After a successful exit from their cannabis supersite, Leafly, founders Scott Vickers, Brian Wansolich and Cy Scott were looking for a new challenge. The Orange County, Calif., engineers, known for aggregating vast amounts of data, were hearing the same questions again and again: Which weed brands are doing well? What kind of products are really excelling in the market? What’s resonating with consumers?
“People were trying to determine if they should jump into new categories and new product formats,” says Scott. Like other consumer packaged-goods companies, they “needed market data to drive decisions. That was really the motivation for us to start Headset.”
Their new company provides market intelligence sourced from dispensaries and retailers in most U.S. legal states and Canada. For example, if you want to know the best-selling flower in Colorado or the top five edible brands in California, Headset’s software will tell you.
So what does their data show about broader industry trends — and particularly, the wants and needs of cannabis’s most active consumer groups? Here’s what Scott shared.
About 50 percent of market share is going to millennials [ages 23 to 39], with Generation X and baby boomers [ages 40 to 75] at about 24 percent. Those groups are bookended by Generation Z [teens and early 20s] and the Silent Generation [75 on up], which is also coming into the market.
What formats do millennials prefer?
Millennials seem to be buying the largest percentage of the pre-roll category, purchasing a lot of single pre-rolls and also concentrates. Some of our assumptions around that are related to pre-rolls being a relatively inexpensive product. Millennials are famously known for not having the kind of income other generations might have. And you can buy a single-pack pre-roll for pretty cheap. On the concentrate side, I think it just goes to the higher-potency products, which is very different than you’d see out of Generation X or baby boomers, who are looking for something that might not be as psychoactive.
Edibles are probably the thing millennials purchase the least. Less than 10 percent of millennial sales are going to edibles. With other demos, you see that number above 10 percent.
It could be price point. It could be format and packaging. We also see millennials having the highest trial of THC-infused beverages. There are beverages that come in 100 milligrams [per serving], so maybe they are looking for the ability to drink 100 milligrams of cannabis, kind of in line with purchasing concentrates, which might be more potent than small-serving edibles.
What are the biggest pre-roll companies in California at the moment?
When we look at the last 365 days in California, Lowell Herb Co is definitely number one. Loudpack, High Grade Farms, Dime Bag, Henry’s Original, Ganja Gold, Sublime Canna, and Canndescent also do quite well.
What about vape pens? Do millennials index high for those?
Generation X actually seems to be the highest purchaser of vapor pens. What millennials are not purchasing are things like topicals, capsules, tinctures — more of the wellness products. Those seem to be resonating with the older generations — maybe because they’re less psychoactive, maybe for pain management and relief.
Account executive Russ Powden at Headset’s HQ, in Seattle. The company sifts through mountains of market intelligence from dispensaries to identify cannabis trends and insights.
Image Credit: Courtesy of Headset
What’s the millennials’ take on CBD?
When we look at CBD-dominant products, there is a bit of a gender split. For female millennials, 7 percent of their purchases are high-CBD products. For male millennials, it’s even smaller — 4 percent. This is below the average of other generations. Often CBD-based products are more expensive, and that could be partly why they’re purchasing less of it.
What do millennials think about flower?
The flower market category continues to decline as a percentage of overall sales. Dollar sales of everything keeps going up. More and more people are buying cannabis, and more and more products are available, so the markets are climbing, but as far as percentage of sales going to flower, it’s getting a bit smaller. Every new market starts out at about 80 percent of sales going to flower because there’s no other format available. When we look at the Canada market, for instance, they don’t sell much outside of flower products. They sell some oil and capsules, but they don’t sell vapor pens. So it’s about 80 percent flower sales in that market right now, and the same could be said for California and Washington, but it gets much smaller over time.
Are you seeing brand loyalty this early in the game?
We’re definitely starting to see it. I think the sales trends are a combination of loyalty and exposure — essentially, in how many locations is your product available?
We find that the [brands] that have the largest distribution with a consistent product at a reasonable price seem to sell really well, but the shelf space is getting crowded and consumers are getting smarter. In a market like Colorado or Washington, where it’s been in operation for well over four years at this point, people are starting to look for brands. In a market like California, that’s definitely happening, just like with any CPG [consumer packaged goods] industry, [where] people go to the store to buy beer or what have you and are often very brand-driven. We expect cannabis to be the same.
What do you think makes these brands stand out?
In traditional [categories] like alcohol, a lot of brand building is driven by marketing and positioning — how people perceive a product and how it might resonate with their belief structure. That’s pretty challenging in cannabis because of the marketing limitations we have. So I think it’s more about pricing and consistency, and having good packaging and positioning at the store.
Also, it matters how the retailers talk about you. How the budtenders articulate your brand is paramount to your success. Hopefully you’d want to be talked about in a consistent manner across all the different stores. That really resonates with the consumer because they need to know: What is this product all about? Why is this one different than that one, given its similar price and format? What am I going to get here?
Where do you see opportunities in the millennial market?
Based on their purchasing behavior, I think it’s continuing to push where they are already buying — like pre-rolls. We’re seeing a variety of different pre-roll types. You’re getting the more connoisseur type. They go beyond just the flower. You’re starting to see wax-dipped pre-rolls, which have more potency. If you look at developing products in that format and keep the price pretty low, like single-serving size that’s more affordable for the millennials, I think that’s an opportunity to crack this market.