How The Canadian Cannabis Market Chooses Products

How The Canadian Cannabis Market Chooses Products

Cannabis legalization is taking over the globe. America is currently waiting on the federal government to push forward and remove the plant from Schedule I classification, where it sits among heroin, cocaine, and other narcotics that have “no currently accepted medical use,” according to the FDA. However, other countries have adopted a more progressive stance

Canada became one of the first countries to legalize cannabis on a federal level a few years back. Our Northern neighbors officially allow for the possession and retail distribution of cannabis products across the country, though each province has its jurisdictions on what is and isn’t authorized. For example, in Ontario, edibles and beverages can contain up to 10mg of THC while their neighbors in Quebec have a limit of 5mg. Still, the number of cannabis producers and cultivators on the market is becoming overwhelming to the point where dispensaries are beginning to scale down on which distributors they choose to work alongside.

MJBizDaily recently published an article including interviews with several cannabis retailers from across Canada who offered insight into their approach to choosing products for their shelves. In Alberta, where the Alberta Gaming, Liquor and Cannabis lists cannabis stock-keeping units (SKUs) with available inventory, revealed a massive spike in SKUs from the last quarter of 2018 (142) to the third quarter of 2021 (1,515). Koltaen Bushong, GM of independent retailer Northern Lights Supply, said that they became “more selective” of the products they choose for their store because “there’s so much out there.” 

There were three common strategies that retailers in Canada used to determine which products could sell in stores:

  • Leveraging data from other stores
  • Studying the producers’ methods of cultivation
  • Understanding their consumer base

And while these do help them maneuver through the otherwise saturated market, many are still trying to figure out how to get generic cannabis brands on shelves, along with finding space for bulk purchases and craft cultivars.

Ontario has similarly witnessed a surge in SKUs since the beginning of legalization in 2018. The Ontario Cannabis Store listed 1,842 SKUs during the second quarter of 2021, while the regional market’s estimated worth reached $110.9M. 

Like Alberta, Ontario dispensaries have seen a surge in SKUs since the beginning of legalization. Co-founder and CEO of Sessions Cannabis, an Ontario-based retail store, Stephen Fry, said that he always has his sights set on new products. Fry explained that the average Sessions Cannabis store carries upwards of 500 products on display at any moment. However, he still expects to see hundreds of different products introduced to the market by the time January 2022 rolls around. 

Using a tier method for a store like Sessions Cannabis has worked effectively among their customers. New and seasoned smokers alike can enter the shop and peruse through the array of options, from the least potent to the strongest strains available. Fry said that it allows customers “to find something that they’re looking for, in some capacity.” 

This route isn’t practical for all dispensaries, though. Vancouver-based independent retailer Up In Smoke carries about 140 SKUs on an average week. It’s a massive decrease from Sessions Cannabis product selection, but it’s because there’s already an overcrowded market. Maximillien Amato, co-owner of Up In Smoke, explained it allows them to curate a more personalized menu that includes top-tier products. Since provincial wholesaler BC Liquor Distribution Branch carries nearly 700 different products, Amato’s approach caters to consumers who are seeking something they can’t find at other retailers.

“We knew everyone’s buying the same product,” Amato explained. “And so, to set ourselves apart, we wanted to work on our menu and do the best procuring we could and, that way, try and have some more niche products that not everyone’s going to carry.” An independent store like Up In Smoke presents an opportunity to deliver products that large retail chains aren’t carrying because there’s already a limited availability. Bringing those items into each store would be a hassle because there’s not enough supply to distribute to each storefront evenly. 

Unfortunately, some of these options aren’t always available to test out before placing them on shelves. Amato explained that, in those cases, he’s diving into each producer’s history, from the soil they use to grow cannabis to the number of lights in each grow room. Otherwise, Amato admitted testing out products from competing dispensaries before deciding whether Up In Smoke should add those items to their succinct menus.

Another problem frequently presented is the number of growers producing the same cultivars. Northern Lights’ Bushong explained that different growers offer the same strains, creating difficulty choosing which one lands on their shelves. For example, Bushong cited the rise of Black Cherry Punch in the market. He said there are probably “six different growers doing that.” However, it all boils down to the economics, and Northern Lights’ customers are often more keen on cost-efficient products.

For producers, it’s always a bit tricky to enter the market, specifically legal retail shops. For one thing, producers who expect to be paid upfront will likely find the door getting shut on them frequently if they approach retailers with a limited budget. Secondly, there’s plenty of mid-level cannabis available, both in dispensaries and in the black market, so it’s up to producers to bring something new and fresh to the table. Fry explained that new cannabis strains intrigue consumers and are easier to move. “Customers do like new – I think between a budtender recommendation and the ‘newness’ factor, that helps with sales quite a bit in terms of moving new product,” Fry explained.

Amato added that producers selling high-quality flowers should price their products slightly higher while maintaining smaller production. “Don’t mass-produce something that’s really good,” Amato said. “All the best things build hype over just doing little (production) runs – little run after little run.” Still, for producers mass-producing mid-grade cannabis, Amato similarly suggested bringing something fresh and new, even if it isn’t the best quality.

“Throw a little cookie strain in there, that you’re mass-producing, throw a little something like that, that’s got a bit of hype to it,” he explained, adding that the customer could “still feel like a bit of a baller” when they crush up their herbs and pack their RAW pre-rolled cones.

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