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When it comes to cannabis pricing, there’s many factors for retailers and dispensaries to consider, from the products they want to carry to their consumer demographics. That being said, when data from pricing trends and average item prices (AIP) in more established cannabis markets is available, assessments can be made to pick the right prices for specific products and for the right customers.
Financial factors
Because there is such a variety when it comes to the different kinds of products, cannabis pricing is measured differently. The prices for products like flower, concentrates, pre-rolls and vapor pens are measured per gram (vapor pen cartridges are sold in 0.5g or 1g). Alternatively, prices for edibles, beverages, capsules, topicals, tinctures and sublinguals are measured by price per milligram.
Each cannabis market has its own set of nuances that must be taken into consideration. States like Colorado, Washington, and Nevada have been part of the recreational cannabis market for longer, and their AIPs are generally more reasonable. However, California, a newer member of the recreational cannabis market, tends to have more expensive products. California and Nevada (likely due to its tourist market), have higher AIP’s across all categories. California’s AIP is $30.90, and Nevada’s is $26.94, with Colorado trailing behind at $23.95 and Washington with the distinct lowest AIP at $15.33
Cannabis pricing by product
Vapor pens are a particularly popular cannabis category. They’re not readily available on the black market, so there’s less competition for them, which translates into better margins for dispensaries. In California, the AIP for vapor pens is about $43, the highest of the four states compared. But in Washington, vape pens average $25. Vapor pens with 0.5g cartridges also tend to be more popular, simply because they’re less expensive than 1g cartridges. The lower price point appeals to Millennials who tend to want to spend less at a time.
Like vapor pens, flower and pre-rolls are also sold in grams. While the price per gram of flower has generally fallen, in California the AIP of flower is actually on the rise. This can be attributed to the fact the California cannabis market is still young, so retailers can charge more for the novelty premium. Similarly, eighths (3.5g packages of cannabis) have made their way from the street to a common amount for consumers to buy from their retailers, as opposed to buying a gram at a time. Alternatively, with Washington not only having an established cannabis market but also an incredible volume of cannabis production, both their AIP and price per gram (PPG) for flower are much lower.
Unlike inhalables, non-inhalables are measured by milligrams, as these products are generally infused with specific amounts of cannabis extract oil. The oil in these products is tested for its potency, allowing manufacturers to know how much to put in each one of them. The price trends for these products show less variance than the PPG of inhalable products.
Cannabis quality and quantity
Quality and quantity are other factors that drive cannabis pricing. Package sizes have shown to be effective in driving pot prices. Larger package sizes, or value-priced packages, are popular, especially amongst younger demographics, especially generation Z.
Another area where savings are an apparent buying factor is the quality that is expected. Pot products can be considered at value, low-priced, mid-priced, premium, and super premium levels. Value and low-priced pot products are often purchased in bulk sizes, like half ounces and quarter ounces. However, mid, premium, and super premium products are more often bought by the single gram.
Know your customers and their demographics
Knowing who shops at your store will not only give you an idea of what products to carry, but also the ideal price points. The different categories of products are especially important when considering who’s buying them. Older generations like Baby Boomers pay the highest prices for cannabis as they buy 10% more premium cannabis than the average consumer. They’re also the audience more likely to purchase single grams of premium pot. Millennials spend about 20% less than Boomers do on single gram products, but they’re more likely to buy bulk packages.
Put simply, there are a lot of different factors that must be considered when pricing cannabis, such as location, quantity, quality, and customer demographics. Finding the right balance around the right price for a product is perhaps as intricate and specific as finding the right cannabis product per customer. That being said, when taking a look at all the different market trends and all the different factors, retailers and dispensaries should be able to figure out what sort of cannabis pricing works best for them.