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  1. Home
  2. / Investing
  3. / Cannabis

Everything Cannabis Investors Need to Know About This Year's 420 'Holiday'

Sales for Pot Holiday 420 will get rolling early this year. Any cannabis investor should pay attention.
By DEBRA BORCHARDT
Apr 12, 2019 Updated Apr 21, 2019 | 12:58 PM EDT

The biggest holiday for the cannabis industry is coming up on April 20, and this year the annual celebration falls on a Saturday. It will be the first time the industry has had a Saturday "420" since full legalization in some states. Dispensaries are expecting big crowds drawn in by equally big promotions.

Cannabis data company Headset has analyzed the data from several years of celebrations and has gleaned some insight as to what to expect at this year's celebrations. Its new report, "4/20 The Greenest Day of the Year," is based on four years of data and derived from point-sale-systems at cannabis dispensaries in Washington, California, Nevada and Colorado. Some states with adult-use sales have several 420s under their belts like Washington and Colorado, while Nevada and California have had fewer.

TGIF

Saturday may be the big holiday, but Headset believes the bulk of the sales will occur the Friday before. Typically sales rise 18.8% at dispensaries on Fridays as paychecks burn a hole in the pockets of consumers. "Headset expects sales on 4/20/2019 to be 2x to 2.2x normal, and sales on Friday 4/19 to be significantly above average as well," the company notes. Headset went on to suggest: "Retailers should consider strategies to attract customers both on '4/20-Eve' as well as on the big day itself."

It makes sense that consumers would want to buy their party products the day before, and be prepared for any events that may be happening in their states. The holiday unapologetically celebrates the "getting high" side of cannabis versus the medical side that kicked off most legalization efforts.

Blazing Numbers

Last year cannabis sales hit $26.6 million on 420, an increase of 111% from 2017 to 2018. Colorado was the king of 420, logging $9.1 million in sales, an increase of 128% over the prior year. Washington state rang up $7.1 million in sales -- a 100% increase. California's adult-use sales during 420 were only $6.9 million, even though it is a much bigger state. The illicit market seems to have held onto its customer base as consumers balk at paying the high taxes. Nevada is also a young, 420 state, and it rang up $3.5 million in sales, but this was a 110% increase over the previous year.

Washington is still the cheapest place to buy cannabis with the lowest average item price at $15.21, while Nevada is the most expensive with the highest average price per item at $38.56. Headset did note that Nevada also runs the biggest discounts (18%), so maybe it all nets out in the end. California's average price was second on the list at $27.11, but it only averaged a 10% coupon. Colorado's average price was $24.73 and it's average discount was 16%.

Don't Bogart That Beverage

Legal cannabis is available in multiple forms and the people celebrating the holiday are choosing to do so with specific products. It seems infused beverages are just the thing for a 420 festivity. Beverages are often associated with other celebrations, like champagne for New Year's Eve and beer for the Fourth of July. So, it isn't really unusual to begin shifting consumption on 420 to beverages. Sales of beverages on 420 rose 149% in 2018 -- making it the fastest growing form factor for the holiday.

Vape pens have shown a positive three-year trend in 420 growth sales. Granted this category has been growing overall regardless of the holiday. Edible sales rose 136% during 2018's 420 holiday. Concentrates are known for having the most pure THC, and those sales jumped 130% in 2018, flower rose 118%, and pre-rolls (joints) rose 111%.

Forms associated more with wellness like capsules and sublingual's did not see nearly as large of an increase in sales. Headset believes that the reason for this is that 420 is all about the partying side of cannabis -- not the wellness side. Think THC -- not CBD on 420.

Cutting Cannabis Coupons

Did you ever think you would see the day that there would be sale on cannabis? In some states, there is fierce competition among the dispensaries for customers. Restrictions on locations often force many dispensaries into the same neighborhoods.

In Denver, there are dispensaries directly across the street from each other. Loyalty programs from companies like SpringBig or Baker can text customers for the dispensaries about specials.

Headset found that pre-rolls have the largest average discount of 21%, while flower had the smallest discount at only 11%. Capsules had the second highest discount at 17%, but it doesn't seem to convince customers that it's the perfect party product.

Investors

Any cannabis investor should pay attention to sales on this holiday. It is the day for brands to shine and retailers to bring in new and old customers. It is a good indicator of consumer preferences and successful price points.

This holiday may become like St. Patrick's Day, where everyone is Irish for a day. Instead, people will become Rastafarians for the day.

-- This commentary was originally published April 12 on Real Money.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Borchardt had no positions in any securities mentioned.

TAGS: Investing | Markets | Marijuana | Retail | Cannabis

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