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Pricing analysis shows similarities and
differences between cannabis and traditional CPG
markets
TORONTO, Nov. 4, 2021 /CNW/ - Through a strategic
collaboration, BDSA, Deloitte Canada, and Hifyre Inc. ("Hifyre"),
the technology subsidiary of Fire & Flower Holdings Corp.
("Fire & Flower" or the "Company") (TSX: FAF) (OTCQX: FFLWF),
today revealed a new, in-depth cannabis pricing report entitled,
"Price. It's Complicated. How Cannabis Pricing Differs From Other
Consumer Goods".
Over the last several years, the medical and adult-use cannabis
markets have seen rapid expansion across North America. The latest report from BDSA,
Deloitte Canada and Hifyre™, unveils new consumer survey data
alongside proprietary market and sales data, providing insights
into the pricing dynamics of legal cannabis markets in both
Canada and the United States and an understanding of the
similarities and differences observed across the growing cannabis
industry as compared to traditional CPG markets.
"Legal cannabis sales in Canada
and the U.S. are growing rapidly and in speaking with our customers
and examining the data, pricing is consistently indicated as a
primary factor in purchasing decisions," said Matthew Hollingshead, President of Hifyre and
Chief Innovation Officer at Fire & Flower. "As existing markets
mature and new markets come online, cannabis pricing is expected to
remain extremely volatile, though there are some similarities in
trends to traditional CPG markets like consumers willing to pay a
premium price for superior products or services."
"As the market continues to expand, understanding the role of
pricing will be imperative to maximizing potential for brands and
retailers," said Kelly Nielsen, Vice
President of Insights and Analytics at BDSA. "Market growth brings
opportunity, and we continue to see more brands and products
entering the market. At the same time, though, consumers,
manufacturers, and retailers are getting more sophisticated. In
order to be competitive, it is important to understand how pricing
plays a role in the decision-making process, and how pricing and
product benefits can be leveraged to maximize potential."
"Pricing in the cannabis market is complex and dynamic, and is
expected to remain so," said Sid
Hathiramani, Partner, Risk Advisory at Deloitte Canada.
"Business leaders must be careful when making assumptions based on
other consumer industries, and instead analyze the data closely,
stay informed on market and competitive activity, and contain costs
in order to achieve target profits. Strong, data-driven business
practices will set cannabis companies up for success."
Additional findings from the report include:
Cannabis Markets Keep Growing Up
Global legal cannabis sales reached nearly US$21.6 billion in 2020, an increase of 50% over
2019 sales of US$14.4 billion, due
largely to legalization. BDSA forecasts global cannabis sales will
continue to grow quickly, to US$62.1
billion in 2026, more than double the 2021 estimated global
sales of US$30.6 billion, at a
compound annual growth rate (CAGR) of more than 15%.
Through dispensaries alone, cannabis sales in the United States reached US$18.0 billion in 2020, and are forecasted to
reach US$24.9 billion in 2021. BDSA
expects U.S. sales to reach US$47.6
billion in 2026, the result of a CAGR of 13.8%, with growth
coming from both the opening of new markets and the expansion of
existing ones.
Price Matters
In both the United States and
Canada, consumers consistently
indicate price is a key factor in decisions about what cannabis
product to buy. The most recent BDSA Consumer Insights survey,
which polls thousands of consumers every six months, found that in
states where cannabis is legal for adult and medical use, low price
was consistently identified in the top three drivers of product
choice. More than a quarter (27%) of respondents said price
influences their purchase decision, just behind taste/flavour and
high THC content. In Canada, low
price was the leading influencer of product choice, with 34% of
consumers stating it matters the most.
In Deloitte Canada's latest study of Canadian cannabis
consumers, titled 'Seeding new opportunities: Listening to
Canada's cannabis consumer', 70%
of respondents who shop the illicit market stated that better or
lower pricing was a key reason they turned to that market.
