Bob Dylan's words are a quick way to summarize my feelings post Hall of Flowers. Hall of Flowers is an-in-your face reminder of how fast this industry is changing and evolving, and that's both exciting and sobering.
Exciting because there are so many people and companies entering with new ideas and products. Sobering because California operators are navigating really tough waters.
This is why community and knowledge sharing are especially important right now, and why trade shows like Hall of Flowers are valuable. Hall of Flowers gave the Headset team an opportunity to meet with our clients and prospects, learn about their businesses and get product feedback about ours, hang out with community whether on the grass or at dinners and parties, and to get to spend time together as a team (remote work challenges!). As we enter 2022, may we embrace change, and allow ourselves to "be like a complete unknown, like a rolling stone".
California is going into its fourth year of recreational cannabis, and with the legal market being in its infancy, the industry is changing quickly and many are finding themselves in a sink or swim position. This was talked about openly at Hall of Flowers, and in partaking in these conversations, and studying the market via our Headset Insights platform, here are my key takeaways.
The beautiful booths and exhibits at the show were a clear sign how much is changing when it comes to branding and marketing, and who the bigger brands are. In our latest Cannabis Market Overview, we found that California saw 6% YoY growth in November 2021, compared to 16% YoY growth in November of 2020. Many in the industry are expressing concern about sales slumps, and we can see that growth rates aren't as strong as same time last year. This makes sense given 2020 was an outlier year as people were panic buying cannabis much like they were toilet paper.
Regardless of the state of the market or recent sales slumps, it’s clear that market leaders are developing. What I find interesting in the data is seeing a metric like Brand Concentration increase. We define Brand Concentration as the percent of the market that the top ten brands make up in terms of sales dollars. As we close out 2021, the top ten revenue ranking brands in California currently make up 30% of the states total sales: Stiiizy, Jeeter, Raw Garden, KIVA, WYLD, Heavy Hitters, CBX, Pacific Stone, Lowell, and Kanha/Sunderstorm (data is for this calendar year and brands listed in order of revenue).
With many unknowns in this upcoming year as it pertains to cannabis regulations, and more broadly, in our society and economy, it is yet to be seen how the marketplace will shift. Will we see smaller brands closing up shop, well capitalized brands owning more market share, and will there be more consolidation to which industry market share will more closely resemble traditional CPG industries?
Walking around the show floor, there were so many new brands that I didn't recognize. Looking at our Insights data, you can see how many new products are entering the market, and over the last 90 days we can see that most new products in California are within Flower, Concentrates, Pre-Rolls and Vapor Pens. Flower was the largest with 1,543 new SKUs.
With this, an increase in Flower brands was noticeable at the show. Traditionally, the majority of cultivators throughout the state have sold bulk wholesale Flower to other licensed operators like manufacturers, distributers, etc. But this year, more so than any other year, we saw the bulk wholesale market bottom out, which forced a lot of cultivators to develop consumer brands in hopes of adding retail as additional revenue channel.
My first year attending Hall of Flowers, I would explain what we do at Headset, and quite frankly, many people were confused or intimidated by the conversation. I received a lot of comments like "data is cool but I don't have time," or "that seems really complicated". This has changed drastically over the years, where now a common topic of conversation with retailers and brands has become about how much data has improved their business. I had many conversations around understanding customer loyalty and segmentation, and how using data can help better understand their customers, brand loyalty, and how people are tracking key metrics like repeat purchase rates and wallet share. This all is a sign of a maturing industry.
Cannabis is unique from other industries in that people have different connections to the plant. This is palpable at Hall of Flowers because you end up meeting people of all backgrounds and mindsets. You can hang with legacy growers, CPG executives, marketing and branding experts, activists, and influencers all in the same space.
One thing I found common to all operators, regardless of company size or license type, is how challenging of a year 2021 has been. The conference brought the community together at a time when operators are feeling particularly isolated and disheartened by the state of the industry. Although community doesn’t help address these problems specifically, it gives everybody some reassurance and common ground. They say misery loves company, but in the case of Hall of Flowers, there was a palpable sense of fraternity and celebration as we close out the year and hope for smoother sailing in 2022.
California is an incredibly exciting market to be a part of. It's not only the biggest market by a long shot (the state will bring in over $5B in adult use sales by years end), but its long standing culture, regulations and policies, and community ethos also make it unlike others. But this has also made so many differing ideologies of what cannabis can be and should be, difficult to navigate.
This opportunity is once in a lifetime, so go forth and push for what you want it to be, because "the times they are a changin'" and "the chance won't come again".