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Interview, Part 1: Kindred Partners EVP And GM David Prodanovic

August 3, 2021

Canada’s cannabis market is expected to reach $4 billion this year and expand to $5.5 billion in 2022, according to market research firm Headset. Kindred Partners, the Canadian cannabis brokerage owned by Breakthru Beverage, has been building its portfolio across key categories and represents producers including Auxly, Skosha, Fluent, and High Park, among others. SNDC executive editor Daniel Marsteller recently caught up with Kindred executive vice president and general manager David Prodanovic for an update on progress.

SNDC: How are overall conditions in Canada’s cannabis market so far this year? What are the main growth opportunities and challenges at the moment?

Prodanovic: It’s very competitive right now. Pricing continues to decrease across all categories and the rate of innovation being introduced to the market is so high that the pressure is building on existing producers to stay relevant. As for growth opportunities, we see tremendous potential in Ontario. Besides the obvious—that it’s the largest market in Canada by overall recreational revenue—it now has the most stores in the country. At the same time, it also presents a significant challenge in terms of being able to service this rapidly growing retail base. We’re moving with greater pace and agility to help our partners meet demand.

SNDC: Which form factors are showing the best growth for Kindred recently? Do you see particular opportunity in any specific segments for the future?

Prodanovic: We’ve seen really good growth in dried flower, pre-rolls, and vapes this year. The innovation we’re seeing in concentrates is incredible, bringing incremental growth. The value and large format dried flower section is also showing a lot of growth.

SNDC: How is the beverage segment in particular developing? What retail price points and types of products are garnering the best traction, and which consumer groups are most interested in beverages versus other form factors?

Prodanovic: Overall, beverages have grown from a 1.4% share of revenue nationally one year ago to a 1.8% share of revenue in June. While we are seeing growth, it can be a difficult category for consumers to understand and to market to.

The low potency and high price compared with the dried flower equivalent have deterred customers from purchasing beverages. Education in this space is key, and a focus point for our associates, so the fact that the category has continued to grow share—especially with the challenges related to consumer engagement in the pandemic—gives us reason to believe there is more to come here. Taste is critical, so those products that can deliver on the consumer’s expectations for flavor and experience will differentiate themselves. Pricing is another key factor but can be a challenge since it differs so much by format and market. Customers can buy 750mg of CBD for as little as $40 in capsules or oils, versus eight 20mg CBD beverages for the same price. So what we find is consumers seeking single cans as opposed to multi-packs like we see in beverage alcohol.

As for consumer groups, seniors and new users are the drivers of beverage consumption as they tend to use them as a safe, low and slow way to introduce themselves to cannabis. After that, many move on to higher value formats like capsules, oils, vapes, and flower depending on the effects of the beverage. Many consumers would like to purchase cannabis beverages and show interest in the product but the obstacles of price, potency, and disproportionate demand for education need to be navigated by the leading producers for this category to reach its potential.

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