Consumers Will Pay More for
Worthy Products
Discerning consumers will pay a premium for superior products
and/or benefits. For example, live resin sales in the 1,000-mg vape
category in California demonstrate
that consumers will pay for premium products. Live resin is
generally perceived as having a higher quality than other vape
cartridge-extraction methods, and now represents 33% of total vape
sales in the state, up from 8% in 2019.
There's similar evidence that consumers of edibles are willing
to pay a premium for unique additional ingredients in gummies. In
the California market, for
example, gummies that also contain CBD are, on average, priced 18%
higher—and their sales have increased by 41% from the second
quarter of 2020 to the second quarter of 2021. In Canada, meanwhile, craft dried flower commands
a price premium ranging from 16% to 41%, depending on its THC
level.
Brands Don't Yet Command Premium Pricing
In the US market, consumers do not name "reputation of a brand"
as a top-10 influencer of their purchasing decision. Only 18% of
those surveyed say brand reputation influences their product
choice. Survey data found that consumers are more likely to choose
a product that is either a brand they have used before (25%); would
opt for a brand that has been recommended by a friend or family
member (20%); or opt for a brand recommended by a "budtender" or
"cannista" (21%).
The Laws of Economics Are Still the Laws of Economics
The cost of goods is a key driver of wholesale pricing and
differs significantly by market. For example, in August 2021, the average price per pound of
flower in Oregon was $1,600/lb but only $900/lb in Colorado. A range of factors influence the
cost of goods, including the grow environment, cultivars, yield,
facility scale, grow medium, and trim method.
Supply and demand, as ever, are also fundamentals. In
Arizona, where sales for adult-use
cannabis began in January 2021,
shortly after it was legalized, prices in the long-legal medical
cannabis channel increased in response to the increased overall
demand.
Product supply was low when adult-use cannabis was legally made
available in Canada, which
resulted in relatively high pricing at the start. As supply
increased, the price decreased, with the average price per gram of
dried flower falling from $11.78/gm
in the first half of 2019 (shortly after legal sales began) to
$7.50/gm in the same period in
2021.
If you are interested in reviewing the full report, you may
download it here.
About Fire & Flower
Fire & Flower is a leading, technology-powered, adult-use
cannabis retailer with more than 95 corporate-owned stores in its
network. The Company leverages its wholly-owned technology
development subsidiary, Hifyre Inc., to continually advance its
proprietary retail operations model while also providing additional
independent high-margin revenue streams. Fire & Flower guides
consumers through the complex world of cannabis through
education-focused, best-in-class retailing while the
HifyreTM digital and analytics platform empowers
retailers to optimize their connections with consumers. The
Company's leadership team combines extensive experience in the
technology, cannabis and retail industries.
Through the strategic investment of Alimentation Couche-Tard
Inc. (owner of Circle K convenience stores), the Company has set
its sights on global expansion as new cannabis markets emerge and
is poised to expand into the United
States when permitted through its strategic licensing
agreement with Fire & Flower U.S. Holdings upon the occurrence
of certain changes to the cannabis regulatory regime.
Fire & Flower is a multi-banner cannabis retail operator
that owns and operates the Fire & Flower™, Friendly Stranger™,
Happy Dayz™ and Hotbox™ brands. Fire & Flower Holdings Corp.
owns all issued and outstanding shares in Fire & Flower Inc.
and Friendly Stranger Holdings Corp., licensed cannabis retailers
that own and operate cannabis retail stores in the provinces of
British Columbia, Alberta, Saskatchewan, Manitoba and Ontario, and the Yukon territory.
To learn more about Fire & Flower, visit
https://fireandflower.com.
About Hifyre
The Hifyre Digital Retail and Analytics Platform is a
proprietary ecosystem of products that includes the Spark Perks
member program, Hifyre ONE retail software platform and the Hifyre
IQ cannabis data and analytics platform.
The Hifyre platform also supports Fire & Flower's advanced
operations and provides a competitive advantage in providing a
tailored digital experience and understanding consumer behaviours
in the evolving cannabis market.
