In an ever-changing cannabis market, infused products play a crucial role in any dispensary owner’s business strategy. How does one achieve the optimal mix of infused products? Nancy Whiteman, co-owner and co-founder of Wana Brands, Colorado’s No. 1 infused product manufacturer, according to BDS Analytics, recently spoke at the Dispensary: Next Conference in Denver to address that vital question.
“When I started Wana in 2010, infused products were a big yawn for many dispensaries. And no wonder—edibles accounted for maybe five percent of sales, and concentrates were barely available. It was all about flower. Fast forward seven years and infused products now account for over 40 percent of cannabis dollars in Colorado,” Whiteman explained.
A dispensary needs to appeal to loyal patrons while implementing a plan to attract new customers. With increasing competition, a proper dispensary strategy is essential.
The big picture: What is selling?
According to BDS Analytics, sales data reveals marked differentiation in product categories over the past three years. The April 2017 report found that concentrates account for 28 percent of products purchased, edibles hold 14 percent, pre-rolls own five percent, and topicals come in at one percent. As Whiteman explained, “Colorado is the most mature market for adult-use cannabis and therefore provides a better sense of where most of the other markets will head over time, assuming that the state regulations allow the full range of products.”
Whiteman then further analyzed market growth data in the categories of concentrates, edibles and topicals. First, within the concentrates category, vapes and shatter dominate with 32.8 percent and 24.35 percent of the growing market respectively, while edible hash and kief come in very low with only a .68 percent and .20 percent growth on the market.
Second, within the edibles category, candy, gummies and chocolates dominate the market. While making up a smaller piece of the pie, infused foods, tinctures and pills are categories within the edibles sector that have seen strong growth in the past year. Within the topicals category, balms/salves dominate at 33.85 percent growth, with creams and patches a close second.
Topicals may not be historically big sellers, but in regards to category growth since 2016, data demonstrates the delivery system is the fastest growing in the infused products category today, accounting for one percent of the market, with a vast 38 percent growth since April 2016.
From this analysis Whiteman advised: “You would want to look at the growth of each category to get a feel for what is up-and-coming. Sometimes you need to carry products that are not the biggest sellers simply to communicate that you are in-the-know about what is trending in the market.”
In order to choose the best dispensary mix and sell what is in demand, dispensaries should assess consumer behavior. Data from Headset, a cannabis business data agency, found very different overall consumption trends by age group of the three infused product categories, vapes, edibles and concentrates.
This market research finds that older demographics purchase more edibles than concentrates. Consumers who are 30+ use concentrates the least in comparison to edibles, vapor pens, pre-roll and flower. Consumers age 21-29 are heavily focused on smokeables with only 19 percent of their purchases going toward infused products.
There are also gender differences between product choice. “In general, women tend to favor pre-rolls and edibles a bit more than men,” Whiteman says. “And while I haven’t seen specific data on this, I would bet that if you overlaid age and gender, you would see a strong preference for edibles and vapes among women in their 30s and 40s.”
Once there is a clear understanding of today’s market, the next variable to assess is selectivity in product selection due to shelf space, or lack thereof.
“Due to shelf space issues or simply because they want to offer only the best products, I often see dispensaries limiting their options to between two to four brands per category,” Whiteman says.
A boutique dispensary with limited shelf space will likely offer a much more carefully curated selection. While a “superstore” will offer a much wider selection of products because of larger shelf space. Dispensaries typically get approached by five to six new infused products companies a week. Therefore, demand for shelf space remains consistently high.
As new brands come in, the opportunity on the shelf is limited because of the difficulty in knocking a tried-and-true industry leader off the shelves. New brands generally need to gain entry through a unique selling point or a discounted price point. Due to low barriers to entry and a highly competitive landscape, shelf space in Colorado is much tighter than in emerging markets.
Choosing the right brands
Choosing the brands to have within a dispensary is based on key criteria including product quality, product consistency, compliance, ability to stock consistently, delivery schedule, service orientation, visual look of brand, point of sale support and terms.
The key for analyzing a solid company is consistency and compliance of the brand itself. Many less desirable aspects can be missed without proper attention, such as inconsistent packaging. “If product quality and consistency are not there, then the product has no chance of being successful. I don’t care what celebrity name you put on it or how cheap it is,” Whiteman says.
A dispensary can also request samples and a visit to the brand’s production facility before putting a product on its shelves.
As the industry continues to evolve, the big picture in product demand will advance as well. Whiteman noted that keeping up with trends is essential. Her advice is to be aware of new products and innovation, take slow sellers off the shelves, and continue to experiment with new products. While there may be lead products at a dispensary, it is important to keep refining. Find a variety of ways to keep abreast of the last trends—purchase industry data, go to a conference, listen to customers, ask them for their input and talk to anyone possible. Being ahead of the competition is the ultimate goal.
“Remember that your customers do like new things,” Whiteman says. “If you want to build your reputation as a cutting-edge dispensary, you’re going to have a couple flops. If not, you’re probably not taking enough risks.”