller shares of the category.

The choice of product depends on what sort of experience is being sought, says Jessica Lukas, vice president of consumer insights for BDS Analytics. “What’s interesting is that there is some consistency in top brands, but they move a lot in this space. A brand can launch and easily become a top-10 brand within six months. You wouldn’t see that in carbonated drinks or salty snacks.”

Meanwhile, recreational use prices are declining in general. Average retail flower prices fell from a high of $7.55 a gram in August 2014 to $4.03 a gram as of November. Over the same period, concentrate prices have also fallen, averaging $21.57 a gram at the end of 2017. Edible prices have hovered around $18 a 100-mg. package, but haven’t exhibited a consistent trend over time.

“Overall profit margins are not all that different from what we see in general retail. When we’re looking at some of the branded products, the margins tend to be around the 50% range. With commodity products, like flower and pre-rolled joints, the margins might jump to a 70%–80% range,” says Shoenfeld.

THC (Delta-9-tetrahydrocannabinol) is the main psychoactive compound in marijuana, and the percentage of THC determines a product’s potency. According to state testing data, average cannabis flower potency increased slightly from 16.4% THC in 2014 to 19.6% in 2017. The average potency of concentrated extract products advanced steadily from 56.6% THC content by weight in 2014 to 68.6% at the end of 2017. State regulations mandate that a single serving of edible products contains 10mg of THC.

In the next few years, Lukas said there will be continued growth in new product categories—ranging from sexual pleasure products (sprays and lotions) to cannabis beer (beers that are de-alcoholized then infused with cannabis). “We’re also seeing some interesting pharmaceutical-inspired formats such as pills and capsules, nasal sprays and inhalers, and orally dissolvable strips,” Lukas says.—Ryan Peacock

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