A deep dive of the Nevada cannabis market

January 12, 2023
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This report is created in partnership with Dai Truong of Arlington Capital Advisors. Please read more about him and his work covering the cannabis space at the bottom of the report.

Introduction

Although Nevada is a smaller market in total cannabis sales, their immense tourism industry puts them at the top of the list for cannabis sales per capita. In this report we will explore sales, product categories, pricing trends, demographic data, and more. Key operators within the market also discuss their strategies for success within Nevada. Let’s dive in together to see where this legacy cannabis market stands today and where it is headed.

Report takeaways

  • With nearly $700 million in total sales through October 2022, Nevada is the second smallest Headset tracked market in the US. However, when adjusting for population Nevada has the second most sales per capita behind Colorado.
  • Total sales from January through October 2022 have declined 13.1% year over year. Through October 2021, Nevada had sold nearly $800 million of cannabis products while in 2022, they have come up about $100 million short of that mark.
  • Compared to the rest of the US market, Nevada customers seem to show a stronger preference towards Flower (+3.3 percentage points) and Pre-Rolls (+1.4 percentage points). While concentrates in particular have 3.3 percentage points less of total sales than the rest of the US market.
  • Over the last year, Flower’s share of total sales has fallen 8.4 percentage points year over year. Most of this market share is being absorbed by Vapor Pens. Vapor Pens, the second largest category nationally, grew by 5.1 percentage points in the last year, converging on the national average of ~23% of total sales.
  • Falling prices and growing discounts indicate lower profits for retailers that have seen units per basket stay relatively flat over the last 12 months.
  • The number of brands in Nevada has stalled and even shrunk by about 6%, with 353 distinct brands capturing a sale during 2022. Between 2019 and 2020, brand count increased 40% from 270 brands to 378.

Methodology

Data for this report comes from real-time sales reporting by participating cannabis retailers via their point-of-sale systems, which are linked with Headset’s business intelligence software. 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. Thus, there is a slight margin of error to consider.

In this report we examine sales from US Headset Insights markets. This includes AZ, CA, CO, IL, MA, MD, MI, NV, OR, FL, and WA. The following analysis reports on sales occurring from January through October 2022, unless otherwise indicated.

Total cannabis sales in Nevada

Nevada cannabis market deep dive graph 1: Total cannabis sales by state

With a total market value of nearly $700 million January through October 2022, Nevada is one of the smallest Headset tracked markets.

Cannabis sales per capita in Nevada

Nevada cannabis market deep dive graph 2: Total cannabis sales per capita

Despite its relatively smaller total sales, the state's total sales per capita in this time period in 2022 is one of the highest alongside Colorado. With a population just north of 3 million, Nevada is one of the smaller states that Headset tracks. However, when normalizing sales totals for population size they are near the top of the list. Tourism potentially has an effect on Nevada's high sales total per capita.

Year over year sales growth in Nevada

Nevada cannabis market deep dive graph 3: Sales growth in the US

Nevada is experiencing a lot of the woes of the industry at large. Sales totals from January through October 2022 have declined 13.1% year over year. Through October 2021, Nevada had sold nearly $800 million of cannabis products, while in 2022 they have come up about $100 million short of that mark. This puts them in the company of other legacy cannabis markets experiencing double digit year over year declines such as Washington (-13.1%), Colorado (-16.2%), and Oregon (-17%). For context, the rest of Headset tracked markets combined have seen total sales decline 1.7% year over year.

Product category trends in Nevada

Nevada cannabis market deep dive graph 4: Product category trends

Nevada shares many of the category trends of other US markets. However, there are some notable differences in category sales. For example, Nevada customers seem to show a stronger preference towards Flower (+3.3 percentage points) and Pre-Rolls (+1.4 percentage points). While Concentrates in particular have 3.3 percentage points less of total sales than the rest of the US market.

Product category trends over time

Nevada cannabis market deep dive graph 5: Product category trends

While Flower may still have more dominance over the market in Nevada than the rest of the US, it is rapidly moving towards the average. Flower’s share of total sales has fallen 8.4 percentage points year over year when comparing January through October in 2021 and 2022. Most of this market share is being absorbed by Vapor Pens. Vapor Pens, the second largest category nationally, grew by 5.1 percentage points in the last year, converging on the national average of ~23% of total sales. Edibles (+1.9 percentage points) and Pre-Rolls (+1.2 percentage points) also eroded some of Flower’s market share in Nevada.

