As consumer preferences change with the times, edible cannabis products are seeing far more impressive growth rates than their smokable counterparts.
Smoking in the United States is undoubtedly on the decline. A widespread awareness of its damaging health effects has led to a drop of over 50% in tobacco consumption in the U.S. since the 1960s. Currently, less than 18% of Americans are regular cigarette smokers.
Similar patterns hold true with cannabis. While overall consumption in the U.S. has risen in the wake of legalization in several states, this increase is not uniform across the board. We are seeing significantly different rates of growth among the three major product categories (smokable flower, edibles, and concentrates) that demonstrate increasing preferences for alternative methods of consumption.
Cannabis edibles come is every imaginable variety, catering to taste, potency, and ease of consumption among other factors. They are food products infused during the cooking process with varying levels of THC (the psychoactive compound in cannabis) that allow for versatile, smoke-free consumption. And they have become very, very popular.
So much so that annual growth among edibles sales is on track to be far greater than that of traditional cannabis flower. Brightfield Group analysts estimate that in both Washington's and Colorado’s recreational markets, the compound annual growth rate (CAGR) of edibles between 2015 and 2019 will outpace that of smokable flower by nearly threefold. Meanwhile, both states’ medical markets will experience equally impressive CAGRs in the edibles category while seeing negative growth in flower sales.
This bodes well for the leading producers of edibles, as they can expect to see their market share increase significantly over the next five years. It will also go a long way towards attracting investment in the event of national legalization after 2016, as brand recognition will be enormously important as different companies compete for market dominance.
There are currently four major players in Colorado’s edibles market (Edipure, Blue Kudu, Dixie, and Incredibles), each of which controls between 7.6% and 9.6% of market share. Competition will continue to be stiff among the four of them, and potential investors will be hard-pressed to identify which of them will offer the highest ROI in the future. It will be interesting to observe the different strategies employed by each company to gain a competitive advantage over the others.