The Industry

Basket Penetration in the Era of Cannabis 2.0 and COVID-19

April 8, 2020

Executive summary

This report looks at two metrics that have a lot to tell us about consumer behavior: basket penetration and attachment rate. These metrics measure, respectively, how frequently certain product categories appear in individual purchases and how frequently product categories appear together. Because it uses recent data, it also includes slides specific to Cannabis 2.0, — the easing of regulations in Canada that allowed Edibles, Vapor Pens, and other non-Flower products to enter the market — and COVID-19, the global pandemic that’s sent cannabis consumers racing to top up their stash.


Introduction

For anyone interested in what consumers are buying, basket penetration is a great way to approach the topic. While sales numbers give an overall picture of where the money is going, basket penetration tells us a lot about what products are popular. It can capture broad shifts in consumer preference, or even holiday specific sales trends, like when Edibles begin appearing in more baskets around the winter holidays. And basket penetration is extra insightful when it comes to major changes in the market, like Cannabis 2.0 in Canada and the COVID-19 crisis in, well, everywhere.

This report examines it all, beginning with basket penetration across categories in the United States, which has had all categories on the market for much longer than Canada. There, we see that Flower is both the most commonly purchased category and the most likely category to appear in single-category baskets. It is clearly still the most common consumption method, and probably the first thing that comes to mind when people think about cannabis. Moving into the other categories, we see some interesting narratives emerge. Edibles are fairly common, being in about one of every five baskets, and have a low rate of single-category baskets, meaning they’re a frequent add-on. Pre-Rolls, however, while less popular overall than Flower, are still relatively high in standalone purchases, which suggests that there is a market for “single serving” products in cannabis.

From there, we look at basket penetration by category in Canada, which gives us an idea of how consumers are reacting to Cannabis 2.0. Given the lower rates across the board when it comes to the newer products — basically anything besides Flower and Pre-Roll — it seems like they’ve been slow to catch on. But again, it’s early days for Cannabis 2.0. Indeed, looking at basket penetration for only Cannabis 2.0 categories, we see a steady upward trendline.

The other big, important, and impossible to ignore event in cannabis is of course COVID-19, which has, as we recently noted, sent consumers to the store for a lot more than toilet paper. Cannabis stores have remained open as an essential service, and quarantined consumers are definitely taking advantage. Given that cannabis is already a welcome enhancement to a night of Netflix and snacks, this makes tons of sense. But what are they pairing with those snacks, exactly? Turns out, the crisis has turned people back to an old favorite: Flower. People also stocked up on Vapor Pens a bit, suggesting some concern about being able to get their favorite cartridges going forward, and Edibles.

Lastly, we look into attachment rates, which gives us a better idea of what products are trip drivers, meaning products that people come to purchase specifically, and what products are add-ons or impulse buys. It also, of course, tells us what people are buying alongside all that Flower. Cannabis 2.0 definitely plays into the numbers here, as we see high Flower attachment rates for Pre-Rolls and Edibles in the U.S., while only Pre-Rolls enjoy a high attachment rate in Canada. Clearly, consumers are not used to Edibles yet. The same is true for Vapor Pens, another major Cannabis 2.0 product.

Overall, the data show some purchasing patterns here that make a lot of sense. While we’re looking at two markets in very different stages of development, not to mention a market caught in the middle of a major global pandemic, certain things just seem to hold true. Like the consumer loyalty to Flower, which has only been strengthened by the pandemic. However, given the gap in Flower basket penetration between Canada, a market that only recently opened itself up to new categories, and the U.S., where Edibles and Vapor Pens have been available for years, the general trend seems to be towards more diverse baskets. Time, as they say, will tell!


Methodology

We use a few key terms in this report. Baskets can be most easily thought of as individual transactions. Thus, an item or category’s basket penetration is defined as the number of baskets in which it appears. If two out of four baskets contain Flower, for example, the Flower basket penetration would be 50%. Attachment rate is somewhat self-explanatory — how frequently a given product or category appears with another — but it’s important to note that it’s always used in relation to an original category. It’s most useful when looking at which products are added on to purchases in popular categories, and indeed we’ve focused on attachment rates for Flower in this report, looking broadly at categories in each country and also zeroing in on regional attachment rates for Pre-Rolls.

Data for this report comes from real-time sales reporting by participating cannabis retailers via their point-of-sale systems, which are linked up with Headset’s business analytics software. The data included are YTD (Jan 1 - Mar 26), unless otherwise noted. Sales data are cross-referenced with our catalog of over 400,000 products to provide detailed information on market trends. 

Headset’s data is very reliable, as it comes digitally direct from our partner retailers. However, the potential does exist for misreporting in the instance of duplicates, incorrectly classified products, inaccurate entry of products into point-of-sale systems, or even simple human error at the point of purchase. For this report, the data are also self-reported by loyalty program participants. Thus, there is a slight margin of error to consider.


Trip Drivers and Trip Passengers

Looking at basket penetration by category in the U.S., it’s clear that Flower is still a favorite at just shy of 50% basket penetration, but not as dominantly as it was in the earlier days of legalization. In addition to being in half of all baskets, it’s quite frequently the only item in those baskets, with 65% of Flower purchases being single-category baskets. This is exactly what we mean when we say something is a trip driver. Pre-Rolls are too. While they appear in far fewer baskets, their single-category basket rate is still very high at around 58%.  

As for the passengers, Edibles have decent basket penetration at 20%, but less than 39% of Edibles baskets are single-category. It’s worth noting, per our above observation, that Vapor Pens and Concentrates have lower basket penetration but higher single-category basket percentages. All the other, more esoteric categories are even lower, but Beverages stand out as the most frequently added-on product. Less than 26% of baskets including a Beverage product were single-category.


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Team Headset

With extensive experience within the cannabis industry, Headset is comprised of a team of industry experts, data scientists and market analysts combining our abilities in technology, design and data to help push the cannabis industry forward.