Jockeying for the Top Shelf when Cannabis Prices Are the Bottom Line

Every new year brings new product categories — with tiers and subtiers within each one — and this market evolution has accelerated as consumers become more familiar with flower, extracts, edibles, and everything in between.

With all the choices on dispensary menus, most pundits expected marketing and branding to become a key differentiator between top-shelf and generic products. They also expected buying decisions to be driven primarily by quality, features, benefits, and other attributes. To some extent, this has happened. Yet, looking at the current state of the market in California (still ground zero for new products and trends), it’s clear cannabis prices remain a major, if not primary, factor as both veteran and newbie consumers make their buying decisions in 2022.

Price-conscious consumers

“I definitely think people are more price-conscious now, and they’re definitely trying to get the most for their money,” said Jason Bridges, head of merchandising at Amuse, a large California cannabis distributor that represents a wide variety of brands. Given the recent nosedive in flower prices on the West Coast — with outdoor and greenhouse products dropping about 50 percent over the past year — consumers certainly have plenty of options in the budget-weed bins.

“If it’s a very high-testing flower, like more than 30 percent [THC], they’re willing to pay top dollar, but there are tons of lower-priced brands that now have higher-testing flowers too,” Bridges said. “So that’s where we’ve seen the shift in our business. Customers are definitely looking for value, and I think they’re less concerned with the brand and the marketing now.”

Earlier this year, Headset reported the popularity of cannabis product categories constantly ebbs and flows, even in mature markets. While flower’s share typically gives way to edibles and other products as new markets mature, more niche products like sublingual strips are becoming increasingly popular. Beverages and pre-rolls also are gaining market share and accounted for the biggest year-over-year growth rates in the United States last year, according to Headset. Meanwhile, tinctures and sublingual products saw 3,000-percent growth year over year in Canada.

Live resin is commanding greater market share every year, too. Initially a top-shelf, niche product for connoisseurs, live resin steadily has claimed a larger share of the vape market. BDSA estimates live resin carts represented more than one third of total vape sales in California from January 2021 to November 2021, up from 10 percent in 2019. Live resin now makes up more than three-quarters of the top-priced items in the category, according to BDSA analysts.

It appears resin products’ dynamic soon will resemble that seen in the flower market, where top-shelf products sell for two to three times the amount budget buds fetch.

“Honestly, I feel like flower has five different tiers, definitely a lot more than the other categories,” Bridges said. “With edibles, everything’s pretty much in the same price point. If you break down pre-rolls, with both singles and packs, they’re pretty much the same. Even with vape cartridges, there is a little bit of a distinction in terms of tiering, but nothing compares to flower for pricing tiers.”

Data about cannabis prices

Differentiation in cannabis prices in all categories will be a ripe topic of conversation in 2022 and beyond, as more sub-categories emerge and consumers decide which products are worth a higher price. There is evidence of this already in the edibles market, where customers are paying a premium for additional functional benefits or ingredients in gummies. Gummies containing CBD are priced about 20-percent higher, and their sales increased 40 percent between 2020 and 2021, according to BDSA. Other minor cannabinoids including CBN and CBG are rising in popularity, and companies in California are charging about 20 percent to 25 percent more for products with those cannabinoids. In fact, six of the top-selling twenty gummy products from September 2021 to November 2021 contained CBN or CBG.

Beyond product tiers and variations, brands and distributors also are starting to better understand regional preferences among consumers and build their menus based on the data they are collecting.

“Buyers are definitely more price-conscious in [northern California],” Bridges said. “We’ve definitely seen some of the less-expensive brands sell better in NorCal versus in Los Angeles, where people are willing to spend top dollar on certain things. In LA, people don’t care if an eighth is $60 to $70. If they like the brand, it tests high, and they like the packaging, they’ll just buy it. So that’s another big shift we’ve kind of made over the past few months—really looking at tiers and price points in NorCal versus SoCal.”

Of course, if we’ve learned anything about the industry as it has matured over the past five years, it’s that nothing is predictable and consumers are a mighty fickle bunch when it comes to weed. So while product and cannabis prices trends on the West Coast may turn out to be a good predictor of what to expect nationwide, don’t bet the farm on it.