As we often note here at Headset, the cannabis industry is anything but stagnant. With new markets legalizing, governments granting additional business licenses, and ever-changing regulatory landscapes within established markets, there is always something in flux. Product, brand, and even entire categories are not immune to these fluctuations, and this can make it difficult for retailers to keep up with the latest trends to make sure their shelves are up-to-date with popular products.
That is why in this report, we are going to focus on some of the significant shifts in product categories in recent years so that you can stay on top of the trends for the year to come. More specifically, we will explore market-wide growth patterns at the category and segment level and also drill in on portions of the cannabis market with the largest shifts over the previous year. We will also touch on some emerging trends that are worth keeping an eye on this year. If you’re looking for a list of top selling products to keep stocked in your inventory, keep an eye on our Best Sellers.
When we explore the changes in cannabis categories, we find that certain categories have been more successful than others in the US and Canada. In the US for example, Beverages and Pre-Rolls saw the strongest year over year growth rates in 2021, while the Tincture & Sublingual category saw a decline in sales. On the other hand, Tincture & Sublingual products in Canada, which were released in late 2020 with other ‘Cannabis 2.0’ products, saw over 3000% growth year over year. When we take a closer look, it seems that Sublingual strips are driving a significant portion of growth to the Tincture and Sublingual category in Canada, with very few distinct products supplying the majority of sales. Flower market share and basket penetration has been declining in both the US and in Canada, but Beverages seem to appearing in more baskets. In the US for example, basket penetration of Beverages nearly doubled from 2% in January 2020 to 3.7% in December 2021.
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 retail partners. 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 Headset Insights Premium markets. This includes CA, CO, WA, NV, OR, and MI in the US and AB, ON, BC, SK in Canada. We present all data in local currency and do not make adjustments for currency fluctuations.
Let’s start by looking at how product categories have grown, or declined, in the past year. On this chart, we can see the 2020 and 2021 total sales values for each product category across Headset Insights markets in the US. The orange dots display the relative year over year sales growth of each category. Total sales growth for the markets included in this analysis was about 18%, so any values below 18% indicate that the given category was not growing as fast as the entire market.
We can see that in the US, Beverages and Pre-Rolls saw the strongest year over year growth in 2021, while Topicals barely broke even and the Tincture & Sublingual category saw an actual decline in total sales.
Now we look at category growth in Canadian markets. Total market year over year sales growth was about 61% in Canada, so it is not surprising to see some higher category-level values here than in the previous graph. What may be surprising however, is the magnitude of growth some categories underwent in 2021. All “Cannabis 2.0” categories saw fantastic growth, with the Vapor Pen category the only one that did not more than double its sales in 2021.
If you’re eying that growth value for the Tincture & Sublingual category and getting ready to write us an email, you can put that keyboard away, that is (amazingly) not a typo. Sales to this category grew so much in 2021 that we had to hack the Y-axis of this graph to make it readable! This is still relative sales growth. Products didn’t start selling in this category until late 2020, creating a minuscule base value to grow from. This is still the smallest category in Canadian cannabis, but still clearly one worth watching. We’ll explore it further later in this report.
We have been looking at raw sales growth so far, but that only tells us part of the story. Changes in market share really display the changes in relative popularity across different product types. This chart displays the year over year relative change in market share of each category within the US and Canadian cannabis markets. For example, market share to the Vapor Pen category in Canada increased from 14.8% in 2020 to 16.4% in 2021, resulting in 11% relative growth (16.4 / 14.8 - 1 = 0.11 = 11%). This chart shows us that some categories, despite having positive year over year sales growth, saw a reduction in their share of the total pie. The Concentrate category in the US is one such example, dropping slightly from 9.3% to 8.8% of total sales while increasing in total sales by more than $100M.
Several categories increased their market share in both the US and Canada. Beverages is one of the most successful of these categories, we’ll take a closer look at this later in the report. Before that, we’ll explore the only category that dropped in market share in both countries: Flower.
To gain a better understanding of the Flower category’s market share decline, we’ll first look at a more detailed timeline. Here we can see that in Canada, Flower market share has been dropping steadily over the past two years. The graph here could almost be fit by a perfectly straight line.
In the US on the other hand, Flower’s market share has been much more volatile, rising steeply early in the COVID-19 pandemic before tailing off in late 2020 and then again through the second half of 2021. US market share to Flower was 40.0% in December 2021, about 7% lower than pre-pandemic January 2020 (43.2%). Flower is still the highest-revenue category in both countries, but as shown above, is now less significant than ever before.
While analyzing the waning popularity of the Flower category, we decided to take a look at how much individual customers are choosing to spend on Flower products over time. This chart shows the median quarterly spend on Flower products of the top 10% of Flower customers within each country. Trends within this subset of customers are important as they drive the majority of revenue within the category. For example, in Q4 2021, the top 10% of Flower customers supplied 60% of US Flower sales and 78% of Flower sales in Canada.
