Cannabis Topicals: An analysis of category trends & data

Introduction

Although Topicals make up a very small percentage of total cannabis sales, their association with wellness products drives unique industry trends compared to larger product categories. Topicals are unlike other cannabis products in many ways, and so are the consumers that rely on these products for pain relief and relaxation. To help you better understand what’s driving demand for Topicals today, this report drills into category insights, explores market share, changes in pricing, various segments, and demographic groups for both US and Canadian markets.

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Executive summary

Topicals make up less than 1% of total cannabis sales in both the US and Canada, and popularity is slowly decreasing in both countries. Average item prices (AIP) for Topicals in the US have held steady at around $26-$27. Prices of Topicals in Canada, on the other hand, have been more volatile. In August for example, Topical products in Canada had an AIP of $33.39, which is a 12.3% decrease from their $38.08 AIP at the start of 2021.

When we look at segments within the Topical category, we find that consumers in the US overwhelmingly prefer Lotion, Salves, Gels, and Creams while Canada sees more diversity in segment sales. Examining different demographic preferences, we find that Female consumers and consumers in older age groups vastly prefer Topicals over younger Male counterparts.

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Methodology

Data for this report comes from real-time sales reporting by participating cannabis retailers via their point-of-sale systems, which are linked to Headset’s business intelligence software. 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.

In this report we examine sales in markets where Headset provides Insights data. This includes CA, CO, WA, NV, OR, MA, MD, MI, AZ, FL, IL in the US and AB, ON, BC, SK in Canada. We present all data in local currency and do not make adjustments for currency fluctuations. Topicals are defined as products which are not inhalable and are not meant for oral ingestion. This includes products like lotions, patches, lubes, and suppositories.

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Market share of Topicals in US and Canada

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Let’s first take a look at the market share of Topicals compared to other cannabis product categories. Topical products account for a very small share of total cannabis sales in both the US and Canada. In Canada, Topicals made up 0.5% of total cannabis sales from January through August 2022. This is a 9% decrease in market share over the same period in 2021. In the US from January - August 2022, Topicals accounted for 0.7% of total cannabis sales, a 3.4% reduction in total market share year over year.

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Market share of Topicals over time

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Here, we look at market share over time. In the US, Topicals reached a top market share of 1.89% in 2018. Since then, market share has been decreasing and has leveled off to about 0.7%. In Canada, Topicals reached a peak market share of 0.85% in December 2021, which decreased to 0.52% in August of this year.

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Market share of cannabis Topicals in states & provinces

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Across Canada, the popularity of Topicals differs from province to province. Alberta has the highest share to Topicals of any province at 2.7%, which is nearly five times the national average. Ontario and British Columbia also have higher shares to Topicals than the national average, which is being lowered by Saskatchewan where Topicals make up 0.1% of all cannabis sales.

In the US, Florida has the highest share of total sales attributed to Topicals (1.3%). Florida is the largest medical cannabis market in the country, and Topicals are typically considered wellness products that are targeted to more medicinal users. This may be why Topicals are more popular in the Florida market. However Topical share is also high in Colorado, an established adult-use market.

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Price of cannabis Topicals in Canada

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In this graph, we look at the average item price (AIP) of Topicals since 2021 in Canada. Prices for Topical products are comparable between the US and Canada, with the AIP in the US at $26.70 and $31.25 ($25.71 USD) in Canada. Their price stability, however, has differed over the past 20 months. In Canada, the price of Topicals fell throughout much of 2021. In August of 2022, Topical products in Canada had an AIP of $33.39, which is a 12.3% decrease from the start of 2021 when AIP was $38.08. However, after hitting an 18-month low of $28.44 in December 2021, AIP has gradually rebounded 11% in 2022 and continues a modest upward trend.

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Price of cannabis Topicals in the US

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In the US, the average price of Topical products has been stable around $26-$27 since the beginning of 2020. Not much has changed so far in 2022 with an AIP of $27.24 in August, which is a 1.4% increase from January of this year.

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Segment shares of Topicals in the US & Canada

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Next let’s explore segments within the Topicals category. Lotions, Salves, Gels, and Creams have long been the most popular segment of Topical products. In Canada, this segment makes up nearly 60% of total sales while in the US, this segment makes up 74.6% of all Topical sales. Canadian consumers also have a great appreciation for Bath Salts, Soaks, and Scrubs, which attract one of every five dollars spent on Topicals in Canada.

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Topicals containing CBD

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Now let’s turn our attention to CBD products in the Topical category, which are common in both the US and Canada. In Canada, 92.7% of products contain CBD either exclusively or mixed with THC or other cannabinoids. CBD-only products can only be sold in cannabis stores in Canada, which is partially represented here. In the US, 79.4% of Topical products contain some amount of CBD.

Products with a 1:1 ratio of THC and CBD are popular in both the US and Canada. However, consumers in the US show preference for CBD products that contain more THC. The THC Heavy product ratio, which contains 300mg of THC or more, is quite popular in the US and makes up nearly 1/3 of Topical sales. This is in contrast to the Canadian market, where only 8.9% of all Canadian Topical sales come from this product ratio.

Products that contain THC and CBD in a 1:1 ratio account for 34.3% of sales in Canada. Products with ‘Pure CBD’ follow as a close second, making up 30.9% of sales, which can be attributed to the structure and regulation of the CBD industry in Canada. In comparison, this product classification only makes up 7.1% of sales in the US.

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Demographic preferences for Topicals in the US

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In this final analysis, let’s see how different age groups are shopping for Topicals in the US. This graph compares the proportion of total market sales in the US by demographic group to the proportion of Topical sales attributed to each demographic group. The index compares these values. If the index for a demographic group is greater than 100, then that group spends relatively more on Topicals. If the index is lower than 100, then that group spends relatively less.

Female consumers and shoppers in older generations show an overwhelming preference for Topicals. For example, Female consumers in the Baby Boomer age group account for 16.1% of all Topical sales but only 4.6% of the total cannabis market. In contrast, Female consumers in the Generation Z age group only contribute 3.6% of Topical sales. This is likely because Topicals are often considered wellness products and can be appealing to older generations who are looking for a more holistic approach to address their health needs.

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Conclusion

While some categories like Topicals and Flower are slowly shrinking, other categories such as Pre-Rolls and Beverages are gaining market share. Category trends are dynamic and always changing, which is why it is crucial to monitor market data in order to make smart decisions for your business. Need help finding opportunities in the cannabis industry? Sign up for a demo of Headset tools today to learn how you can stay ahead of the competition.

Key takeaways

• Market share of Topicals is less than 0.1% in both the US and Canada and is steadily decreasing in both countries.
• Lotion, Salves, Gels, and Creams is the dominant Topicals segment in the US with 74.6% of all Topical sales. The Canada market sees more diversity in segment sales share with categories like Bath Salts, Soaks and Scrubs capturing one-fifth of Topical sales.
• The average price of Topical products have remained fairly stable in the US. The Canadian market has been experiencing more turbulent pricing patterns, which makes sense since Topicals are a newer category in Canada.
• Large package sizes of Topicals containing over 300mg of THC are leading the US market with 34.5% of Topical sales. In Canada this same package size only makes up 7.5% of sales, but products without THC make up 31% of Topical sales.
• Female consumers and consumers in older age groups vastly prefer Topicals over younger Male counterparts.

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