Food for Thought: Edibles Enjoy Solid Sales, Steady Growth

Executive summary

This report examines the Edibles category in depth. It looks at how the category has developed since the first legal sales, seasonal trends, popular segments within the category, price data, and more. It also examines and compares the market share vs total sales of Edibles. It will be interesting to cannabis retailers, anyone who manufactures products that fall into this category, and anyone curious about consumer spending patterns in cannabis.

Introduction

The Edibles category is an interesting one, because Edibles were very popular before legalization — Alice B. Toklas’ recipe for pot brownies was published in 1954, and they’ve enjoyed a place in popular culture ever since — which is not true of some of the other non-inhalable categories. Thus, Edibles have enjoyed a receptive customer base since the beginning of legalization, and trends suggest that their popularity will continue to grow as legalization sweeps the nation.

For one, as more non-traditional cannabis consumers warm to the idea of legal weed, the demand for non-inhalable products will surely rise. Some of this will be absorbed by the Vapor Pens market, as vaping technology is widely regarded as safer than smoking, but plenty of people will turn to things like Edibles, Beverages, and other ingested forms of cannabis to avoid inhalation altogether. While the high is significantly different — Edibles come on slowly and deliver a high that usually lasts much  longer — many die hard users enjoy both, and some people even prefer the slower onset.

The recreational cannabis market is relatively young, and includes some unique events, like more recent legalization campaigns in California and Nevada, but the fact that Edibles have maintained a steady market share among the chaos speaks volumes. Also, if you’ve browsed our other reports, you know that there are lots of small, new categories gaining steam, which means that Edibles are holding their own against these competitors. Overall, more cannabis of all types is being sold than ever, and the market is growing increasingly diverse, with more products and more methods of consumption than ever before.

This report demonstrates that Edibles will likely be an enduring one. In it, we look at market share by state as well as seasonal trends. You might not be surprised to learn that the winter holiday season, when Edibles make very, very popular gifts, is great for sales. We’ve also examined some state-specific regulatory issues, like the recent kerfuffle over gummy candies in Washington, giving you insight into the impact that local regulators can have on the tightly controlled cannabis industry.

Overall, there’s a lot to be gleaned from our Edibles data. As ever, state trends are the big story, and probably will be until federal legalization, but the overall bent for the category is towards growth. Or, at the very least, a sustained and significant share of an increasingly competitive marketplace.

Methodology

Data for this report comes from real-time sales reporting by participating cannabis retailers via their point-of-sale systems, which are linked up with Headset’s data analytics platform. The data included are for 2019 year-to-date, and span Colorado, Washington, Nevada, and California, except where noted. Those data are cross-referenced with our catalog of hundreds of thousands of products to provide detailed information on market trends.

Headset’s data is very reliable, as it comes digitally direct from our partner retailers. 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.

The Overall Edibles Market

Looking at the aggregated Edibles sales data might make you think that they skyrocketed in popularity between July of 2017 and January of 2018. While it’s not untrue that the demand for Edibles has grown, a lot of that has to do with Nevada and California’s legal markets coming online. We can see a small spike in July 2017 for Nevada, and a much more significant one in January 2018, for California. This is reflected in the fact that overall market share doesn’t leap up at the same times, even if it has grown slightly since the first states legalized. California coming online brought the biggest bump in market share, suggesting that Edibles are extra popular in that state, although total market share has tapered off slightly since then.

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Edible Sales by State

Bearing out the notion that Californians are into Edibles is the fact that, when the California market debuted, their Edible sales alone nearly equaled that of the other three states in our data. Nevada’s market is comparatively small, which is not surprising, as it is less established than Colorado and Washington, and far, far smaller than California’s market. Washington, it’s worth noting, is not a great state for Edible sales. Colorado has consistently outsold its fellow first adopter of legalization, in both raw volume and market share, which we’ll look at next.

Righting the Ship: Market Share by State

This market share graph might look like chaos at first glance, with Washington and Colorado slowly gaining ground, Nevada shooting up, and California dropping off a cliff. However, if you consider the timelines involved, and allow that Nevada could be an outlier, it makes a whole lot of sense. Washington and Colorado both saw market share drop off quickly after legalization, only to return shortly after. The return was quicker for Colorado, which makes sense, given their proclivity to Edibles. Still, the trend line for both states has steadily climbed up since then. Given how things played out in Washington and Colorado, California’s precipitous drop in July of 2018, shortly after their market got started, is less alarming. Already it appears to be stabilizing, and if the other states are any indication, it will begin to steadily climb over the coming months.

