BDS Analytics Webinar · How does a new state market grow? Three phases of growth Source: BDS...

BDS Analytics WebinarCannabis Market Lifecycles: What Drives (or Kills) Growth

Presented by:

Roy Bingham| CEO and Co-Founder

Tom Adams| Managing Director, Industry Intelligence Group

Antonette Goroch | Senior Analyst

Three Phases of Market Growth

© 2019 BDS Analytics

How does a new state market grow?

Three phases of growth

Source: BDS Analytics GreenEdge™ Platform

205 298 333 $385 $422 $448 $419 $331

$313

$593

$880 $1,111 $1,235

0

200

400

600

800

1000

1200

1400

1600

1800

2011 2012 2013 2014 2015 2016 2017 2018

Colorado: Inception through Maturity

$1,015

+45%

$1,328

+31%

$1,530

+15%

$1,566

+2%Hypergrowth

$298 +45%

$333 +12%

$698

+110%

$205

Inception

Maturity


Cannabis Consumer Sales ($m)

Market growth in three phases:

Key characteristics & trends

Inception

• Lack of regulatory framework, including licensing, taxation & local/municipal permits, etc.

• Predominately medical use.

• Consumer attitudes begin to change through an increase of positive exposure.

Hypergrowth

• Adult-use replaces medical use.

• Shift to retail consumer products.

• Can suffer from short-term supply chain issues.

Maturity

• Greater focus on brand.

• More retail friendly products like vapes, pre-rolls, candy

• Market share leaders emerge.

• Average prices decline as appeal broadens.


5

0

2

4

6

8

10

12

2014 2015 2016 2017 2018

USA Legal Cannabis Spending by State ($USD Billions)

Other

AZ

NV

OR

WA

CO

CA

Growth by state drives overall growth as new states enter hypergrowth

Source: Arcview Market Research & BDS Analytics Cannabis Intelligence Briefing Series

Hypergrowth: CO CO, OR, WA CO, OR, WA, NV, AZ OR, NV, AZ


32%…of adults 21+ in Fully Legal US States have Consumed Cannabis

Within the Past Six Months

~ 32% are Acceptors(would consider in the future)

~ 36% are Rejecters(would not consider in the future)

Source: BDS Analytics Consumer Research: US adults 21+ in Legal Level 1 States

Three categories of customers: Consumer, Acceptors and Rejecters™


Consumer Behavior and Attitude Evolution

15%25%

35%

40%30%

25%

45% 45% 40%

0%10%20%30%40%50%60%70%80%90%

100%

Inception Hypergrowth Maturity

Consumer Evolution

Rejecters

Acceptors

Consumers

Source: BDS Analytics Consumer Insights Research


Branded products are now approaching 50% of sales in Colorado and higher in other mature states

19% 26% 32% 38% 44%

81% 74% 68% 62% 56%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2014 2015 2016 2017 2018

Branded Products Market Share CO %


2018CA = 76%


Market share by category shifts through the phases


Total Colorado Category Sales


New Market Impact Factors:What Makes a Market Grow (or

Not)


All markets are not created equal

55.3%

45.1% 42.1%36.6%

11.3%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

WA OR AZ CO CA

2013-2018 CAGR By State

But what drives their relative growth?



Regulatory & Business Landscape Impact Factors

Licensing & Taxation

Dispensary Counts

Extralegal Market

Consumer Awareness

Consumption Regulation

Supply Chain Regulation

What shapes a new market’s growth? Six broad categories.


What is the total combined cost of taxation & compliance?


Retail sales tax?

Wholesale tax?

Excise tax?

Municipal & local

tax?

License fees?

A fundamental driver in every market.


How many dispensaries are legally operating?

Ratio of consumers to stores has a direct impact on price, consumer choice and sales volume.

More Dispensaries

• Easier access for consumers.

• More choice for consumers.

• Greater competition means:

• Lower prices.

• Higher volume.

• Diminished impact of extra-legal market.

Fewer Dispensaries

• Less convenience for consumers.

• Fewer choices for consumers.

• Less competition means:

• Higher prices.

• Lower volume.

• More consumers driven to extra-legal market.


Consumer Awareness


Competitive Strength vs. Extra Legal Market Strength

Relative strength of legal supply chain to sources of extra-legal supply


What types of laws and how are they enforced?

Supply Chain Regulation

• Product restrictions and requirements.

• Vertical integration requirements or bans.

• Moratoriums & licensing bans.

• Zoning complications

• High costs of compliance.


• Medical vs. adult.

• Possession limits.

• Purchase limits.

• Criminal penalties or fines.

• Condition lists.

How does this impact the climate for doing business?


How the States Compare

A comprehensive view

Source: BDS Analytics Cannabis Intelligence Briefing

0

5

10

15

20

25

30

Colorado Washington Oregon Arizona California

Growth Indicator Matrix

Supply Chain Regulations

Consumer Perspectives & Attitudes


Extralegal Market Resiliance

Dispensary counts



Making sense of diverse markets

19

A comparative tool

8.3

7.7

7.3

6.0

3.7

36.6%

55.3%

45.1%42.1%

11.3%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

3.0

4.0

5.0

6.0

7.0

8.0

9.0

Colorado Washington Oregon Arizona California

20

13

-20

18

CA

GR

Gro

wth

Ind

ex

Sco

re

Growth Index Score vs. CAGR by State

Growth Index Score 2013-2018 CAGR

Source: BDS Analytics Cannabis Intelligence Briefing // GreenEdge™ Platform


What Does This Mean For Emerging Markets Today?


© 2019 BDS Analytics© 2019 BDS Analytics





California Legal Spending (In Billions)


Colorado Legal Spending (In Billions)


Provincial Population vs. Cannabis Sales 2018

11.6%13.5%

3.6%2.1% 1.4%

2.6%

38.7%

0.4%

22.6%

3.1%

0.3%

27.7%

6.9%

4.5%2.4% 2.0%

4.5%

35.7%

0.8%

11.8%

2.9%

0.6%0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

Alberta BritishColumbia

Manitoba NewBrunswick

Newfoundland& Labrador

Nova Scotia Ontario Prince EdwardIsland

Quebec Saskatchewan Territories

% of 2018 Population % of 2018 Revenue




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BDS Analytics Webinar · How does a new state market grow? Three phases of growth Source: BDS...

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