The cannabis consumer has spoken with their wallets and what they want is affordable marijuana with high THC content.
In recent years, a string of marijuana companies has rushed to establish top-tier, premium cannabis products on dispensary shelves. The belief was that consumers would gravitate towards luxurious cannabis goods, much in the same way as craft beer and aged whiskey dominate a specific foothold within the spirits industry. This would be especially true for older crowds and newcomers, who would buy top-of-the-line weed to assuage any concern about this brave new world of marijuana.
Some companies even believed a demand would exist for $100 marijuana grams. That isn’t happening, not yet anyways. Since the Canadian cannabis market opened last summer, customers have gravitated toward cheaper cannabis goods and mid-to-high tier goods have lost their market share.
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Aurora Cannabis CFO Glen Ibbott said on a conference call last week that cheap weed accounted for only 2% of the Canadian cannabis market last summer. That number has now jumped at 17%, with cheap marijuana qualifying as anything less than C$9, which is $6.79 in U.S. dollars. In the same time span, premium marijuana has dropped from a market share in the mid-30s to just 17%.
That badly hurt Aurora Cannabis, which focused on selling premium product. The company posted a $1 billion number in quarterly losses and saw its stock prices drop by 80% in the last 12 months. Aurora CEO Terry Booth announced he would step down, and the company has announced a sweeping cost-cutting plan. As you might expect, Aurora revealed this week it would launch a cheaper marijuana called The Daily Special.
The cannabis consumer has spoken with their wallets and what they want is affordable marijuana with high THC content. In other words, people want big highs with low costs. While PI Financial analyst Jason Zandberg told MarketWatch he expected the market would eventually demand for such product, many executives and insiders were caught off guard that it would happen this soon.
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“Clearly, there is more production of cannabis than demand, but I didn’t expect downward pricing pressure for weed this soon, just over a year into the legal market,” Zandberg said.
