A Year in Review: Major cannabis trends & takeaways

The cannabis industry had quite a wild ride this past year. While it continued to grow at a steady clip, with the addition of new legal states and the continued expansion of the Californian cannabis industry, it also found itself at the center of the maelstrom of misinformation and panic that was the“Vape Crisis.” More on that in a moment.

To start things off, let’s look at how the market performed overall this year. Headset’s total market, meaning all transactions tracked via Headset software, grew from $388 million in January 2019 to $517 million in November. That’s a 33% increase in overall market size, which is remarkable fora year in which no new states joined the legal cannabis market. By extension, it shouldn’t be much of a surprise that California, still the newest market, was responsible for most of that growth.

Looking at California more closely, we can see that their growing market was thanks in no small part to simple maturity. In 2018, regulatory issues abounded, with many businesses facing difficulty making the transition from medical to recreational cannabis sales. Some went so far as to describe the July 1 compliance deadline for the state’s new emergency regulations as an “extinction event.” However, that didn’t come to pass. Our data show California’s legal market making up nearly half of the total 2019 market, at around $250 million.

Diving into the other states, Colorado, the oldest legal market, had the next best performance. California’s growth in average daily sales was 66%, far and away the highest, but for a market that one would expect to be as tapped out as Colorado’s, 34% is not bad at all. Nevada, somewhat surprisingly, didn’t expand much, seeing only 15% growth, while Washington lingered at only 14%. However, at the end of the day we’re talking about growth here, so the only numbers that should be troubling are negative ones. Overall, the market is performing well, and even states that have enjoyed nearly six years of legal sales are gaining ground.

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Growth is always good news, but the year did have some bad news. Manufacturers of Vapor Pens, a category everyone had high hopes for, found themselves embroiled in a public relations crisis pretty much entirely out of their hands, decimating their sales in a period of mere months. And while the news cycle has largely moved on from the so-called “Vape Crisis,” consumers have not. Sales for Vapor Pens spent the rest of the year far, far below previous levels.

From early in August 2019, when news of the vaping-related illness first broke, to mid-September, when stories started to trickle off, the Vapor Pens category went from 25% total market share to 19%. After that, it fell a few points more, and basically stayed stuck at around 18% for the rest of the year.

However, while the Vape Crisis shattered consumer trust in cartridges, it’s not like it made all those previously pot-loving people stop wanting to consume cannabis. Looking at sales data for categories that could be described as good replacements for Vapor Pens — namely Edibles and Pre-Rolls, as those categories contain plenty of discreet, single-use items — we see that consumers did, to some extent, take their business elsewhere.

Both categories saw market share growth in the exact same period that Vapor Pens’ market share was shrinking, with Edibles going from 10.5% to12% by the end of the year, and Pre-Rolls going from 9% to 10%. While it doesn’t add up to an even exchange, the timing of this uptick is a little too spot on to deny a connection.

While the year was, in the aggregate, a good one for the cannabis industry, there were definitely winners and losers. Going into 2020, we’ll see if the Vape Crisis is a death sentence for the e-cigarette and cannabis vapor pen industry, or just a speed bump. With strong messaging around purity and product safety, it’s not inconceivable that legal cannabis manufacturers could gain back some of that lost market share. Dispelling disinformation, once it’s lodged in public consciousness, does take a lot of time though.

Either way, 2020 is sure to be an interesting year. Canada’s“Cannabis 2.0,” as the regulatory framework allowing for the sale of Edibles and other cannabis derivatives, including Concentrates and Beverages, will see its first products to market in February of this year. And Illinois, which legalized adult-use recreational cannabis in June of 2019, saw its first legal sales on New Year’s Day 2020. The state’s 37 dispensaries sold $11 million worth of cannabis in just one week, so the state could certainly emerge as a major market. But while we’re all about the data here at Headset, it’s also worth noting that Governor J.B. Pritzker celebrated the new year by pardoning 11,000 cannabis convictions. Safe to say 2020 is starting off on the right foot!