Pot consumers want it by the bucket

Even as Americans fork out more cash for upscale forms of caffeine and alcohol, there is one thing they want in bulk, for cheap: marijuana.

In Tilray’s fourth-quarter call last week, CEO Irwin Simon said that Covid-19 prompted more people to shop for marijuana online, and that worked against premium brands. That contrasts with the “premiumisation” trend of consumers trading up to higher-priced products that companies including Molson Coors and Starbucks talked about in earnings calls last week.

Tilray is not the only one noticing: a Stifel survey of almost 500 marijuana users across the US and Canada came to the same conclusion.

“Yes, there will be some room for brands that differentiate themselves on quality, but this is a price-sensitive category,” Stifel analyst Andrew Carter said in a phone interview about the study, which was published last week.

Stifel’s survey found that price, potency and quantity were the top factors that influenced cannabis shoppers. Carter also observed that there was a high level of turnover in terms of which brands were most popular during Covid-19, as shown through data from cannabis data tracker Headset. This shows that consumers are still largely searching for brands and products to latch on to.

Headset analyst Cooper Ashley said there was also a trend towards buying cannabis flour in larger package sizes during the pandemic. “This indicates increased consumer price sensitivity, because the average price per gram of larger package sizes was (and still is) much lower,” Cooper said in an e-mail. “Customers were finding value by purchasing in bulk.”

Canadian consumers are more sensitive to price than their southern neighbours, Stifel’s study found. About a third of consumers said it was a top priority in Canada, versus only about a quarter in the US.

Simon was optimistic on Tilray’s call that the situation will change as Canadian Covid-19 measures ease. Over the past six months price has mattered more than marketing, since most websites list products by price, he said.

With more consumers out and about, they can “interact with bud tenders” and carry out impulse buys in stores, he said. That will cause customers to “shift away from price-based cannabis purchases”, Simon said.

Even if the trend towards low-cost pot sticks, Stifel’s report hinted at a bright side of the pandemic on the cannabis market: it has increased use, and that is likely to continue after Covid-19 ends.

Looking at Washington state, which is considered a mature market, Carter noted that cannabis was the top-ranking “expandable” consumer item — or product that consumers reached for most often when it was readily available. In that sense, according to data from Headset and IRI, marijuana outperformed cookies, chocolate and stay-at-home alcoholic drinks.

Bloomberg News. More stories like this are available on bloomberg.com