State of the Cannabis Industry: Mid-Year Review Recap

In Akerna’s first mid-year review of the cannabis industry, multiple experts weighed in to provide a holistic and accurate picture of what the cannabis industry looks like today. By piecing together important indicators, expert analysis, insights on legalization measures, and economic, sales, product, and safety trends, Akerna has created a comprehensive guide to understanding the realm of business they and so many others operate in.

The collection of actionable business intelligence was created to serve as a reference for anyone—industry experts and novices alike—interested in better understanding one of the fastest-growing industries in the world. Our shortened summary will cover the high points of the longer presentation. You can download the entire Mid-Year Review by clicking here.

Cannabis Capital Markets

In this section, two members of the Entourage Effect Capital team—Andy Sturner and Codie Sanchez—explore events from other prominent industries that mirror the current state of cannabis in the US. Firstly, they explore the tech bubble from the 1990s. Tech was untouchable—until it wasn’t. Between 2000 to 2002, dot com wonderkids vanished overnight as investor money dried up, companies delisted, and many firms simply fell apart. But this sudden shrinkage in overall market size let larger, successful organizations rise to the top—which is what Andy and Codie have seen occur again in the cannabis industry, 20 years later. They argue that the 2020 crisis is a “small business crisis,” which will have a similar effect on those organizations the way retail investment did on the wounded housing industry back in 2008.

Quick Hit: The Cannabis Industry is Recession Resilient

During the 2020 COVID-10 Pandemic, cannabis sales soared. They increased by 19% overall. In the week of March 11-18^th alone:

• Medical cannabis sales: Up 20.8%
• Recreational cannabis sales: Up 11.6%
• Flower sales: Up 22.6%
• Vape sales: Up 9.7%
• Edible sales: Up 12.4%

Cannabis Legalization + Economic Recovery

Like many industries in 2020, the COVID-19 pandemic has had a major impact on cannabis—but this isn’t necessarily a bad thing, according to Akerna’s Director of Regulatory Services, Thomas Roth. During the peak of pandemic-related lockdowns, cannabis was deemed an “essential service.” Such a designation is a huge win for the industry at large and helps further the national normalization of cannabis use, both for medical and recreational reasons. Due to the uptick and sales and its newly won essential status, the cannabis industry has also been hugely responsible for job creation and the generation of huge amounts of tax revenue at a time when many businesses are facing layoffs and tremendous amounts of money lost. In numbers, the $10.73 billion dollar cannabis industry has:

• Created 243,700 full-time jobs as of early 2020
• Generated $1.9 billion dollars in tax revenue in 2019
• $538 million from California
• $290 million from Colorado
• $354 million from Washington
• $155 million from Oregon

This financial impact is making headway for legalization in numerous states. Eleven states have cannabis initiatives on their 2020 ballots—Arizona, Arkansas (2022), Mississippi, Montana, Nebraska, New Jersey, Ohio, Oregon (amendment), South Dakota, and Florida (2022). Akerna is in a uniquely situated position to aid these states should their cannabis bills pass, Roth writes, thanks to the combination of finely tuned software and team members with years of expert experience.

Quick Hit: Policy Changes Can Help Economic Recovery

In response to pandemic-related regulations, Nevada eased restrictions on curbside pickup for cannabis businesses, resulting in an increase in curbside sales from 3% to 67% of total sales. This reversed the drastic drop in sales the recreational market experienced during the week of March 21, when sales hit an all-time low for the state. With the new pickup option in place, the number of daily curbside orders soared 2,746%. It is worth noting, however, that 95% of these orders are recreational—medical marijuana users seem to rely on delivery and traditional pickup methods instead. And it’s not just Nevada who has seen a positive impact on cannabis sales due to curbside pickup allowances—17 states and the District of Columbia are also currently allowing similar processes, encouraging a steady increase in their overall sales as well.

Year over year, April 2020 vs. April 2019: Total cannabis sales increased 68%, with an average ticket size of $123. Top categories include:

• Concentrates, which increased 22% and accounted for 11% of total product sales
• Cartridges/Pens, which increased 3% and accounted for 35% of total product sales
• Infused edibles decreased by 18%, accounting for 9% of total product sales
• Flower maintained 43% of total product sales

Counterfeiting and Product Safety: How solo*CODE Can Improve Consumer Confidence

The counterfeit of cannabis products represents 3% of international trade, damaging economies, endangering public health, and supports dangerous illegal organizations. While attempts have been made with Q.R. (Quick Response) codes, holograms, and other coding options, none of the current technologies truly address the techniques used to fool consumers and regulators. solo*CODE, created by solo sciences, is the strongest attempt yet to alter anti-counterfeiting efforts. Through their simple-yet-efficient app, a secure channel is created through which shoppers or government agencies can confirm a product’s authenticity. The free solo* app can be downloaded onto any mobile device that has a camera. By utilizing a proprietary and secure end-to-end encryption, solo* ensures that only confirmed products and data are added into the solo* system. A solo*CODE is readable only through solo* technology, preventing other applications developers from circumventing the closed-loop.

Quick Hit: Women Outspent Men on Cannabis in Q1

Women across all age groups of 18-55+ drove cannabis sales in the first quarter of 2020. The average amount spent by women on cannabis products increased by 50% in March alone. The top products purchased in Q1 in each category:

In March, the average basket size for women hit an all-time high above $105, while the average basket size for men was below that of March 2019.

Quick Hit: Online Cannabis Orders and Delivery Dip as States Reopen

Now that restrictions are easing in most states, many cannabis consumers are choosing to return to more traditional fulfillment methods. As such, online cannabis orders and pickups are starting to decline. Looking at the numbers relative to January 2020, March saw a 220% increase in daily deliveries and that continued to balloon up to 710% in April. “There will likely be a long-term increase, but the April bump doesn’t seem sustainable; at least some of the shoppers want to return to in-person transactions,” says Aryeh Primus, Vice President of Analytics at Akerna.

Case Study: Trellis and Brite Labs

Brite Labs, based in Oakland, CA, produces cannabis products cultivated on California farms and crafted to maintain botanical integrity. When they realized they needed a software solution that could help reduce unnecessary man-hours related to employees having to input data multiple times into multiple systems, they turned to Trellis. Trellis’s software helped them save roughly 3 hours a day since its implementation. Take a deeper look at the case study on page 49 to learn how.

What’s Selling? Cannabis By The Numbers

What people are buying January 1 – June 29, 2020:

• Flower: 45.2%
• Cartridges/Pens: 32.7%
• Concentrates: 10.7%
• Edible: 9.2%
• Other: 2.2%

Broken down by gender:

Days of the Week:

For further breakdowns and a look at what’s selling, click here to download the full mid-year review (and then jump to page 54).

Conclusion

Akerna’s company ecosystem has been developed to provide a wide range of solutions and insights for both our clients and the larger cannabis industry. Our platforms allow cannabis operators to manage every detail of their business, while our business intelligence helps them make the most impactful decisions for their operations. With our 80+ integration partners, our functionality is at maximum capacity, allowing us to provide the full range of services that enhance cannabis businesses; including inventory management, on-line ordering, digital menus, delivery capabilities, and numerous payment options, just to name a few.

Our breadth of business intelligence has enabled Akerna to share predictions for the cannabis industry for the past two years. In 2020, those predictions included: cannabis becomes cool beyond THC and CBD, data is the new cannabis currency, consumers become savvier, cannabis businesses focus on fundamentals and legislative action on legalization–all of which we’ve seen come to fruition.