Oct 21, 2024
Premium marijuana brands report steady sales despite shaky economy
In a volatile economy, luxury goods often take a hit.
But a surprising trend has emerged in the cannabis industry: Many premium brands are not only surviving but thriving.
Despite economic uncertainty, luxury marijuana products continue to attract discerning consumers seeking premium experiences.
“Some consumers want the best in any category – cannabis or not,” said Dana Mason, vice president of brand marketing at Chicago-based Cresco Labs, producer of high-end brands Mindy’s Edibles and FloraCal.
“There are people who appreciate premium products and are willing to pay more.
“Luxury brands are targeting a different consumer group than those looking for that everyday value.”
Exclusivity – characterized by high price points and limited availability – is the key element of luxury goods, cannabis executives say.
“You can’t have a premium product at a value price, otherwise, that product isn’t going to be premium for long,” said Nick Ortega, co-founder and CEO of Southern California-based flower and pre-rolls brand Claybourne Co.
Claybourne’s Ortega said it’s tough to gauge how premium brands are doing based on reports from companies that collect and analyze cannabis industry data.
The problem in California, where Claybourne is based, is that many brands give high-end flower and pre-rolls to retailers, which artificially inflates sales figures in the data reports, he said.
“That’s the biggest challenge we face as a brand: How much are the Joneses giving away for free, and how much you want to keep up with the Joneses?”
“When you see crazy market share increases, there’s typically a hidden reason,” Ortega added.
Claybourne strives to be the most expensive brand in the California market.
As a result, the company avoids selling Claybourne products to stores in areas where the clientele is unlikely to pay a premium price.
“You have to know your consumer,” Ortega said.
“There are shops that will never carry our Gold Cuts flower, but those same shops carry Frosty Flyers (Claybourne’s pre-rolls brand) because they’re close in price to other pre-rolls; they’re the highest price, but it’s not as big of a spread.
“You can’t be targeting a budget consumer with a Cadillac.”
Ortega said the key to getting on store shelves as a premium brand is proving to retailers that a high-end product can make them more money than other products.
“If they’re smart, retailers want to sell high-priced goods,” Ortega said.
“The race to the bottom also affects the retailers.”
Pre-roll sales have skyrocketed in recent years, jumping 271% from $71.4 million in January 2020 to $265 million in July 2024, in the markets tracked by Seattle-based cannabis industry data analytics firm Headset.
Chris Louie, co-founder and CEO of Made in Xiaolin, said getting his Colorado-based infused pre-rolls company off the ground was an uphill battle that leveled out in 2020, when cannabis was deemed an essential industry during the COVID-19 pandemic.
Made in Xiaolin doesn’t just use premium cannabis in its pre-rolls: Each creation is a work of art.
The Knife, for example, features 2 grams of flower and has an estimated lit time of 20-30 minutes, while the brand’s White Rose contains 0.4 grams of flower and has a lit time of 10 minutes.
“It’s a very subculture type of thing,” Louie said.
“We love to be creative with our products and really showcase craftsmanship.”
Although Made in Xiaolin’s sales started dropping at the end of 2021 and into 2022, Louie said the brand has been picking up sales in New York's growing marijuana market.
He said the company’s novelty pre-rolls are well-suited for a market such as New York, where people constantly seek new and unique products.
“We sold out for a few weeks while we were trying to get things into production and online out there,” Louie said.
“It’s about more than the product: It’s about the whole experience from buying it to unboxing it to sharing it and experiencing it and lighting it up.”
Cresco Labs produces Mindy’s Edibles, a product line created by James Beard award-winning chef Mindy Segal.
Cresco’s Mason said that while some marijuana categories have been affected by price compression in states such as Illinois and Michigan, edibles sales have been steady.
“Cannabis really proved itself during COVID to be a strong and consistent consumer category,” she said.
“We’ve seen that coming out of the pandemic as well.”
Mason compared marijuana consumers to wine connoisseurs and said both value and luxury brands, such as Mindy’s Edibles, are holding steady.
“Although there’s always going to be the consumer that wants the boxed wine,” she said, “there’s also the shopper that is looking for variety and the bottle.
“Making sure we have both products to meet their needs continues to be important today.”
Wana Brands President Joe Hodas, who prefers to use the term premium rather than luxury to describe the company’s infused edibles, said his company’s mission is to bring Wana products to as many people as possible.
But the Colorado-based brand won’t stay in a market where its products aren’t performing well.
Wana pulled out of California two years ago because it couldn’t compete with the illicit market and brands already entrenched in the state.
“It’s just an expensive market to be in,” Hodas said.
“You have to spend a ton on marketing; if you have a low budget, you’re shouting into a wall.”
Wana also exited the price-compressed Oregon market nearly two years ago.
While Wana’s revenue is rising in Michigan, it must sell double the number of units as in other markets because of the severe price compression the market has experienced in recent years.
As sales of THC-infused beverages have increased over the past five years, pricing has leveled off, according to Headset.
Retailers sold $6.1 million worth of THC-infused beverages in January 2020, in the markets tracked by Headset, and category sales have grown steadily to reach $23.2 million in July.
Beverages sold for 18 cents per milligram in January 2020, dropping to 10 cents per milligram by July 2024.
Jake Bullock and Luke Anderson created THC-infused beverage company Cann in 2019, when they were trying to cut back on alcohol but wanted to stay socially engaged with their friends.
“Our idea was this is an alcohol alternative,” Bullock said.
“We really believe this should be sold alongside alcohol.”
When the California-based company started, Cann beverages could be sold only in regulated marijuana stores.
Then, on July 1, 2022, Minnesota started allowing sales of hemp-derived THC beverages in liquor stores; other states soon followed suit.
“We’re really seeing a lot of growth coming from those new markets,” Bullock said.
“In the interim period, it’s providing a new model for states on how to improve THC access.”
In Connecticut, some Cann products are available in dispensaries, liquor stores and through e-commerce – and sales at each outlet are increasing, according to Bullock.
“That tells us that dispensaries are an imperfect way to gain access to these low-potency drinks,” he said.
“Dispensaries are trying to get a good value for their dollar.”
While marijuana businesses including Cann offer both hemp-derived THC beverages and drinks containing THC from marijuana, other infused-beverage manufacturers prefer to stick to the hemp market.
Kristin and Ben Kennedy created Fable after hearing repeatedly from their friends that nonalcoholic beverages are “nice, but what’s the point?”
They knew cannabis-infused beverages would be an attractive alternative.
The Kennedys’ line of infused beverages debuted in January 2022 in 100 California dispensaries.
Their Denver-based company sold just $25,000 of product during their first year in the saturated California market before pivoting to hemp-derived THC drinks, starting in Minnesota, and sales hit $1 million in fewer than 12 months.
Ben Kennedy said Minnesota wine stores are reporting that 15% of their total revenue is derived from THC-infused beverages.
“There’s a misunderstanding between hemp and marijuana,” Kennedy said.
“If we just looked at this as cannabis, we’d understand that flower, which is bought on cost and strength, should remain in dispensaries.
“Beverages don’t have a home in dispensaries, it doesn’t work.”
Headset tracks sales that occur only in medical marijuana dispensaries and adult-use stores, so Cann and Fable products sold in liquor stores and other retail outlets are not included in the data.