The state of California is the largest US cannabis market by sales, eclipsing $5B in annual sales in 2021 and is on pace to do so again this year. While total market sales in California are large and noteworthy, there are quite a few nuanced sub-trends developing in the Golden State’s cannabis industry. Below, we explore how category sales patterns have shifted in California over the past year.
In this first graph, we look at the last two years of adult-use sales in California, with adult-use cannabis sales on the left y-axis and the category sales share of Flower products on the right y-axis.
While sales have been fairly flat across this time period, we can see a clear decline in the sales share of Flower products, which has accelerated in the last year. For example, if we look at the decline in Flower share from June 2020 to May 2021, we see a -3.8% decrease. When we look at the next 12 months from June 2021 to May 2022, we find a -14.3% decline in Flower share, indicating an acceleration in share reduction.
If consumers in California are dedicating less spend to Flower products, what other categories are benefiting?
To get a better understanding of the decline in Flower share, let’s look at the category sales share growth of all cannabis product categories over the same time periods (June 2020 - May 2021 and June 2021 - May 2022).
As Flower market share has decreased over the past two years, other categories such as Vapor Pens, Pre-Rolls, Edibles, and Beverages have all been growing, particularly in the last 12 months. The Pre-Roll category experienced some of the most pronounced growth, with sales share increasing 22.8% from June 2020 to May 2021 and 21.6% from June 2021 to May 2022.
Now, let’s dive into Pre-Roll baskets to understand the drivers of growth in the Pre-Roll category over the past 12 months that we discovered on the previous graph.
This graph shows the sales share of Pre-Roll products in baskets that contained a Pre-Roll item on the left y-axis, which tells us the sales share that Pre-Roll items account for within their own baskets. On the right y-axis, we see the attachment rate of Pre-Roll products and Flower products within Pre-Roll baskets. This tells us the rate at which Pre-Roll baskets include only Pre-Roll items and a Flower item in addition to a Pre-Roll item.
We can see that while the sales share of Pre-Roll products within Pre-Roll baskets has remained steady over the last 12 months (on the left y-axis), the rate at which Flower and Pre-Roll products are included in these baskets has been changing (on the right y-axis). For example over the last 12 months, the Pre-Roll Only attachment rate increased +11.7% from 47.1% to 52.6%. This means that as of May 2022, 52.6% of Pre-Roll baskets included only Pre-Roll items. Over the same time period, the attachment rate of Flower in Pre-Roll baskets has decreased -21.8% from 28% to 21.9%. This tells us that customers who buy Pre-Rolls are including fewer Flower products in their baskets, which is contributing to the overall increase in Pre-Roll sales share and the overall decrease in Flower sales share that we found earlier.
While overall market sales in California have been relatively flat over the past year, we’ve started to see some interesting trends in how sales are distributed amongst product categories. Most notably, Flower has seen a -14.3% decrease in category sales share (relative terms), in the last year. This decrease in Flower has many drivers, but the rise in Pre-Roll sales share is one of the more significant trends. This rise in Pre-Roll share can partially be attributed to Pre-Roll baskets seeing a trend in decreasing Flower attachment rate, which is offset by an increase in Pre-Roll only baskets. We’ll continue to keep a close watch over the California cannabis market as these trends develop. If you’d like to keep track of California or other legal markets, or need help assessing the opportunities in the cannabis industry, sign up for a demo of Headset.