To learn more about Hifyre, visit www.hifyre.com.
About BDSA
Headquartered in Boulder,
Colorado, BDSA is the premier global cannabis market
research firm helping businesses improve revenues, reduce
innovation risk, and prioritize market expansion. The company
provides a holistic understanding of the cannabis market through
data, analytics, and insights from retail sales data, consumer
research, and market forecasts. To learn more please visit
https://bdsa.com/.
About Deloitte
Deloitte provides audit and assurance, consulting, financial
advisory, risk advisory, tax, and related services to public and
private clients spanning multiple industries. Deloitte serves four
out of five Fortune Global 500® companies through a globally
connected network of member firms in more than 150 countries and
territories bringing world class capabilities, insights, and
service to address clients' most complex business challenges.
Deloitte LLP, an Ontario limited
liability partnership, is the Canadian member firm of Deloitte
Touche Tohmatsu Limited. Deloitte refers to one or more of Deloitte
Touche Tohmatsu Limited, a UK private company limited by guarantee,
and its network of member firms, each of which is a legally
separate and independent entity. Please see
https://www.deloitte.com/about for a detailed description of the
legal structure of Deloitte Touche Tohmatsu Limited and its member
firms.
Our global Purpose is making an impact that matters. At Deloitte
Canada, that translates into building a better future by
accelerating and expanding access to knowledge. We believe we can
achieve this Purpose by living our shared values to lead the way,
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
INFORMATION
This news release contains certain forward-looking
information within the meaning of applicable Canadian securities
laws ("forward-looking statements"). All statements other than
statements of present or historical fact are forward-looking
statements. Forward-looking statements are often, but not always,
identified by the use of words such as "anticipate", "achieve",
"could", "believe", "plan", "intend", "objective", "continuous",
"ongoing", "estimate", "outlook", "expect", "project" and similar
words, including negatives thereof, suggesting future outcomes or
that certain events or conditions "may" or "will" occur. These
statements are only predictions. Forward-looking information
in this news release includes, but is not limited to, statements in
respect of the integration of PotGuide and Wikileaf into the
Company's operations and digital strategy.
Forward-looking statements are based on the opinions and
estimates of management of Fire & Flower at the date the
statements are made based on information then available to the Fire
& Flower. Various factors and assumptions are applied in
drawing conclusions or making the forecasts or projections set out
in forward-looking statements Forward-looking statements are
subject to and involve a number of known and unknown, variables,
risks and uncertainties, many of which are beyond the control of
Fire & Flower, which may cause Fire & Flower's actual
performance and results to differ materially from any projections
of future performance or results expressed or implied by such
forward-looking statements. Such factors, among other things,
include: regulatory and other approvals or consents; fluctuations
in general macroeconomic conditions; fluctuations in securities
markets; the impact of the COVID-19 pandemic; the ability of the
Company to successfully achieve its business objectives and
political and social uncertainties.
No assurance can be given that the expectations reflected in
forward-looking statements will prove to be correct. Although
the forward-looking statements contained in this news release are
based upon what management of the Company believes, or believed at
the time, to be reasonable assumptions, the Company cannot assure
shareholders that actual results will be consistent with such
forward-looking statements, as there may be other factors that
cause results not to be as anticipated, estimated or intended.
Readers should not place undue reliance on the forward-looking
statements and information contained in this news release.
Additional information regarding risks and uncertainties relating
to the Company's business are contained under the heading "Risk
Factors" in the Company's annual information form dated
April 30, 2021 and the heading "Risks
and Uncertainties" in the management discussion and analysis for
quarter ended May 1, 2021 filed on
its issuer profile on SEDAR at www.sedar.com. The forward-looking
statements contained in this new release are made as of the date of
this news release, and the Company does not undertake to update any
forward-looking statements that are contained or referenced herein,
except in accordance with applicable securities laws.
No stock exchange, securities commission or other regulatory
authority has approved or disapproved the information contained
herein.
SOURCE Fire & Flower Holdings Corp.