{"id":2841,"date":"2021-12-06T14:28:33","date_gmt":"2021-12-06T14:28:33","guid":{"rendered":"https:\/\/www.leafly.com\/wp-home\/?p=186977"},"modified":"2021-12-06T14:28:33","modified_gmt":"2021-12-06T14:28:33","slug":"cannabis-prices-are-we-in-a-race-to-the-bottom","status":"publish","type":"post","link":"https:\/\/thcinct.com\/?p=2841","title":{"rendered":"Cannabis prices: Are we in a race to the bottom?"},"content":{"rendered":"<p>  <title>Cannabis prices: Are we in a race to the bottom? &#8211; Leafly<\/title>     <!-- This is Index Exchange, a script\/\/3rd-party integration that interjects GAM. It needs to be 'ahead' of GTM in the DOM, which comes from Cephalopod. GTM loads GAM. This script needs to setup it's interjection stuff before GAM loads. --> <!-- End Index Exchange --> <!-- Quotes = strings--><!-- No quotes = boolean-->\t   <!-- This site is optimized with the Yoast SEO Premium plugin v17.5 (Yoast SEO v17.5) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->                  <!-- \/ Yoast SEO Premium plugin. --> <\/p>\n<p> <!-- BEGIN Sailthru Horizon Meta Information --><\/p>\n<p><!-- END Sailthru Horizon Meta Information -->  <!-- Google Publisher Tag --> <!-- End Google Publisher Tag --> <!-- Google Tag Manager --> <!-- End Google Tag Manager --> <!-- Chartbeat --> <!-- End Chartbeat --><br \/>\n <!-- Google Tag Manager (noscript) -->   <\/p>\n<div id=\"copy_clipboard_success\" class=\"fixed top-0 left-0 right-0\">\n<div class=\"bg-white p-lg container mt-xl flex justify-between elevation-low rounded\"> <span class=\"flex items-center\">     <span class=\"ml-md\">Link copied to your clipboard<\/span> <\/span> <button id=\"copy_clipboard_close_btn\">    <\/button> <\/div>\n<\/p><\/div>\n<p> <!-- End Google Tag Manager (noscript) -->   <title>Leafly<\/title>     <title>Leafly \u00ae<\/title>                                                                                                                                                                                                                                                                                                                                                                                              <title>Loading\u2026<\/title>                <\/p>\n<div class=\"bg-white fixed flex hidden inset-0 items-start md:h-auto md:items-center overflow-auto\" id=\"age-gate-container\">\n<div class=\"bg-white md:h-auto mx-auto p-lg text-sm w-full\" id=\"age-gate\">\n<p><label for=\"select-country\">Where are you from?<\/label><\/p>\n<div class=\"age-gate__info\">\n<p><label for=\"select-province\">Which part of Canada?<\/label><\/p>\n<div class=\"age-gate__age hidden\"><\/div>\n<p class=\"error error--underage hidden\">Darn! You&#8217;re not old enough to use Leafly.<\/p>\n<p class=\"error error--unavailable hidden\">Sorry, Leafly isn&#8217;t available in your location yet.<\/p>\n<\/div>\n<p class=\"hidden age-gate__loading\">Redirecting you to<span class=\"redirect-domain\"><\/span><\/p>\n<p class=\"text-xs mt-auto\">By accessing this site, you accept<br \/>\nthe <a class=\"py-xl\" data-testid=\"tou-link\" href=\"https:\/\/www.leafly.ca\/info\/terms-of-use\">Terms of Use<\/a><br \/>\nand <a class=\"py-xl\" data-testid=\"pp-link\" href=\"https:\/\/www.leafly.ca\/info\/privacy-policy\">Privacy Policy<\/a>.<\/p>\n<\/div>\n<\/div>\n<div class=\"container my-xl\">\n<div class=\"row\">\n<div class=\"col md:col-9\" id=\"article-content\">\n<p>Canada\u2019s first wave of private cannabis stores was dominated by retail spaces designed to mimic the Apple store, with iPads on gleaming white countertops to scroll through product selections. <\/p>\n<p>\u201cYou were going to have people who had never been cannabis consumers before giving up Pinot Grigio for Pink Kush,\u201d said Darren Karasiuk, the CEO of Nova Cannabis. <\/p>\n<p>There were stores designed for the aspirational consumer\u2014warm wood accents, greenery and scented candles, similar to yoga studios and spas.