The analysis compares data between three cohorts of Headset tracked markets, legacy US markets (CA, CO, NV, WA, OR), emerging markets (MI, MA), and Canadian markets (AB, BC, ON, SK). The analysis looks at distinct products launched in the full year of 2020, 2021, and 2022 and does not include house brands or vertically integrated products. When referencing “survivability” for new products, we evaluated how many products that launched in January of a given year recorded a sale after that same calendar year.
When we look at the number of new products that have come to market since 2020, we find that market conditions play an influential role. Since 2020, the cannabis industry has navigated a global pandemic, shifting consumption patterns, an increasingly competitive market, and an evolving regulatory landscape as our industry continues to take shape. However, the experience of the Canadian market has differed significantly from that of the US — even US legacy markets show divergent trends when compared to US emerging markets. This context is important to understand when analyzing new product launches, which are very much a function of their own environment. In this report, we will analyze new products trends over the last three years and discuss anticipated trends for 2023.
Canadian, US emerging and US legacy markets have each had unique recent histories related to total sales and year-over-year growth.
As you can see, the market growth of each of these cohorts differs and in some cases show opposite trends. US legacy markets have experienced a sales bell curve with declining growth in the last 18 months. Meanwhile, Canadian and US emerging markets have experienced sustained growth, which closely relates to the growth rate in new products released over the last few years.
Between 2020 and 2021, total sales in these mature markets grew by 12.8% during a pandemic that saw an increase in consumer spending. However, this artificial demand didn’t last, and the legacy market saw total sales decrease by 10.3% in 2022 compared to the previous year.
In markets where sales have shrunk, so have the number of new products coming onto the market in the last two years, decreasing by 10.9% in 2021 compared to the previous year and then falling another 6.8% in 2022. This downward trend will likely continue through 2023 in US legacy markets, as the market tries to converge on how many products can be supported.
Despite the experience of legacy markets and pricing compression woes, emerging US markets such as MI and MA and the Canadian market saw positive total sales growth year over year. Between 2020 and 2021, US emerging and Canadian markets saw total sales grow 85.3% and 61.2% respectively. The following year, sales continued to increase but at a lower rate of 21% in US emerging markets and 20.1% in Canada.
We also see a similar trend in the count of new products entering the market. In 2021, US emerging markets posted a huge increase of 249% in new products relative to 2020. This trend is likely a symptom of their more recent shift to recreational consumption. We see this phenomenon play out in new states where brands, producers, and retailers rush in to capture pent-up demand. However, new products entering these markets slowed substantially during the following year but still grew by another 44%.
The Canadian market has far fewer products than US markets. As Canadian markets have grown steadily over the last three years, they saw total new products grow by 21% in 2021 and another 6% in 2022.
When we look at the growth rate in 2022 of new product debuts for the shrinking legacy markets, only Pre-Rolls saw an increase in the launch of new products. This is consistent with the category’s growing popularity among consumers, which brands have seen as an opportunity for investment and product innovation.
As for the US emerging markets, most of the major product categories saw an increase in new products hitting the shelves in 2022. Pre-Rolls increased their presence in the market with new product count growing by 72% from 2021 to 2022. In fact, Pre-Roll products represented one in every four new SKUs launched in 2022, second only to Flower products which represented 38.5% of all newly launched SKUs. Beverages, another buzzing product category, grew new product count by 55.6%, but the category represented less than 1% of newly launched SKUs during the year.
New product growth for Canada saw mixed results in 2022. Following general market trends, Beverages, Pre-Roll, and Edibles all saw increases in the number of products entering the market last year. Each category increased in consumer popularity, which likely drove brands to prioritize these categories for product innovation. Collectively, these three categories made up 41% of new product debuts in Canadian markets. Pre-Rolls alone accounted for 27% of new products while Edibles and Beverages made up 9.6% and 4.4% respectively.
In all three market cohorts, “wellness” products such as Topicals, Oil, Capsules, Tincture & Sublingual saw a decline in new products introduced to the market, which is consistent with the shrinking popularity of these categories. In Canada, the decrease in Topicals, Oil, Capsules and Tincture & Sublingual products is also an indicator of assortment decisions made by provincial category managers. The product call cycle further influences the timing of when new products show up in the Canadian market.
When evaluating the time of year that new products are typically launched, timing seems partially dependent on market conditions rather than seasonality. In 2020 in US Legacy markets as the pandemic gained steam and propelled new levels of cannabis consumption, sales hit their highest point in August, the same month that new product debuts also peaked. Between May and October of that year, 56.6% of all new products hit the market.
This differs from US emerging markets and Canadian markets which have maintained steadier growth in sales and new product launches. New products in these markets have been released in the later halves of 2020 and 2021.
In 2020 and 2021, the share of new products launched in January that lasted through the end of the year was 29%-30%. That number fell to 17.1% in 2022.
In emerging markets, new products launched at the start of 2020 benefited from first-to-market advantage with three of every four of those new products surviving through the year. Three years later, 28.4% of those products are still on the market. In 2021 the number of new products showing up in stores increased significantly. As a result, the share of new products surviving 12 months dropped to 41.1% and then 17.2% in 2022 matching what we see for survivability in legacy markets.
Subject to heavier regulatory processes, including those implemented by provincial wholesalers, the Canadian market launches significantly fewer products annually than American markets. This may be a contributing factor to why such a high percentage survive. For products launched at the start of the year between 2020 and 2022, 68% - 75% survive for at least a year. This has remained very consistent over the last three years.
Across most market cohorts, we have seen year-over-year growth for the average lifespan of new products launched In 2022, Canadian new products in particular last almost 7.5 months before their last transaction while both US cohorts have a lifespan between four and five months.
For products released in January that didn’t make it through the calendar year, "wellness" products and other slow-moving and shelf-stable categories had a longer average lifetime. This includes categories like Topicals, Oil, Capsules, Tincture & Sublingual. Furthermore, fast-moving product categories like Flower, Concentrates, and Pre-Rolls spend less time in-market. The lower lifespan of these products is largely based on new unique strains in various package sizes that may last through a season only to disappear and be replaced by the product's next iteration.
Market conditions predict new product launches, from the types of products launched to the specific time at which they hit the market. US legacy markets, with fluctuating sales over the last three years, have had an overall decrease in new product launches year over year. Conversely, emerging US markets, which have grown over the past three years, have seen an increase in new product launches, but at diminishing rates each subsequent year. While emerging markets enjoyed a high survival rate of new products in the past, competition is growing and fewer products are continuing to exist in the market throughout the year.
Canadian markets, despite their own regulatory and industry woes, have managed to grow the number of new products making an entrance. Their smaller new product selection compared to US Markets consistently allows the majority to survive beyond the year. Across all market cohorts, there are notable investments in new Pre-Roll products as the category increases in popularity, while new product launches in “wellness” categories such as Topicals, Oil, Capsules, Tincture & Sublingual have declined, consistent with the shrinking popularity of these categories.
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