<< Back to All NewslettersCannabis as a Consumer Staple
In what should have probably been predictable in hindsight, the U.S. cannabis industry thrived during the COVID pandemic (where it was able to stay open thanks to “essential” designations), recording significant sales growth even in “mature” adult-use markets like Washington and Oregon.
Not many people would have predicted that over a year into a pandemic cannabis sales would be up 30-60%. Maybe that’s because people are focused on looking at what’s new and different about cannabis (and there’s a lot) instead of first looking at how much cannabis behaves like products we know well, we budget for, and buy regularly - consumer staples.
Alcohol, long acknowledged as a consumer staple, saw a very similar pattern to cannabis sales during the pandemic but had the added advantage of being able to sell interstate online:
Consumer staples are widely regarded as recession-resistant - consumers cut discretionary spending first and staples last. Paradoxically, sometimes consumers spend more on consumer staples during a recession by buying more costly products. Marijuana Business Daily research shows this as well - a significant shift in adult-use markets towards more premium-priced dried cannabis.
Again, this looks a lot like consumption patterns in alcohol during the pandemic. The Financial Times research showed that premium and prestige brand alcohol spending was up in multiple categories over the last year, often overtaking standard brands’ growth.
Again: cannabis is new and different in many critical ways, but it doesn’t seem to be very different on a fundamental level from other products that consumers make a regular part of their lives (as opposed to a fad or style which comes and goes - I’m looking at you Snuggie).
This Week's News: April 9, 2021
For better or worse, high levels of THC have become a proxy for quality in many cannabis consumer’s minds. For cannabis to fetch a “premium,” or in some markets even “medium,” price it must usually be 20% or more. So, to a grower, a THC test that shows under 20% can significantly threaten margins by forcing them to discount inventory. Economists would call the 20% THC line in the sand a “sharp nonlinearity in the payoff function for competitors” which is sometimes a “key feature” in things that are “ripe for corruption.” Not unlike when researchers looking at conscription records from France in the 1800s found a “puzzling” amount of French men measuring under 1.57 meters tall when the minimum conscription height happened to be 1.57 meters. It shouldn’t be a surprise then that a recent study of Washington and Nevada lab results show an “unusual spike” in the occurrence of dried cannabis products listed as having just over 20% THC. After looking through the data, the study authors realized why this was the case: “The average THC results were higher for the labs who had their licenses suspended. But also, there’s just not the same bunching around 20% for the largest (more trustworthy) labs... The plant doesn’t care if it’s got 19.8% or 20.2% THC, but consumers seem to care and you see that in the testing results for the labs who had their licenses suspended, but not for (the other labs).”