&nbsp;<\/p>\n<p>But this year, a new approach to cannabis retail emerged: the discount cannabis store. Walmart\u2019s of weed emerged, price matching competitors and slashing costs to entice consumers. <\/p>\n<h2 id=\"h-how-low-can-they-go\">How low can they go?<\/h2>\n<p>The Edmonton-based company owns and operates all <a href=\"https:\/\/www.novacannabis.ca\/news\/news-details\/2021\/Nova-Announces-Third-Quarter-2021-Results\/default.aspx\" target=\"_blank\" rel=\"noreferrer noopener\">71 Value Buds<\/a> stores in Alberta and Ontario, which are designed for high-volume, knowledgeable cannabis shoppers who know what they\u2019re looking for. <\/p>\n<p>Leaning on the resources and strategies of major investor Alcanna, a private liquor retailer in Alberta, Value Buds stores are selling ounces (28 g) of dried flower at prices as low as $56.57 before tax.<\/p>\n<blockquote class=\"wp-block-quote\">\n<p>\u201cIf we have a lot of players doing it, then we\u2019re kind of creating a race to the bottom. And that is a really, really hard place to be in,\u201d<\/p>\n<p><cite>Krista Raymer, a cannabis retail strategist and co-founder of Vetrina Group<\/cite><\/p><\/blockquote>\n<p>\u201cThere is a spot in the marketplace for the premium consumer, but it\u2019s not nearly the size of the value-focused customer,\u201d he says, noting that according to Statistics Canada, <a href=\"https:\/\/www150.statcan.gc.ca\/n1\/pub\/82-003-x\/2021004\/article\/00001-eng.htm\" target=\"_blank\" rel=\"noreferrer noopener\">35.4%<\/a> of cannabis consumers said they still bought from an unregulated source in 2020. <\/p>\n<p>\u201cWe\u2019re building our strategy based on the current customer and there is still a lot of room to grow here on the unregulated side of things.\u201d<\/p>\n<p>According to a report by <a href=\"https:\/\/www2.deloitte.com\/content\/dam\/Deloitte\/ca\/Documents\/consumer-industrial-products\/ca-en-cannabis-pricing-report-v8-aoda.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">Deloitte<\/a> published in early November, pricing has emerged as one of the most important factors to cannabis shoppers. Around 34% of respondents said price was the \u201cleading influencer of product choice\u201d, citing data from the latest BDSA Consumer Insights Survey,&nbsp;<\/p>\n<p>\u201cIn 2021, average prices continued to decline in most categories due to increased competition and excess supply of inventory relative to sales. [Which] led to a much wider range of price tiers, both low and high,\u201d explains Sid Hathiramani, partner of risk advisory, Deloitte Canada.<\/p>\n<p>It is difficult to know when cannabis product pricing with level out. Hathiramani explains to Leafly that in states like Colorado and Oregon, there was also rapid price compression due to oversupply. In those cases, there were gradual price increases as competition normalized and consumers began to recognize the value in more premium products. <\/p>\n<p>\u201cWe expect a similar trend in Canada, although over a longer time period as the licensing and distribution regulatory framework creates a more gradual entry of new suppliers and products to market,\u201d says Hathiramani.<\/p>\n<h2 id=\"h-the-hidden-cost-of-low-prices\">The hidden cost of low prices<\/h2>\n<p>Price is also one of the few differentiators retailers and brands have to play within the tightly regulated market, where stores largely carry the same products obtained via provincial wholesalers.<\/p>\n<p>\u201cWhere retailers can be competitive is limited and price becomes a really attractive strategy,\u201d said Krista Raymer, a cannabis retail strategist and co-founder of Vetrina Group, in a phone call. <\/p>\n<p>\u201cIf we have a lot of players doing it, then we\u2019re kind of creating a race to the bottom. And that is a really, really hard place to be in. If we\u2019re not generating revenue from other areas of the business because we have such tight margins to begin with.