07.26.2016
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A Q&A With Headset: All the Data You Need to Make a Fortune in Weed

The marijuana intelligence community is here to enrich your understanding.

Cy Scott is a co-founder of cannabis-industry intelligence providers Headset.  Scott and his partners, as instigating forces behind the pioneering online strain encyclopedia Leafly, were working in the business of legal marijuana long before the cannabis industry could rightfully brand itself as emerging or even nascent.

As such, the Headset brain trust knows firsthand what it means to navigate the uncharted terrain of cannabis capitalism. This is a space where the banking industry as a whole, and individual accounting firms, shy away from working with you. Market fragmentation creates myriad regulatory nuances from state to state—and even county to county. Lingering stigma and a less-than-certain path to legalization scare off traditional venture-capital investors.

Pricing continues to drop, particularly around outdoor harvest dates. This lowering of prices across the board is great for consumers and continues to validate that the experiment is working.

A new player in the weed field needs a map, set up by those who have gone before. In a sense, Headset specializes in posting coordinates and signposts that—when read correctly—will minimize risks to the people who are normalizing marijuana purchase and consumption for the rest of us, and enable them to make informed decisions.

If you want in on the secrets contained in the Headset team's must-read market insights, scroll on.

The KIND: To what degree do the findings in Headset's 'Washington Cannabis Market Insights' apply to market trends in other recreational-legal states?

Cy Scott: You'll definitely find similar patterns in other recreational markets, and we're already seeing that in our early data as we expand our services to other states. Washington and Colorado have very similar limitations for recreational cannabis, and you are even beginning to see brand and product crossover (such as Zoots, a Washington-based company now selling in Colorado). For Oregon, with its developing recreational market, we see a subset of the same trends. For example Oregon recreational edibles have a maximum of 15mg. In Washington, just over 50 percent of units and 20 percent of dollar sales are for products with less than 15 mg, and 15-mg or less products account for just over 40 percent of all edible products sold.

The KIND: How much longer will the increase in retailers and revenues in Washington state go on? Will revenues and retailers level out? Or is a crash probable?

Cy Scott: Market share among categories is beginning to flatten, but the overall market size continues to grow. I believe we'll see consolidation of products and brands, as indicated by such a large percentage of product sales going to only a limited amount of brands.

The KIND: Is the 33 percent drop in price for ounces a typical result—so far—of a state going rec legal? And is this price drop good news for producers as well as consumers?

Cy Scott: Pricing continues to drop, particularly around outdoor harvest dates. This lowering of prices across the board is great for consumers and continues to validate that the experiment is working as it's critical to be competitive with the black market. For producers, as the market price continues to push downward, they will definitely need to be thinking long-term about investments. As a producer it's easy for pricing to go down, but not so easy for it to go up—so a race to the bottom with lower prices might not be the best thing for them.

The KIND: What are the factors behind just four processor brands dominating the state's Top 10 sales numbers?

Cy Scott: First-to-market advantages, great packaging and branding, store availability, momentum, and reputation. Some of these processors aren't even the largest "tier" and rank high in sales. Scale isn't a totally limiting factor to success at the moment, but that continues to change.

The KIND: Do you have any sense of what's driving consumers to purchase larger quantities of flower and concentrate? Has confidence in product increased? Are larger quantities more economical? Is there a greater convenience in buying bigger and less often?

Cy Scott: Continued lower pricing is a huge factor. Selling bulk at a low price often acts as a motivator to get people in your store. We often see low-priced ounces as a promotion item with the goal of getting more people in the store. Convenience is less of a factor, as purchasing cannabis is as easy as dropping by your neighborhood location, showing an ID to verify you're 21 and purchasing your product.

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