Cannabis Beverages: Examining category performance & trends

Introduction

While a small category, Beverages have significant potential for growth. Currently making up 1%-3% of overall cannabis sales, Beverages are rapidly climbing with triple digit year over year sales growth in some markets. As this young category gains popularity, there are several important questions we need to answer in order to understand what is driving success for Beverages. In which markets are Beverages the most popular? What types of Beverage products are in demand? How quickly are new brands entering the market? What consumer demographics are attracted to these products? All of these questions and more are answered below, so let’s crack a cold one and dive in.

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Report takeaways

• Beverages are a small but growing category. Since the beginning of 2021, market share of Beverages has increased nearly 40% in both the US and Canada.
• Beverages are more popular in Canada than in the US. On average, Beverages make up 2.1% of total sales in Canada and 1.1% in the US.
• Seasonality is a significant factor. Beverage sales have spiked in the last two summers in both Canada and the US, as well as on popular US holidays such as 4th of July, Labor Day, Thanksgiving and Christmas.
• Industry excitement may be exceeding customer demand. Since January 2021, the Canadian market has seen a 300% increase in brands. Beverage brands grew 65% in the US over the same time period. This flood of new brands and products into the market could be exceeding demand and contributing to price compression within the category.
• A variety of types of products are attractive to consumers. Both countries have over three product segments with over 15% market share.
• High dose packaging is popular with US consumers. High dose products (25mg - 1000mg), make up over one-third of all Beverage sales, with 100mg packages contributing 22% of total sales through the first ten months of 2022. Low dose Beverages with less than 6mg of THC account for over 22% of total sales.

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Methodology

Data for this report comes from real-time sales reporting by participating cannabis retailers via their point-of-sale systems, which are linked to 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.

Unless otherwise noted, sales data is from ON, AB, SK, BC, markets in Canada and WA, OR, CA, AZ, CO, MI, FL, MA, NV, MD, and IL markets in the US. The following analysis reports on sales occurring from January through October 2022, unless otherwise indicated.

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Market share of cannabis Beverages

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Beverages are a small part of the overall cannabis market, but they are growing. In Canada, Beverages are the seventh most popular category, making up 2.1% of total sales from January through October 2022. Beverages are the sixth most popular category in the US, capturing 1.1% of total sales in the same time period.

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Market share of Beverages in states & provinces

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Market share of the Beverage category in Canadian provinces ranges from 1.4% of total sales in Saskatchewan to 2.4% of total sales in Ontario. Markets in the US have a greater range in share for the category. West coast markets such as Washington (2.8%), Oregon (1.8%), and California (1.4%) are the most popular states for Beverages. Generally, newer adult-use markets in the US such as Illinois (0.8%), Arizona (0.7%), and Michigan (0.4%) have a smaller representation of the category. Florida has the lowest representation of Beverages in total sales at 0.1%. Florida is the largest medical-only market in the country, but Beverages are a highly regulated category, which may limit product diversity. For example, ready-to-drink Beverages are currently unavailable in Florida. Instead, customers must purchase dissolvable powders that are meant to be mixed into other drinks.

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Sales growth of cannabis Beverages

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This graph looks at the year over year growth of Beverages. We saw in the previous graph that Michigan had the lowest Beverage share of any adult-use market in the US. But here we can see that Michigan also has the highest category sales growth rate by far. Through the first ten months of 2022, Michigan’s Beverage sales have increased 272% over the same period in 2021. Other top sales growth markets include Ontario (67%) and Massachusetts (53%). On the other hand, Colorado (-15%), Maryland (-17%), and Nevada (-21%), all have had negative Beverage sales growth over this period.

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Market share of Beverages over time

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Here we see the market share of Beverages in the US and Canada since the beginning of 2021. In both countries, market share has seen nearly a 40% increase since January 2021. Market share seems to be growing more rapidly in Canada. This may be due to the relatively recent introduction of Beverages to the market with cannabis 2.0 products.

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Seasonality of cannabis Beverages

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When we look at Beverage sales trends, we do seem to find an aspect of seasonality to the popularity of Beverages. This is most clearly demonstrated in Canada, where we can see a lift in category share of total sales in the last two summers. This trend is more obvious in Canada since the demand is larger, but we also see small spikes in popularity in the US during peak summer months.

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Growth of Beverage brands in the US & Canada

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In both countries, brand count has increased significantly since the start of 2021. Brand growth has been dramatic and linear in Canada, with a 300% increase in brands since January 2021. In the same time period, the US experienced a 65% growth in Beverage brands. Despite the strong growth in 2021, it seems brand growth has slowed in 2022. In Canada this year, brand count has increased 39% compared to 141% through October of 2021. Similarly in the US, brand count grew 54% through October in 2021. However this year, brand count grew 12% to reach a peak in May and then declined 8%. This year cumulatively, brand count has increased only 3% in the US. Consumer demand for Beverages may be slowing down in the US, which may explain the brand decline we are seeing.

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Popular Beverage products in Canada

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There are many different types of Beverages to choose from. This graph shows us that there is a diverse interest amongst Canadian consumers across the many product segments. Every other Beverage sale is from a product from the Carbonated segment. Beverages like XMG’S Mango Pineapple Sparkling Drink (10mg THC, 236ml), are among the most popular in this segment. The Iced Tea, Lemonade, and Fruit segment captures a significant 20% of Beverage sales as well as THC infused Water, which captures another 19% of Canadian Beverage sales.

