This report examines Headset data on price from four key states with legal cannabis sales. Prices are broken down by item, the traditional method, and also by measurements unique to the cannabis industry, like grams of Flower or milligrams of THC in Edibles. This offers a unique perspective on pricing trends. Readers should use it to understand where prices will head in newly legal states, as well as to get a general idea of how much people are willing to pay for pot.
Pricing trends in cannabis are difficult to track, because much of the market is so new. But we’re lucky enough to have significant data from two of the oldest legal states, a new but multi-year state, and a brand new state, which paints an interesting picture of where prices have gone and where they’re going.
In the newest member of our dataset, California, prices are high by all measurements. Given how much settling out there’s been in Colorado and especially Washington, which boasts the lowest prices in the nation, California shouldn’t expect its prices to stay so high for so long. Nevada, which has had sales since 2017, has lower overall prices than California, which is to be expected for a state that’s had more time to develop its market, but significantly higher prices in the interesting and important Vapor Pens category.
In addition to examining average item prices (AIP) across the states, we’ve looked at price from a different angle: by weight and dosage. Because the popularity of different package sizes varies so much across the states, price can skew high or low based on how much volume people are buying. By looking instead at granular price data, like price per gram for Flower, Concentrate, Pre-Rolls, and Vapor Pens (which use 0.5g or 1g cartridges), or price per milligram in Edibles, Beverages, Capsules, Topicals, and Tinctures & Sublinguals, we get a clearer picture of what consumers are willing to pay in each state.
Moving deeper into package sizes, we’ve looked at Flower sales from both the AIP and the price per gram sides of the issue, and noticed a trend towards higher AIP but lower per gram prices. This suggests that people are buying more pot in fewer packages. Which is, of course, great news for everyone involved. Examining California’s Flower sales by package size, we see that, while people were buying plenty of dime bags early on, almost all sales are eighths now. Although more data suggest that people buy the most bottom tier legal cannabis in large quantities, so value consumers do exist. We’ve also evaluated demographic data, and are not at all surprised to see that older generations are willing to pay more for legal pot.
Data for this report comes from real-time sales reporting by participating Washington State, California, Nevada, and Colorado cannabis retailers via their point-of-sale systems, which are linked up with Headset’s business analytics software. The data in this report pertain to average item prices and granular unit prices in 2018 and the first two months of 2019. Demographic data is from voluntary participants in store loyalty programs. Those data are cross-referenced with our catalog of over $4.5 billion 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. Thus, there is a slight margin of error to consider.
AIP ranges from $15-30 across the four legal states in this report’s dataset, with the lowest AIPs occurring in states that have had more time with legal cannabis markets. This makes sense, as prices tend to fall when production ramps up to meet demand. The first day of legal cannabis sales in Washington state saw grams of cannabis being sold for as much as $30, which is unheard of now. Washington is, in fact, the home of the lowest prices in legal cannabis, with an AIP of $15.33 across the various product categories.
However, it’s not simply more cannabis being produced for less money that determines AIP. Competition plays a major part, both within the legal cannabis industry, and from the black market. So does regulation. Washington has thousands of distinct cannabis brands, and a “tiered house” market system that gives retailers a lot of power to push back on price. The result is a lot of affordable cannabis products. Colorado’s system allows for vertical integration, so even though it has seen prices come down over the years, the brand landscape is less hotly contested. Prices did go down in Nevada and Colorado, though they stayed flat in Washington, where there’s really no room to drop. IN California, which just came online in 2018, AIP has actually gone up by $5, but that can’t last forever.
In California, Vapor Pens are an extremely popular category, with a third of the total market, and a high-priced one, with an AIP of about$43. We’ve examined this trend in other reports, but it seems that items not freely available on the black market are especially popular IN California, which benefits Vapor Pens. In other states, the market share is more reasonable, but it’s important to note that Nevada has even higher prices than California, with an AIP just shy of $50 for Vapor Pens. This is likely due to its tourism-driven market, allowing retailers to charge a premium to people who are from out of town.