Strong MSO presence within dispensaries

Nevada currently has 102 operational dispensaries total (according to the Nevada Cannabis Compliance Board as of December 2022), with a meaningful presence of MSOs outside of Trulieve and Cresco Labs (Columbia Care does not have a presence in Nevada either). MSOs and the number of dispensaries they own: GTI (8 dispensaries), Curaleaf (7 dispensaries), Ayr Wellness (6 dispensaries), Verano (5 dispensaries), Jushi (4 dispensaries), MedMen (3 dispensaries) and Planet 13 (3 dispensaries). Notable independent operators include Deep Roots Harvest (7 dispensaries), Thrive Cannabis Marketplace (5 dispensaries), CLS Holdings (1 dispensary), Shango (1 dispensary) and Jardin (1 dispensary).

Cannabis brand growth in Nevada

Nevada cannabis market deep dive graph 6: Number of cannabis brands in Nevada

Adult-use cannabis sales began in mid-2017 in Nevada. In 2018, there were 268 distinct brands in the market and 2019 saw that number hold steady. However, in 2020 as demand spiked during the pandemic so did the number of brands entering the market. Between 2019 and 2020, brand count increased 40% from 270 brands to 378. Since then, the number of brands in Nevada has stalled and even shrunk by about 6% with 353 distinct brands capturing a sale during 2022 so far.

Top Nevada brands by category

Below is a list of top brands in Nevada by category by total units as of January 2023. Be sure to check our Best Sellers for the latest top performers in legal markets, updated daily.

Nevada cannabis market deep dive graph 7: Top cannabis products in Nevada

Cannabis prices in Nevada

Nevada cannabis market deep dive graph 8: Cannabis prices in Nevada

When examining pricing, we see average item price (AIP) sharply declining over this time period. In Nevada AIP has shrunk 12.2% since October 2021. This is similar to the 12.7% decline in AIP for the rest of the market in the last 12 months. While Nevada is experiencing pricing compression along with the rest of the market, their AIP in October of this year is 16.8% higher than the rest of the US.

Additionally, average discount has grown 7 percentage points from 12.8% to 19.8% between October 2021 and October 2022. Lower item prices and higher discounts reduce already strained margins for retailers.

Nevada cannabis market deep dive graph 9: Change in cannabis prices in Nevada

When comparing October 2022 to the previous year, AIP is falling across most categories with the exception of Capsules (17.8%), Topicals (2.8%) and Beverages (2.2%). Equivalized price (EQ) or cost per single unit of measurement, which tends to be a better indicator of price, has fallen in nearly every category. Beverages is the only category that has seen price per milligram increase in the last year (29%). Tincture & Sublingual (-39.6%) and Flower (-24.7%) have seen their price per unit decrease the most since October 2021.

Cannabis basket analysis in Nevada

Nevada cannabis market deep dive graph 10: Cannabis basket analysis

Nevada retailers, along with the rest of the US market, have seen their margins eroded in the last year. Since October 2021, the average basket size in Nevada has lost 12.6% of its value, falling nearly $10 on average. Falling prices and growing discounts indicate lower profits for retailers that have seen units per basket stay relatively flat over the last 12 months.

Consumer preferences in Nevada

Nevada cannabis market deep dive graph 11: Who's shopping for cannabis in Nevada?

The typical Nevada cannabis consumer is reflective of overall US demographic trends. Nearly half of cannabis shoppers in Nevada are Millennials with the same proportion of sales coming from Male consumers between the ages of 26-57. However, Nevada does show a slightly higher representation of Female customers across all age groups when compared to other US markets.

Consumption lounges

Consumption lounges will start to open in Nevada this year, with the first 40 cannabis consumption lounge licenses issued in November 2022. Lounges can be associated with existing dispensaries (40-45 licenses will be available to existing retailers), or operate as stand alone consumption lounges. While the concept is not new, Las Vegas is particularly set up well to be at the forefront of operating cannabis consumption lounges at scale, with tourists willing to transact on high average order value (AOV) and spend on experiences. Larry Scheffler, co-CEO of Planet 13, looks forward to opening their consumption lounge as the company "has always been about offering new and one-of-a-kind immersive experiences for customers” and expects to push the envelope and expand people's minds about what cannabis can be.

