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  1. Home
  2. / Investing

Vape Market Stabilizes as Holiday Sales Look Strong

As vape illnesses have dropped, it seems consumers are drifting back to making vape purchases.
By DEBRA BORCHARDT
Jan 13, 2020 | 05:00 PM EST
Stocks quotes in this article: GGBXF, PLNHF

The point-of-sale data from BDS Analytics, which does market research for the global cannabinoid industry, in November pointed to strong sales growth. There were also reports that December sales were robust as well for the holidays. Canaccord Genuity reviewed the data from BDS that covered Arizona, California, Colorado and Oregon and found that total sales increased 15% year-over-year, but basically flat from October's sales. California's sales lagged, but it seems the vape crisis has begun to stabilize.

December Sales

Green Growth Brands Inc.  (GGBXF) owns two dispensaries in Nevada called The+Source and it released a post-holiday report card. Not too many others in cannabis did this, but then many of the GGB executives are retail veterans and so this is just business as usual for them. The company said that more than 62,000 total transactions were processed at the two The+Source dispensaries between Green Wednesday (November 27, 2019) and December 28, 2019. On Green Wednesday alone, over 3,300 transactions were processed.

"Our ability to capitalize on the holiday shopping season is a reflection of our retail and operations expertise," said Peter Horvath, CEO of Green Growth Brands. "We are pleased with the performance of both business segments and particularly excited by the consumer demand signals we saw in CBD. We have brought together high-quality CBD, high-efficacy personal care formulations, familiar packaging, top-tier retail presentations, and fair, everyday-value prices to create products that consumers from all walks of life are really responding to."

GGB said that during the month of November roughly 28% of sales consisted of in-house brands CAMP, 8 Fold, and Seventh Sense, compared to about 11% last year.

"This is just the beginning," added Horvath. "This holiday introduced our products to a tremendous number of new consumers. We are looking forward to their product reviews, suggestions for new formulations, and re-orders."

Planet 13 Holdings  (PLNHF) also reported on its holidays sales, noting that "Although Q4 is a seasonally slower period in Las Vegas with lower overall tourist traffic, Planet 13 successfully delivered a record average ticket of $100 during December." This is higher than the company's normal $90 average ticket. Of course, it didn't hurt that the MJ Biz conference brought in over 30,000 industry workers and many went to Planet 13 during their stay to check out the dispensary.

Capitalizing on this timing, Planet 13 launched two new edible brands during the conference Dreamland Chocolates and HaHa gummies with purchases starting December 10. Canaccord Analyst Bobby Burleson is maintaining his 2020 estimate for Planet 13 of $106 million in revenues and introduced a 2021 estimates of $127 million in revenues.

Vape Sales

The vape crisis continued to have an effect on the market as more consumers switched back to flower, pre-rolls and edibles. Flower accounted for 41% of sales versus November of 2018 when it was 38% of sales. Pre-rolls had the strongest year-over year category growth with an increase of 36%. Vape sales for November were down 2% year-over-year. Burleson believes vape sales are stabilizing because California's sales declines lessened.

The state's cannabis sales had dropped 7% from last year in November, lagging other states. In September sales had declined by 9%, then they dropped by 2% in October and went flat in November. "Flat M/M performance is significant in our view given the state's disproportionate exposure to vape and can be taken as evidence of stabilization for vape demand," wrote Burleson.

The crisis has also affected the prices for the products. The average sale price for vapes according to BDS Analytics fell 10% this past November, but another sign of stabilization is that the prices remained flat month over month. The average selling price for flower increased by 11% year over year and remained flat month over month.

The holidays have always been a time for increased sales for dispensaries. Consumers are getting used to heading to the dispensary to either buy a cannabis gift or bring some cannabis to a party instead of a bottle of wine. So, it's no surprise that cannabis retailers are wanting to report strong holiday sales. As vape illnesses have dropped, it seems consumers are drifting back to making vape purchases. It had been the fastest growing category and with reason - it's convenient. It won't take long for consumers to begin switching back to vape purchases as long as they can be sure it isn't from the illicit market.

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At the time of publication, Debra Borchardt had no position in the securities mentioned.

TAGS: Investing | Stocks | Trading | Cannabis

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