CANNAINVESTOR Magazine November / December 2016 - Page 126

When states legalize cannabis, flower at first dominates sales. The plant itself continues to lead as states enter their second and third year of legalization, but flower's reign weakens as more companies emerge that manufacture things like marijuana chocolate bars and beverages, salves and balms, and concentrates.

In Colorado, Washington and Oregon, concentrates quickly established itself as an exceptionally fast-growing cannabis category, with market share second only to flower. Between all of the medical and recreational channels in the three states, concentrates so far in 2016 captures 21 percent of market share and flower commands 59 percent of the cannabis marketplace. In Colorado, the state with the longest history of legal recreational cannabis sales, concentrates holds the highest percentage of market share between medical and recreational channels — 23 percent. In Washington, market share is 20 percent, and in Oregon it sits at 14 percent between the state's two channels.

The popularity of concentrates — a range of styles of concentrated cannabis that exhibit high percentages of THC and, depending upon how they are manufactured, take different forms, ranging from brittle to pliable and soft to liquid — is of immense interest to entrepreneurs. But when it comes to concentrates, not all varieties are of equal interest to consumers. And marijuana shoppers in Colorado, Washington and Oregon prefer different concentrates — at least so far.

Consider shatter, a type of concentrate that, per its name, is sold as small, brittle flakes; one of shatter's advantages is it showcases excellent flavors. In Colorado, shatter captures 25 percent of the concentrates market in the combined adult-use and medical channels, followed by pre-filled cartridges (24 percent) and wax (16 percent). But between Oregon's two markets, it stands a distant third place, with the market leader pre-filled cartridges at 40 percent far outperforming shatter, tied at 11 percent with oil (which only registers 5 percent in Colorado). In Washington, shatter at 8 percent is far behind pre-filled cartridges (34 percent), as well as wax (17 percent) and oil (11 percent).

Colorado's status as a concentrate outlier, with shatter instead of pre-filled cartridges ruling the market, may shift soon. Pre-filled cartridges — vials of viscous concentrate that fit into portable pens that vaporize the THC — already lead market share in Colorado's robust adult-use market, with 33 percent of sales (representing $37.05 million of the overall $112.4 million adult-use concentrates market in 2016). It is only because of Colorado's medical market, where shatter grabs 28 percent of the market ($23.4 million in sales carved out of the overall medical concentrate market's $83.21 million in sales) that pre-filled cartridges do not — yet — eclipse shatter between the two channels for cannabis sales. In Colorado's medical channel, pre-filled cartridges have not fully captivated consumers, clocking $9.86 million in sales and 12 percent of the market so far in 2016 and behind shatter and live resin (14 percent), and nearly tied with budder, at 11 percent.

126