\u201d<\/p>\n<p>One way to keep prices low is the white label strategy, she said \u2014 repackaging and selling cannabis from undisclosed sources at a discounted price. But with profit margins already so slim, the pressure is on to make up that revenue in other areas of the business, either with lower operating costs or higher prices in other product categories in the store, such as premium or craft products.<\/p>\n<figure class=\"wp-block-image size-large is-style-default\"><img width=\"1024\" height=\"683\" alt=\"low price guarantee - sign on paper price tag against a rustic barn wood\" class=\"wp-image-187222 has-ll lazyload\" data-srcset=\"https:\/\/thcinct.com\/wp-content\/uploads\/2021\/12\/cannabis-prices-are-we-in-a-race-to-the-bottom.jpg,compress&amp;w=550 550w, https:\/\/thcinct.com\/wp-content\/uploads\/2021\/12\/cannabis-prices-are-we-in-a-race-to-the-bottom.jpg,compress&amp;w=740 740w, https:\/\/thcinct.com\/wp-content\/uploads\/2021\/12\/cannabis-prices-are-we-in-a-race-to-the-bottom.jpg,compress&amp;w=1100 1100w, https:\/\/thcinct.com\/wp-content\/uploads\/2021\/12\/cannabis-prices-are-we-in-a-race-to-the-bottom.jpg,compress&amp;w=1480 1480w\"><figcaption>In 2021, producers and retailers lowered prices in hopes of being more competitive and enticing consumers to the regulated market. (Adobe Stock)<\/figcaption><\/figure>\n<p>According to Jennawae McLean, the founder and CEO of Kingston, Ontario\u2019s independently owned Calyx + Trichomes cannabis store and the executive director of NORML Canada, prices were far too high at the beginning of adult-use legalization. <\/p>\n<p>She was glad to see prices come down\u2014to a point.<\/p>\n<p>\u201cOur pricing runs close to value brands, but we\u2019re still not necessarily as low as they are because we still have to pay for a living wage and we still have to pay for benefits,\u201d she said in a phone call. <\/p>\n<p>\u201cYou know, a big part of the reason why we\u2019re number one in the eastern [Ontario] region is that we have the best team in the eastern region. And the reason why we have the best team is that we try to add value as an employer to their lives.\u201d&nbsp;<\/p>\n<p>She said she suspects the majority of the store\u2019s customers don\u2019t care if employees are paid well or not, but that the customer experience is vastly improved because of those higher operating costs associated with employee training and retention.&nbsp;<\/p>\n<p>McLean also said it\u2019s not just prices that discount retailers are competing on. Corporate entities with deep pockets are better able to pay for premium commercial real estate locations with more visibility and curb appeal.&nbsp;<\/p>\n<h2 id=\"h-cannabis-reward-clubs-are-on-the-rise\">Cannabis reward clubs are on the rise<\/h2>\n<p>High Tide is the latest player to join the race, this time through a discount club concept. In October, the company <a href=\"https:\/\/www.newswire.ca\/news-releases\/high-tide-becomes-north-america-s-first-cannabis-discount-club-retailer-with-over-245-000-members-878743648.html\" target=\"_blank\" rel=\"noreferrer noopener\">announced<\/a> that Cabana Club memberships would be available in all 101 of its retail stores in Manitoba, Saskatchewan, Alberta and Ontario.<\/p>\n<p>CEO Raj Grover said there are currently 270,000 members enrolled in the Cabana Club who take advantage of lower prices among in-house brands and accessories. Currently, there is no fee to enroll like there is for parallel businesses like Costco, but that may change in the future.&nbsp;<\/p>\n<p>The company also hopes to chip away at the unregulated market, which Grover said is estimated to be valued at about $3 billion in Canada. The report by Deloitte also noted the growth opportunity remaining in the illicit market, saying that \u201c\u202670% of respondents who shop the illicit market stated that better or lower pricing was a key reason they turned to that market.