With the first few months of adult use cannabis sales in the books, California’s marketplace is exceeding expectations. Initial California cannabis sales reveal a growing demand for legal cannabis in all forms, despite hurdles like increased taxes, uncertain regulations, and rigorous packaging demands. In this first quarter, we’ve started to see a shake out with consumer trends that will shape the rest of the year.
Big Picture Numbers for Q1
Caliva welcomed the adult use customer on 1/1/18 and saw sales increase 81% compared to Q1 of 2017. Our number of transactions increased by 102%. These high performing months were a welcome outcome for Caliva and Growth Analyst Ryan Malley explains, “When looking at daily sales, what used to be our big days are now our slow days. It’s an exciting first quarter.”
Product Sales By the Numbers
Across the board, every type of Caliva product saw sales increases. Continuing with January buying trends, House Doobies and Caliva vapes saw significant sales boosts. “The new recreational customer definitely has an interest in CPGs (Consumer Packaged Goods), Malley pointed out. This figure did not come as a surprise to Caliva as vape sales rose throughout the year. Compared to Q1, vape sales increased by 12% and flower decreased by 16%.
The small uptick is a good indication that customers are enthusiastic in responding to upsells and quality packaged and branded pre-rolls like Caliva’s Toasties and Dogwalkers.
Tackling the Illegal Market
Sales and sentiments across the industry continue to trend upward. However, a few glaring issues will require addressing in the months to come.
Due to either licensing issues, or noncompliance, numerous businesses began 2018 unlicensed. This issue did not stop operations for scores of these companies. To counter the measure, the state Bureau of Cannabis Control started its approach with a cease-and-desist letter to roughly 500 offending establishments. Without any threat of any future action, what if any, follow-up steps remain unknown.
In some cases, shutdowns have occurred, including the January closure of a Laguna Beach church that was an illegal dispensary. More recently, the state stepped up its efforts by threatening Weedmaps to halt its promotion of illegal operations. While the issue is hot in major cities like Los Angeles, Caliva and San Jose haven’t experienced nearly as much of a problem so far. Malley described the impact on business as minimal. “The city of San Jose did a great job working with the dispensaries and many of them are licensed.”
Even if an illegal market were in the neighborhood, Malley and Caliva remain confident that it could not compete with the Caliva experience. “We do not believe that we are competing against the black market,” Malley noted. “Our goal is that the experience that our customers receive at Caliva will keep them coming back. The black market cannot offer what we can when it comes to our variety/quality products, comforting environment, and knowledgeable staff.”
A Change in Taxes Coming?
One shared pain point for California’s marijuana dispensaries and customers are the taxes. Some products are now having prices double that of 2017. While the price jump hasn’t affected Caliva products, it has swayed how much a customer can spend. While this jump is alarming, the worry should only be short-term.
“The new taxes have created tension within the industry,” Malley explains. “But we have seen this happen in Colorado, Oregon, and Washington. Eventually, the market will adjust and prices will go down.”
To a Bright 2018 and Beyond!
2018 has been an exciting and profitable year for adult use sales in California to date. With figures beating expectations on state and local levels, it remains to be seen just how successful the first year can become.
While there are the expected problems, they will be addressed in time. In time, taxes and licensing dilemmas should come under further control. For now, dispensaries can go with the flow and be proactive as possible with regulations. With 420 just around the corner, it’s time to stock up so you can replicate the success of January 1st. With how well the market has performed to date, this 420 could be one for the ages.