EXCLUSIVE: BDSA Analyst Digs Into New Cannabis Markets, Behaviors, Trends, Social Bonds On 4/20

BDSA's Brendan Chesebro wields data to uncover the conflicts, tensions, and potential of the cannabis industry. Here he discusses changing consumer behavior and preferences; how 4/20 differs depending on the market; the importance of social consumption; and the seasonality of cannabis sales.

Emerging Markets

U.S. regions — East Coast, Midwest, and Southeast in particular — are expected to be the primary drivers of sales growth in the cannabis industry, Chesebro says.

Consumer participation in emerging markets, adult-use markets that came live in the past several months, is growing at a faster rate than ever before compared to markets like California or Colorado.

“In 2018, when California launched legal sales, consumer participation was at roughly 30% and it took years for that to grow to 47% in the spring of 2022. In contrast, New Jersey started sales in the spring of 2021 with a 31% past six-month consumer rate. Within just one year, that had grown to 46%,” Chesebro explained.

In newer markets like New Jersey and New York, consumer participation rates gradually climbed until they reached about 50%.

Consumer Preferences

Higher consumer participation is good news for the cannabis industry, but there is no one specific consumer profile, Chesebro says.

A recent BDSA survey showed:

• 72% of adult use consumers consume for recreational or social reasons
• 57% consume for health or medical reasons
• 45% consume for general quality of life reasons.

Pain relief, better sleep, and relaxation are cited as the top reasons for consuming cannabis, all related to the health and wellness segment, he explained, adding, “Even recreational consumers cite health and wellness reasons for consumption."

4/20

According to BDSA, mature markets, and inhalable products are likely to see the biggest discounts on April 20.

However, there are differences between 4/20 in emerging markets and more established mature markets. Emerging markets saw a bigger increase in total dollar sales last year compared to mature markets, which have experienced price compression in recent years.

California, for example, saw an average decrease of about 26% in retail prices between January 2022 and January 2023. Retailers in mature markets are likely to rely heavily on promotions to retain consumers, given the abundance of choices and the expansion of delivery services since the pandemic.

In contrast, most emerging markets still have higher average retail prices.

"For 420, you can focus on inhalable products like flower and pre-roll, as they see the biggest sales growth during the holiday," Chesebro said.

Seasonality

Social consumption and low prices are expected to be the main drivers of cannabis purchases on 4/20. About 44% of consumers prefer cannabis when they're at a get-together with friends.

November and December are big cannabis-buying occasions due to holidays like Thanksgiving and Christmas.

Retailers can leverage the surge in cannabis sales during 4/20 by catering to social consumption behaviors and creating products for sharing, which can also help overcome the seasonality of cannabis sales, Chesebro says.

Next Trends

Chesebro predicts:

• Infused pre-rolls will be one of the fastest-growing product categories due to convenience
• Between Q1 2021 and Q1 2023, infused pre-rolls went from making up a 39% share of total pre-roll sales to a 57% share in January 2023.
• The disposable vape category, which went from a 12% to 16% share of total vape sales in just one year, will continue to grow
• Solventless concentrates (i.e., rosin and bubble hash) will continue holding higher prices at retail despite price compression, which makes them valuable for premiumization to stay afloat in markets with slim margins.

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