We've been seeing increasing anecdotal evidence that cannabis sales have been slowing down, but do we see any evidence of this in the data? To answer this question, we look to data available in Headset Insights, reviewing concrete numbers from five of our Premium markets (CA, CO, OR, NV, and WA).
While we find there to be a general slowdown across most markets, we believe this is more due to unusually robust sales in late-March through mid-April in the US, which was likely boosted by the stimulus payments that went out around the same time. Furthermore, as July progressed, we saw a reversal of the trend and month over month like store growth between 3.8% and 8.8% depending on the US market.
How widespread are the declines? Are they just some stores or most stores? It is also important to compare previous years as well so we can be sure we don't only analyze seasonal variation. With that in mind, we look at month over month changes in like store sales from April to June using 2019-2020. For example, April represents the change from March, May represents the change from April, and so on. When considering the breadth of the declines, it seems that a larger share of the stores have experienced sales declines as opposed to growth.
When we look at California and Colorado in the above graphs, we see that the percentages of like stores with declining sales in 2021 are far higher than in previous years. The exceptions are mainly April 2020 changes, which were hit by COVID restrictions the hardest, so we can conclude that declines in the spring of 2021 are broad-based.
Examining sales by week in the US, we find that while average baskets remained elevated from their pre-COVID levels (starting the year at ~$49 vs. ~$35 pre-COVID), a boost to average basket size in mid-March, (at least partially) sustained through the week of 4/20 has since abated. Further, unlike 2019, we do not see a sustained increase in average basket sizes through the mid-summer.
This decline in average basket was observed in Canadian markets as well. Recent news from StatCan regarding cannabis sales in Canada also show a slight softening in May, and we also found that Canadian markets are experiencing a decline in average transaction size.
In the US, you'll see a distinctive pop in average transaction size in mid-March. We think this is likely due to the stimulus checks, which were distributed during the weeks of 3/15/21 and 3/22/21. By the second week, 127 million economic impact payments had gone out, totaling approximately $325 billion.
In both the US and Canada, the overall downward trend could be partially driven by the changing retail landscape (more dispensaries, online ordering, new consumers), which can make smaller baskets more common. In the US, comparing the basket sizes to April or late March may be somewhat misleading because of the stimulus and 4/20 inflated levels. Compared to pre-stimulus weeks, the average basket size in the US is still favorable or at least "back to normal" in recent weeks.
In Canada, where many provinces have increased retail license issuance, this trend appears to be stronger. The declines in basket size are mostly related to declines in prices as competitive forces continue to pressure the market with more and more retailers now competing for consumers' wallets. Average item prices in January 2021 crested $27, but have since declined to just over $25.
Investigating potential reasons for the declines did not provide a single "smoking gun" reason. The observed declines do not appear to be concentrated in any particular category but categories such as Topicals, Capsules, Tinctures & Sublinguals, and Beverages might have been impacted more. In addition, retail inventory levels and changes (either supply constraints or retailer pullbacks) do not not correlate with store level sales declines.
Another possible explanation for the slowdown in sales in the US is the reopening of the economy, which has led to less leisure time for many people. This appears to be supported by store traffic being down more than the other metrics. There is evidence of this outside of the cannabis industry, with off-premise alcohol sales, DIY, and streaming subscription services all seeing reductions in spend as consumers return spending to areas like travel and in-person entertainment.
Despite the negative news in late spring and early summer, we find that in July the trend appears to have reversed in the first half of the month. Data indicates month over month like store growth between 3.8% and 8.8% depending on the US market.
We will continue to monitor cannabis sales trends in the US and Canada, because that is one of the things we do best at Headset. Ready to track market data in real-time? Request a demo or learn more about our Insights offering here.