Cheap Cannabis Undercutting Illegal Market
Hexo Led the Way and Now Several LPs Offering Cheap Cannabis Options – LPC
Cheap cannabis is on the rise and according to analysts, it’s undercutting the illegal cannabis market. Hexo began selling its “Original Stash” brand at $4.49 per gram in bulk last October.
Now, about a dozen other companies are following suit including Canopy Growth. Cheap cannabis – defined as cannabis sold under $6 per gram – now represents 40 per cent of the market. That’s up from 10 per cent last October.
“The value segment is really aimed at getting people in (the legal market),” said Graeme Kreindler, an analyst from Eight Captial. The business model though is to foster customer loyalty so that they try higher-end cannabis later. “The producer’s job is to keep that customer and then trade them up to more expensive products.”
Tilray CEO Brendan Kennedy agrees that cheap cannabis is almost exclusively attracting new customers from the illegal market.
“If we see the value market growing over time, that’s probably a good thing because those value consumers are migrating from the illicit market,” Kennedy said.
Some analysts worry that long term, the strategy could backfire. According to Health Canada, the cannabis stockpile amounted to 669,000 kilograms of unpackaged dried flower in May. That means if all Canadian LPs stopped producing right now, there’s enough to last a year.
Worrying about the long term at this point could be counter-productive since the market will shake out how the market will shake out. But if cheap cannabis is helping eliminate the illegal cannabis market, that can’t be a bad thing.
This editorial content from the LPC News Team provides analysis, insight, and perspective on current news articles. To read the source article this commentary is based upon, please click on the link below. Are you part of the legal cannabis industry in Canada? Add Your Listing and get found by your potential customers.