Tis the Season…For Salted Caramel Cannabis Candies\

Two trends immediately jump out in this graph: the winter holiday season is very hot for Edibles and April is very cold. This graph depicts the difference between the month over month growth of the Edibles market and the market as a whole, so if there’s a positive value, it means Edibles were selling relatively better than everything else that month. Edibles outperformed the total market by 20% in two out of the four Decembers measured here, and never less than 10%. On the other hand, they sold 4-10% worse than the total market every April. So, Easter bunnies are out, Advent calendars are in. In all seriousness though, it’s worth noting that the 4/20 holiday — a major part of stoner culture with huge increases in sales volume — seems to leave the Edible category behind. This is probably because Flower and Pre-Rolls are the dominant products on 4/20. It is traditionally a smoker’s holiday, so that makes sense. Around Christmas, sweets abound, so it is predictable that Americans who celebrate that holiday might want to give each other cookies, brownies, and candies.

Seasons Change

This graph examines the seasonal trends we saw in the previous one year over year. Looking at it, we can see that the Edibles seasonality has stayed relatively consistent over the four-year we’ve been measuring data. It should be noted that this graph and the previous do not include sales data for California, because of a significant regulatory event that made that state’s data extremely erratic. Due to new quality control and packaging regulations being introduced to the market in July 2018, there was a massive offload of product that wouldn’t meet the new requirements, which skewed the data for that state too much to be useful for examining seasonality. We see that the other, more mature, legal states all follow the aforementioned pattern of a slow April and a December rush. We can also see that March is an exceptionally good month for Edibles, along with the months of early summer.

Understanding Edibles Segments in Each State

Breaking out Edibles into segments shows us a generally similar pattern across most states. However, it also shows us that local regulations have an outsized effect on each market’s sales patterns. Namely, gummies make up the majority of Edible sales in California, Nevada, and Colorado, but only 21.9% of the market in Washington. This could be due to a number of factors, but the tumultuous regulatory environment in Washington cannot be ignored. Washington regulators, concerned about Edible products that were too appealing to children, banned gummies from the outset, then slowly became more lenient, only to then more recently announce new requirements for products, ones that many manufacturers would be hard pressed to meet. Thus, it’s understandable that gummies have much lower market share in Washington. It’s also worth noting that Chocolate is pretty much evenly popular across the states. While brownies might be the classic Edible, Chocolate is much more popular today, and seems to be a stable bet.

Parsing Out Package Sizes

The 100mg THC package size has always and continues to dominate the Edible market. Market share for 100mg edibles rose from 57% of sales in late 2015 to a massive 84% in Q3-2019. As100mg is the largest Edible package size allowed in all current legal states, it makes sense that it is the most popular, as it typically represents the best “bang for your buck” value to the customer. With this clear expansion in market share, we may be witnessing some commodification of the Edible market at this maximum package size. Of course, if this were the case, we would expect to see a decline in pricing over the same time frame. We’ll look at that next.

Is Commodity Pricing Coming?

If we only had data from Washington state, one might suspect that prices are rapidly approaching commodity price levels. However, this is not the case in other markets. Colorado’s Average Item Price for 100mg Edibles has held steady right around $18 for over three years. No obvious trend has emerged yet in California. Washington has a lower Average Item Price(AIP) than those states currently, but all three are in the same ballpark; between $14 and $18.Nevada is the main outlier, with an AIP that has always been above $20, even if it has dropped from its initial peak around $26. This, we suspect, is due to the fact that Nevada is a market primarily driven by tourism and can charge higher prices for novelty items that might not be so readily available in places like New York or Chicago. Edibles are a part of the traditional cannabis pantheon, to be sure, but that doesn’t mean they’re widely available in states where cannabis is still illegal.

Conclusion

The Edibles market is strong. While it hasn’t seen the explosive growth that some smaller categories have enjoyed, that’s likely because it began as a popular alternative to Flower and Pre-Rolls and stayed that way. Current trends suggest that will continue.

As far as which types of edibles are popular, Gummies and Chocolate seem to be the safest bets. Even in Washington, which has had regulatory issues with Gummies, they’re still one of the top categories. Consumers apparently enjoy the convenience and flavor of small, soft candies. Consumers also enjoy high doses and low prices, which is not surprising. Given the data ,a competitively priced multipack of infused gummies with 100mg total THC is likely to be a strong product.

Beyond that, it’s clear that Edibles enjoy a niche as a gift item. The data on seasonality shows that. This makes sense, as they are still something of a novelty item for many users. While plenty of people enjoy the slower onset of Edibles, they’re not the most popular consumption method for daily use. But many die-hard cannabis enthusiasts still enjoy Edibles as an aside ,and many more new users will turn to them as an alternative to smoking or vaping.

Overall, Edibles are a worthwhile market for those who are in tune with consumer trends. Manufacturing the right products in the right sizes at the right price point is key, as shown by these data. And, given California’s promising entry into the market, the category will only continue to grow.