Another interesting aspect of the Vapor Pens pricing story is package size. Most cartridges for Vapor Pens are sold in .5g or 1g units, with Avery small number of other options. Obviously, 1g units cost more, so seeing which sizes are sold in each state offers additional insight about the AIP for the category. The .5g size is the most popular overall, which makes sense. It’s the affordable option, and the cannabis markets dominated by money-conscious Millennials. In Washington and California, 1g sizes are actually quite popular, with 37% and 29% of sales going to those package sizes, respectively. In Colorado and Nevada, less than 10% of Vapor Pens sales are to 1g sizes. What’s interesting about this is that Colorado enjoys the highest prices, while Washington has the lowest. This tells you exactly how low, as they’re selling significant number of full gram cartridges, but still have an AIP nearly $20 below California’s.
AIP is great for understanding a market’s overall performance, but for more granular analysis, price per gram can give a clearer picture. This is especially true when package sizes vary as much as they do in Vapor Pens. Looking at the category, we see that price per gramis actually much higher than AIP across the board. And the state-to-state price differences are actually much more significant than AIPindicates. Nevada’s Vapor Pen price per gram—$96!—is nearly three times Washington’s
Price per gram (PPG) works well for pretty much all of the inhalable categories, as Flower, Pre-Rolls, and Concentrates are all sold in gram units as well. The PPG distribution is pretty similar across the states, with Nevada boasting the highest prices overall, California close behind, and Washington sitting well below both of them. However, this is somewhat less pronounced in the Pre-Roll category. Perhaps this is because Pre-Rolls are already a very low-priced category, leaving very little room for price variance. Of course, Washington is still the home of the $1 Pre-Roll, but consumers are generally unwilling to pay more than $10 for a Pre-Roll, unless it’s something really special, like a Cannagar.
For products that you don’t inhale, there’s another convenient, universally applicable metric: milligrams of THC. Beverages, Edibles, Capsules, Tinctures & Sublingual, and Topicals are all measured in milligrams of THC. This is because these products are generally infused with specified amounts of extracted cannabis oil. The oil is tested for potency, allowing manufacturers to have a relatively reliable way of knowing how much they’re putting in each product.
When breaking prices down by milligrams of THC, the variance is a lot less pronounced than with price per gram, and price trends don’t mirror the state trends shown in inhalable. We actually see Colorado having the most expensive Tinctures & Sublingual's, with Washington beating out California in both that category and Edibles.
Flower comes in a variety of package sizes these days, therefore, normalizing prices per gram is extremely important. We can see that in the chart below, which compares the AIP of Flower to its price per gram. Prices have actually been rising in California for Flower, though per gram price has fallen. This is to be expected, as the market is still new and retailers can charge that novelty premium. But price per gram suggests that some of the economies of scale that ultimately drove prices so low in Washington are beginning to develop in California. In Washington, producers grow an incredible volume of cannabis, and sometimes sell it for as low as $0.20 per gram at wholesale. The change in California, as we’ll see in the graph, is driven by a shift in package size sales, with more consumers buying larger packages.
An eighth is a 3.5g package of pot. It’s a carry over from the days of street dealing, where it was shorthand for “an eighth of an ounce. Metric and Imperial measurements were mixed frequently in illicit markets. Dime bags, or single-gram packages, didn’t make it into the lexicon of legal cannabis, but plenty of pot is sold in single-gram sizes. However, in California, that’s shifted since the onset of legalization. We see that, while single-grams were popular initially, eighths grew to completely dominate the Flower market by the end of the year. This would explain why prices have risen—more pot costs more—but price per gram has fallen. For consumers to buy more, volume has to equal value. Interestingly, eighths have even eaten into large format package sales in California.
