Making Sense of the COVID Cannabis Surge

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How can we make sense of the COVID Cannabis surge? As reported previously, a pandemic-induced cannabis bubble has now burst. Total market cannabis sales are now in decline but what’s happened is a return to pre-pandemic market conditions.

We can answer some pressing questions using real-time sales reporting from Headset Insight. Namely, did we see a more significant decline in transaction volume or transaction size?

Which products fared best and worst during the last couple of years? And which customers are now buying less cannabis than they were in 2020 and 2021.

Digging into these underlying issues reveals patterns we can discern from the data. We know the COVID cannabis surge was real, so let’s discuss the details.

Decreases in Cannabis Transactions 

COVID Cannabis Surge

This graph shows the monthly transaction volume of the median store in four markets (California, Colorado, Oregon and Washington). Previously, Headset marked mid-summer as the turning point for when sales begin to stagnate and decline.

You can see that point marked by a grey dotted line.

Transaction volumes have been steadily declining. For example, the California median store transaction volume dropped from 7,309 transactions in July 2021 to 6,106 transactions in July 2022.

COVID Cannabis Surge – Shrinking Baskets

COVID Cannabis Surge

Again we look at the median store in each of these US cannabis markets. This time we’re looking at the average transaction or basket size trend. (Basket size is a measurement describing how many items a consumer purchases in a single transaction).

Similar to the previous graph, there is a steady decline across all markets. Consumers are spending less overall on each trip to the cannabis store.

The average basket size at a median Colorado store in July 2021 was $59.73.

In July 2022, it was $55.21.

This means that the COVID cannabis surge was indeed a pandemic-related consumer response.

Transaction volume vs. Transaction size 

COVID Cannabis Surge

Decreasing transaction volume and shrinking baskets have both contributed to overall sales declines. But which one is causing the most impact?

The chart above compares relative declines in median store transaction volume and average basket size by state from July 2021 to July 2022.

In every market, the relative decrease in transaction volume is more significant than the relative decrease in basket size.

This decrease implies that the reduced number of transactions has had a more significant effect on sales than shrinking baskets.

Of course, this depends on the market. In Colorado, for example, the retraction in overall transaction volume is nearly double the decline in basket size. Whereas, in Washington, these two data points are almost identical.

Category performance in California 

It can be tricky discovering sales trends among the different product categories. Diving into the data, we can see what’s contributed to recent downturns in top-line sales.

The chart above shows the year-over-year sales growth of different products in California. It then compares it to total market growth over the same period.

Flower, of course, performed well. From July 2019 to July 2020, flower sales growth rates were nearly double of the overall California market. This is the COVID cannabis surge in action.

Drinks and vape pens have maintained positive growth while topical and tinctures sales are decreasing.

Category Performance in Washington 

Washington’s cannabis market performed similarly to California’s. Flower saw a massive increase in early 2020, a poster child for the COVID cannabis surge.

Flower is now correcting while drinks and vapes remain consistent. Like California, tinctures are on the decline. But, unlike California, the topical category saw positive growth. 

Trends among top cannabis spenders before and after the COVID Cannabis surge

Who helped create the COVID cannabis surge? Top cannabis consumers spend more than average and contribute a disproportionate percentage of revenue to the cannabis industry.

This graph shows the median total spending of the top 10% of cannabis consumers over three months (May to July) over the past four years.

These customers have the greatest (relative) influence on top-line sales. For example, the top 10% in California have accounted for 30% of all cannabis sales this year.

On average, the top 10% also spent $100 more during the COVID cannabis surge than in 2019.

This trend shows that the top-tier cannabis buyers were influencing the COVID cannabis surge by purchasing more cannabis than average. This trend now appears to be in decline.

Cannabis customers compared 

The graph above compares the top 10% with the rest of the group. Here, we can reach the 10% with the bottom 90% and how it relates to the COVID cannabis surge.

In 2020, all cannabis consumers increased their spending. This is what we mean by the COVID cannabis surge. 90% of customers in California increased their spending just as much as the top 10% did.

In 2021, all groups had flat year-over-year growth in spending.

As the COVID cannabis surge officially ended by 2022, the differences between these two customer types are apparent.

In both Washington and California, the summer spending of the median customer in the top 10% decreased significantly more than that of the median customer in the bottom 90%.

Cannabis’ biggest spenders are tightening their belts. This is causing top-line market retractions.

COVID Cannabis surge broken down by age

All age groups follow a similar pattern. Generation X had the highest spending levels, while Millennials still contributed the most considerable total revenue.

Year over year growth in median customer spending during the May-June period is graphed above. During the 2020 COVID cannabis surge, younger customers spent more. This may be because older generations were less willing to venture outside the house and visit a retail shop.

Median customer spending held flat in 2021 across all age groups.

So far in 2022, most age groups have averaged similar decreases in spending. One exception is Generation Z which has the most significant reduction in total spending at -11%.

This data suggests that the youngest customers were also fuelling the COVID cannabis surge in early 2020.

In Summary

The COVID Cannabis surge is over. We see this with decreases in both transaction volume and basket size. However, reductions in transaction volume have a greater influence.

Flower remains the most volatile, with massive surges early in the pandemic with significant corrections in 2022.

Beverages and vape products have remained the most consistent during the rise and fall of the COVID cannabis surge.

The top 10% of cannabis consumers increased their spending in 2022 but decreased their spending in 2022 more than the bottom 90% of customers.

Younger customers were also responsible for the COVID cannabis surge. But customers across all age groups are now reducing their spending at more or less equal rates.


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