\u201d<\/p>\n<div class=\"wp-block-image is-style-default\">\n<figure class=\"aligncenter size-large\"><img width=\"1024\" height=\"453\" alt class=\"wp-image-187219 has-ll lazyload\" data-srcset=\"https:\/\/thcinct.com\/wp-content\/uploads\/2021\/12\/cannabis-prices-are-we-in-a-race-to-the-bottom.png,compress&amp;w=550 550w, https:\/\/thcinct.com\/wp-content\/uploads\/2021\/12\/cannabis-prices-are-we-in-a-race-to-the-bottom.png,compress&amp;w=740 740w, https:\/\/thcinct.com\/wp-content\/uploads\/2021\/12\/cannabis-prices-are-we-in-a-race-to-the-bottom.png,compress&amp;w=1100 1100w, https:\/\/thcinct.com\/wp-content\/uploads\/2021\/12\/cannabis-prices-are-we-in-a-race-to-the-bottom.png,compress&amp;w=1480 1480w\"><figcaption>Table 4: Number and percentage of consumers who accessed cannabis from each source, Canada. (Stats Canada)<\/figcaption><\/figure>\n<\/div>\n<p>\u201cI think the cannabis illicit market will get thinner and thinner and thinner,\u201d Grover said in a phone call. \u201cSo the actions that we have taken now with our innovative discount club concept, as its first of its kind in North America, I think it\u2019s definitely going to contribute substantially here in Canada to bring the illicit market down.\u201d<\/p>\n<p>Grover said he hopes to introduce the model to the US when Canadian-owned companies are able to enter the market. \u201cWhen US opens up,\u201d he said, \u201cI can\u2019t wait to introduce this concept in the United States.\u201d<\/p>\n<div class=\"leafly-sailthru-signup p-lg my-xl bg-white rounded elevation-low border border-light-grey\">\n<p class=\"text-xs pt-lg\">By submitting this form, you will be subscribed to news and promotional emails from <a href=\"https:\/\/www.leafly.com\">Leafly<\/a> and you agree to Leafly&#8217;s <a href=\"https:\/\/www.leafly.com\/company\/tos\">Terms of Service<\/a> and <a href=\"https:\/\/www.leafly.com\/company\/privacy-policy\">Privacy Policy<\/a>. You can unsubscribe from Leafly email messages anytime.<\/p>\n<\/div><\/div>\n<\/p><\/div>\n<\/div>\n<p> <!-- Chartbeat --> <!-- End Chartbeat -->  <!--\nPerformance optimized by W3 Total Cache. Learn more: https:\/\/www.boldgrid.com\/w3-total-cache\/ Served from: _ @ 2021-12-07 00:14:33 by W3 Total Cache\n--><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Cannabis prices: Are we in a race to the bottom? &#8211; Leafly Link copied to your clipboard Leafly Leafly \u00ae Loading\u2026 Where are you from? Which part of Canada? Darn! You&#8217;re not old enough to use Leafly. Sorry, Leafly isn&#8217;t available in your location yet. Redirecting you to By accessing this site, you accept the Terms of Use and Privacy Policy. Canada\u2019s first wave of private cannabis stores was dominated by retail spaces designed to mimic the Apple store, with iPads on gleaming white countertops to scroll through product selections. \u201cYou were going to have people who had never been&#8230; <\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"","fifu_image_alt":"","footnotes":""},"categories":[1],"tags":[],"class_list":["post-2841","post","type-post","status-publish","format-standard","hentry","category-marijuana_information"],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/thcinct.com\/index.php?rest_route=\/wp\/v2\/posts\/2841","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/thcinct.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/thcinct.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/thcinct.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/thcinct.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=2841"}],"version-history":[{"count":0,"href":"https:\/\/thcinct.com\/index.php?rest_route=\/wp\/v2\/posts\/2841\/revisions"}],"wp:attachment":[{"href":"https:\/\/thcinct.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=2841"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/thcinct.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=2841"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/thcinct.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=2841"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}