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Popular cannabis Beverage products in the US

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In the US, the wealth is spread between a greater variety of product segments. Drops, Mixes, Elixirs, and Syrups leads the pack, however, Iced Tea, Lemonade, and Fruit as well as Carbonated Beverages all capture 21%-29% market share. Even the infused Water segment captures 15% of sales. This shows that consumers in the US are open to a wide variety of Beverage products. Next, let’s look at the top products capturing sales in these segments.

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Top Beverage products in the US & Canada by segment

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Here, we look at the top Beverage products in total sales in the US and Canada, by segment. To keep track of the best selling Beverage products in each market, check out our Best Sellers, updated daily.

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Popular package sizes of Beverages in Canada

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The most popular package size by far in Canada is the 10mg size with over two-thirds of total sales. Similarly to Edibles, regulation limits the amount of THC in a single package, which makes high-dose Beverages nearly impossible to sell. The third most popular package size is 0mg with 6.6% of total Beverage sales. Canada also regulates the sale of CBD, so this statistic is an indicator of CBD-related Beverages that currently cannot be sold in traditional retailer outlets.

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Popular Beverage package sizes in the US

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Customers seem to gravitate towards the higher dose packages in the US. Half of all Beverage sales go to the 100mg per package category, similar to what we see with Edibles. This is likely due to the higher value; more THC for a lower price point is hard to beat.

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Low dose vs high dose in the US

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High dose: 25mg - 1000mg

Low dose: <0mg - 5mg

Unlike Canada, Beverage products in the US are allowed to be sold in much higher doses with some products reaching 1000mg of THC in a package. The most popular dosage for Beverages in the US is 10mg, capturing 39% of the market. However, high dose Beverages over 10mg are very popular as well. High dose products account for over one-third of all Beverage sales, with 100mg products contributing 22% of total sales through the first ten months of 2022. Low dose Beverages also have their place in the US market. Beverages with less than 6mg of THC account for over 22% of total sales in the US.

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Price of cannabis Beverages in the US & Canada

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Similar to other product categories, the price of Beverages has been dropping in both the US and Canada. Canada has seen the largest drop in price. From October 2021 to October 2022, the average equivalized price (EQ), or price per milligram of THC, has dropped 27%. The US also has seen a steady decrease in price, but not to the same magnitude as Canada. Since last October, the EQ price of Beverages has decreased 12%. This trend looks like it will continue in both the US and Canada. There are many factors that have led to pricing compression in cannabis. For Beverages, we see a flood of new brands entering the market, which may result in an excess supply compared to the demand. As markets continue to mature, we will likely see some prices begin to flatten.

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Demographic preferences for Beverages in Canada

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This graph compares the proportion of total market sales in Canada by demographic group to the proportion of Beverage sales attributed to each demographic group. The index compares these values. If the index for a demographic group is greater than 100, then that group spends relatively more on Beverages. If the index is lower than 100, then that group spends relatively less.

In Canada, Beverage sales are dominated by Male and Female consumers between the ages of 26 and 57. These consumers account for over 80% of category sales, nine percentage points higher than their typical rate in cannabis. Both the oldest consumers and the youngest show adversity to this category in the Canadian market.

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Demographic preferences for Beverages in the US

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In the US, Female consumers over the age of 25 show a strong preference for the Beverage category. Typically, this cohort of women account for 28.7% of total cannabis sales. In this category however, with the exception of the Gen Z age group, Female consumers contribute 37.1% of category sales. Additionally both Male and Female consumers in the Generation X age group (ages 42-57), seem to show preference to this category as well.

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Conclusion

Beverages are a small but rapidly growing product category in the industry. In some markets, sales have skyrocketed by triple digits year over year. Beverages have the potential to attract new consumer groups who may not tend to purchase the traditional inhalable product categories. There is a lot of opportunity in cannabis Beverages, especially during a time when people are drinking less alcohol, particularly in the US. The seasonality of cannabis Beverages may be redefining what it means to crack a cold one, so keep an eye on the category as it continues to grow. Need help identifying opportunities in Beverages and other cannabis categories? Headset can help! Sign up for a demo and learn how Headset tools can help your business succeed in the industry.

Key takeaways

• Beverages are a small but growing category. Since the beginning of 2021, market share of Beverages has increased nearly 40% in both the US and Canada.
• Beverages are more popular in Canada than in the US. On average, Beverages make up 2.1% of total sales in Canada and 1.1% in the US.
• Seasonality is a factor with Beverages. Beverage sales have spiked in the last two summers in both Canada and the US, as well as on popular US holidays such as 4th of July, Labor Day, Thanksgiving and Christmas.
• Industry excitement may be exceeding customer demand. Since January 2021, the Canadian market has seen a 300% increase in brands. Beverage brands grew 65% in the US over the same time period. This flood of new brands and products into the market could be exceeding demand and contributing to price compression within the category.
• A variety of types of products are attractive to consumers. Both countries have 3+ product segments with over 15% market share.
• High dose packaging is popular with US consumers. High dose products (25mg - 1000mg), make up over one-third of all Beverage sales, with 100mg packages contributing 22% of total sales through the first ten months of 2022. Low dose Beverages with less than 6mg of THC account for over 22% of total sales.

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