What cannabis operators are saying about Nevada

Thrive Cannabis Marketplace

Thrive Cannabis Marketplace operates five Nevada dispensaries (three Las Vegas, Reno, Jackpot), and has succeeded in the market through their relentless focus on customer experience—aiming to be the friendly, trusted brand that meets each of our customers wherever they are on their cannabis journey. In speaking with Thrive’s COO, Brandon Wiegand, he noted that the Nevada market is still “recovering from a hangover caused by artificial demand due to COVID.” For a lot of operators that scaled their business to meet this perceived demand, market oversupply occurred and “licensees got over their skis and are having to course correct.” With regards to brands, Wiegand points out that Las Vegas sees roughly 40 million tourists annually, which provides a ton of visibility for brands. Similar to other operators in the market, Thrive believes consumption lounges are a potential game changer, where the Company will focus their offering on education and experience.

CLS Holdings

CLS Holdings is a vertically-integrated cannabis producer and retailer with brands that include City Trees and Oasis Cannabis. CLS Holdings’ CEO Andrew Glashow thinks that being smaller in this tough environment has served them better as its allowed them to be nimble and make quick pivots as needed. CLS’s dispensary, Oasis Cannabis, is seeing 30% more customers while average spend is down 18%. Glashow commented that customers now want more cannabis than they did a year ago, without spending more, so the Company must meet customers where they are. Customers are expecting a combination of quality, quantity, and value—"people want their escape and cannabis is exactly that.”

MSOs deepen presence in state

With the majority of licenses issued in 2018, M&A activity by MSOs spiked shortly thereafter (GTI acquired Integral Associates in November 2018, Curaleaf acquired Acres in March 2019). However, there were a handful of notable M&A deals in the market this past year, two of which were MSOs deepening their presence in the state. Curaleaf completed its acquisition of Tryke Companies in October 2022 (announced in November 2021), which included four additional retail dispensaries in Las Vegas, Sparks, and Sun Valley, bringing its total to seven dispensaries in the state. Verano completed its acquisition of Sierra Well in September 2022, which added two additional retail dispensaries in Carson City and Reno, bringing its total to five total dispensaries in the state. Jushi, meanwhile, entered the market in 2022 with its acquisitions of Apothecarium Nevada (completed March 2022), which included a dispensary in Las Vegas, and NuLeaf (completed April 2022), which included dispensaries in Las Vegas (2) and Lake Tahoe.

Conclusion

Nevada is being subjected to a lot of the pains of the industry at large. As a legacy market, they have likely converged on the current consumer demand. Falling prices and increased discounting puts retailers in a tough spot as the amount of people buying and product being bought has not grown much if at all in the last year. While a victim of pricing compression, the silver lining is that relative to the rest of the market their average item price is 16.8%. Need help identifying the opportunities in Nevada or other legal cannabis markets? Headset is here to help! Sign up for a demo to learn how our tools can help you succeed in the industry, and one of our friendly team members will be in touch.

Key takeaways

  • With nearly $700 million in total sales through October 2022, Nevada is the second smallest Headset tracked market in the US. However, when adjusting for population Nevada has the second most sales per capita behind Colorado.
  • Total sales from January through October 2022 have declined 13.1% year over year. Through October 2021, Nevada had sold nearly $800 million of cannabis products while in 2022, they have come up about $100 million short of that mark.
  • Compared to the rest of the US market, Nevada customers seem to show a stronger preference towards Flower (+3.3 percentage points) and Pre-Rolls (+1.4 percentage points). While concentrates in particular have 3.3 percentage points less of total sales than the rest of the US market.
  • Over the last year, Flower’s share of total sales has fallen 8.4 percentage points year over year. Most of this market share is being absorbed by Vapor Pens. Vapor Pens, the second largest category nationally, grew by 5.1 percentage points in the last year, converging on the national average of ~23% of total sales.
  • Falling prices and growing discounts indicate lower profits for retailers that have seen units per basket stay relatively flat over the last 12 months.
  • The number of brands in Nevada has stalled and even shrunk by about 6%, with 353 distinct brands capturing a sale during 2022. Between 2019 and 2020, brand count increased 40% from 270 brands to 378.

About the author

Dai joined Arlington Capital Advisors in 2021 and leads the firm’s Cannabis practice. Prior to joining Arlington, Dai served as VP Corporate Development for Left Coast Ventures, a CA-based Cannabis Company which completed a qualifying transaction with Subversive Capital Acquisition Corp. to form The Parent Company. Prior to Left Coast Ventures, Dai held various Corporate Development and investment positions at MedMen, Anheuser-Busch InBev, Austin Ventures and Bank of America Merrill Lynch.

Arlington Capital Advisors is a leading investment bank, offering financial and strategic advisory services to the consumer industry. Securities are offered through its affiliate, Arlington Capital Services, LLC, member FINRA/SIPC.

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