Online Panel Discussion
On October 30th, we had the pleasure of hosting industry leaders from retail (Katy Perry, CEO of Toke Cannabis), processing (Aaron Anderson, VP Sales of Tricanna Industries) and international import and export (Shannon Kloet, Partner of Tamerlane Trading) to discuss the expectations and current challenges of the Canadian cannabis supply chain. See below for key takeaways or watch the full length online session here:
In the competitive world of cannabis, margins can be tight, therefore understanding the different market segments is crucial to success. Aaron Anderson from Tricanna Industries noted that critical to achieving success relies on proper planning across sales channels while keeping internal production costs in check. The discussion that followed focused on navigating different market segments and strategies to maximize profit margins.
The Three Market Segments: Bargain, Value, and Premium
When analyzing the cannabis market, it's helpful to break it down into three primary segments: Bargain, Value, and Premium. As Katy Perry from Toke Cannabis points out, these segments typically follow a predictable pattern. The Value segment often captures the largest share—more than 50% of the total retail market, while the Bargain and Premium segments make up the other 50% combined.
This breakdown reflects the buying behavior of consumers and should inform pricing strategies. The challenge for cultivators and processors is to identify where their products best fit within these segments and ensure their offerings meet the specific demands of each.
Market Stability, Production Consistency, and Brand Loyalty
Market stability is essential, requiring consistency in production. While 2.0 products (such as edibles, concentrates, and vapes) are easier to standardize compared to dry flower, companies that can deliver a consistent, high-quality product will likely maintain strong market positions. Aaron Anderson emphasized that those who can meet consumer demand and maintain consistent production volumes will thrive in this market.
The Cultivator’s Misconception: Quality Over Everything
One common misconception among cultivators is the belief that the quality of their product will automatically ensure high prices and success. Shannon Kloet from Tamerlane Trading Global compares this to the wine industry, where higher priced premium wines are available, but move off shelves a much slower rate that than of more affordable wines (note: cheaper doesn’t mean poor quality). Just as with wine, the cannabis market’s value segment is where most consumers are buying—and this segment can’t be overlooked.
Planning for Success: Avoiding Last-Minute Deals
Failure to plan, plan to fail. A lack of planning can hurt margins and force cultivators into last-minute deals that often come with lower prices. Without a clear strategy, cultivators may find themselves with surplus inventory or the need to sell quickly, which can erode potential profits. Developing strong, long-term relationships with the right partners and planning production and distribution accordingly can help mitigate these risks.
Product Velocity and Margins: The Key to Retail Shelf Space
At the retail level, product velocity (how quickly a product moves off the shelf) and margins are the primary factors that determine whether a product will secure shelf space. With so many options available, brokers and processors can help cultivators navigate this complex landscape, ensuring that products are marketed effectively and that their margins are protected.
The Role of Brokers and Processors
Both brokers and processors should be viewed as an extension of your business. They can bring added value by handling the logistics of distribution and sales while helping ensure that your products meet the demands of the market. In a competitive industry, using them strategically can lead to greater efficiency and, ultimately, better profit margins.
Looking forward
In the ever-evolving cannabis industry, understanding market segments, maintaining consistent production, and strategic planning are key to sustaining profitability. Finding the right partners and focusing on production consistency will help cannabis cultivators find a balance that keeps them profitable in this competitive market.