In this chart we can see that in both countries, heavy Flower customers had the highest spend between Q2 2020 and Q2 2021 before that value began to drop in Q3 2021. We can see that in Q4 2021, Flower spend continued to drop in the US and rebounded upwards in Canada. Regardless of the recent trajectories, the fact that the median spend of top Flower customers is currently higher than it was in late 2019 indicates that the decrease in Flower market share is probably not being caused by Flower fans purchasing less Flower. Instead, it’s possible that fewer customers are choosing Flower.
For one final analysis of the Flower category, let’s shift to a view of basket penetration over time. This graph displays the percentage of cannabis transactions within each month that contained at least one Flower product in the US and Canada. The trends for each market look quite similar to the market share graph we just looked at before. Flower basket penetration has steadily declined in Canada since the beginning of 2020, whereas there was an uptick during the first few months of the COVID-19 pandemic in the US. However, the big difference here is that Canadian Flower basket penetration dropped well below that of the US during 2021, settling at just over 36% in recent months. The fact that Flower market share is higher but basket penetration is lower than in the US indicates that Canadian customers who are purchasing Flower are either purchasing relatively more of it per transaction, and/or relatively more overall. Despite this interesting nuance in the analysis, the most important takeaway here is that in Canada, Flower products are showing up in smaller proportion of cannabis transactions over time.
Next let’s look at a product category that is growing in popularity rather than shrinking: Beverages.
One type of product that is definitely finding its way into more baskets is Beverages. This graph shows the same basket penetration analysis as the previous graph, but instead for the Beverage category. Here we can see much happier trendlines in both the US and Canada. While the proportion of total baskets in which Beverage products appear is still relatively low in both countries, it is rising steadily. For example in the US, this metric has nearly doubled from 2% in January 2020 to 3.7% in December 2021. Beverage basket penetration held relatively steady around 4% in Canada through the past year, but then hit an all-time high of 4.5% in December 2021.
In our product taxonomy of the cannabis industry, segments are the layer of granularity below categories. This chart shows the five Canadian product segments with the highest and lowest year over year sales growth. On the low end we see that two Edible segments, Cookies and Mints, have experienced some significant retractions despite only launching in 2020. Both Mixed Strain Pre-Rolls and Ground Flower have undergone fantastic growth, and are not part of the ‘Cannabis 2.0’ categories. On the positive end, the standout segment is the ‘Breathstrips and Sublingual Pouches’ segment within the Tincture and Sublingual category. Given the similarity of this segment’s year over year growth value to the category’s overall growth we saw earlier, it is safe to assume that this segment contributes the vast majority of sales to the category. Let’s explore this fast-growing segment further in the next graph.
This graph shows the total sales to the Tincture and Sublingual category in Canada over time. This small category is dominated by sublingual strip products, and by two in particular: Kin Slips - Cloud Butter Sublingual Strip 10-Pack (100mg), and Being - THC Fast Acting Oral Quickstrip 10-Pack (100mg). These two products supplied more than 70% of Tincture and Sublingual sales in December 2021 and have been completely dominant over the entire sales history of the category.
There’s yet another cannabinoid making waves in the market: Delta 9 Tetrahydrocannabivarin, more commonly known as THCV. Despite the similar acronym to its cousin THC, low-to-moderate doses of THCV are reported to be non-psychoactive, even counteracting some of THC’s negative effects when it’s present. Though rare, it’s found in many sativa and sativa-dominant strains known to produce higher levels of energy, focus, and euphoria. You’ll see it in favorites such as: Durban Poison, Tangie, GSC, and Jack the Ripper, among others.
Some studies have suggested that THCV could aid in a broad range of diseases and disorders due to its many reported benefits - including helping to regulate blood sugar, reduce inflammation, up-regulate energy metabolism, and suppress appetite. This grouping of benefits seems to have earned THCV its current nickname “diet weed” - and has made it a prime cannabinoid for cannabis-infused “fitness/health” supplements. Brands are now starting to market products with THCV for benefits like reduced food cravings.
One example is Wana’s Fit gummies, their latest addition to their fast-acting Optimals line of products. Wana touts that, with THCV, one Fit gummy a day will help reset eating habits without cognitive impairment. While this trend is still new, Wana’s Fit gummies have been gaining traction in the Colorado market with nearly $35,000 in total sales since their launch in mid-October. There are roughly twenty total distinct cannabis products that logged sales in 2021 that advertise their THCV content. Clearly, producers are testing the waters and THCV is a trend to keep a close eye on in 2022.
Keeping up with changes in cannabis industry trends takes too much time without the right tools, especially considering the pace in which this industry travels. Make sure you understand who your customers are and their favorite products. Otherwise, you risk losing them to your competitors. Headset offers tools that provide the ability to understand who is coming to your store and what they are looking for, marketing integrations to attract even more customers, and reports to drill into your inventory so that you can be prepared for every occasion. Request a demo today to learn how we can help your business succeed.
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