Using price per gram allows us to break products into useful tiers. We’ve organized them into Value, Low-Priced, Mid-Priced, Premium, and Super Premium, with each representing a sequential 20% of the price spectrum. Cross-referencing this with package sizes tells us a lot about consumers’ motivations for purchasing a given package size. If a given package size sees most of its sales going to Value products, we can deduce that people are buying it with savings in mind. The most clear example of this is in ounces and half ounces, where a majority of products are Value or Low-Priced. The same is true with quarter ounces, another size that has historically been considered a bulk purchase. Eighths and single grams, on the other hand, both see the majority of their sales going to Mid-Priced, Premium, and Super Premium. Eighths are the highest-selling category for Super Premium products overall.
Older generations are, unsurprisingly, paying the highest prices for pot. It’s no secret that Baby Boomers and the Silent Generation have more to spend than their youthful compatriots. Gen Xers are the average to measure everyone else against here, but we see price preference swing out around that. Millennials and Post-Millennials pay significantly less, and this is especially true for single-gram sizes, while Baby Boomers and the Silent Generation are much more willing to buy Premium single-grams. Millennials and Post-Millennials spend about 20% less on average on single-grams, while Baby Boomers purchase the most premium grams, at 10% above average. In eighths, the difference is much less pronounced, and Millennials are almost as likely to purchase Premium products as Baby Boomers.
Looking at generational preferences for larger package sizes in California, we see that sales have generally grown. Regulation changes IN California led to a significant sales spike in June of 2018, when new packaging and quality requirements created a sell-off of old product, which was followed by supply issues. However, we see sales of larger package sizes picking back up. Given this trend, sales of larger package sizes will probably to continue to grow in 2019, especially the sale of Value priced ounces. Value priced ounces are especially popular withPost-Millennials, a demographic that’s only just begun aging into the market. Given how comfortable with cannabis their elder siblings, the Millennials, are, Post-Millennials are expected to be a large and dedicated group of customers
One of the biggest takeaways here is that prices are very locally specific. Each state has its own cannabis regulations, which shape everything from the brand landscape to the cost of production. You might think Colorado’s vertical integration would drive price down, because it actually reduces costs quite a bit, but it seems to actually keep prices higher, while Washington’s tiered house system has driven them into the ground.There’s also the matter of taxes, which are generally folded into price, but vary widely between the states. Perplexingly, Washington also ha sone of the highest cannabis excise taxes in the market.
There’s also the matter of demographic price trends, which will shift rapidly in the next two to three years, as a significant chunk of Postmillennial age into the market. Vapor Pens will probably have to come down in price to meet demand for cheap cartridges, as we’ve seen that younger generations have a preference for bulk cannabis at a good price, and prefer vaping to smoking. However, despite the broad differences between states and generations, there are some undeniable trends. Older markets have lower prices, and brand new markets have higher prices. As newer legal states come online, we expect future versions of this report to feature sky high prices in places like New York and Massachusetts, while California comes more in line with existing legal states. Washington will, barring serious regulatory changes, remain the lowest-priced state in the nation.
Packaging sizes could be an interesting narrative, as bulk packaging stands to become a serious market. Stepping outside of inhalable products, prices are much more stable. While price per milligram might be low, there’s plenty of money to be made when you multiply that by te 100mgs of THC that’s commonly found in infused chocolate bars.
Most importantly, we would urge people interested in price trends to keep a close eye not only on AIP, but also price per gram and package size distribution. Granular price data paints a very different story than just AIP, as in the case of Nevada’s significantly higher gram/milligram prices compared to California, which has a higher AIP.
Headset is a market data and business intelligence platform for the cannabis industry. Our extensive Industry Reports deep-dive into specific categories and aspects of the industry to help businesses better monitor the market and perform exhaustive category analysis. Reports are generated via aggregate, real-time transaction data to get a unique and thorough analysis of what’s happening in the cannabis industry as the data becomes available. Headset offers three distinct products that help retailers, dispensaries, brands, product manufacturers, distributors, and investors move ahead in the industry.
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