(The opinions expressed in this post are solely my own.)
By Claire Kaufmann | February 27, 2017
Yes, we all know that Q4 was a brutal month for Oregon’s cannabis industry, but just how bad was it? Being the data geek that I am, I wanted to get to the bottom of it. In order to resolve this mystery I first had to study seasonality and how it effects sales in other states. How much of our market slowdown was due to seasonality and how much of it was due to the testing regulations bottle-necking the industry?
What does cannabis sales seasonality look like? Let’s look at Colorado.
While this is, of course, a very small sample size, we can at least start to see how sales move through late summer and into fall. They tend to spike in July, come down some in August, stay steady in September, dip in October, they can dip more in November, and then spike again in December because of the holidays.
This is Oregon…
What we see here is that, yes, we do have some seasonality at play in Oregon. Everything looks fine in July. We see the declines in August, coupled with a bump in September and then boom. October 1st hits and new testing regulations create a huge bottlenecks in inventory for dispensaries. Most dispensaries only had a few edibles, concentrate and topicals to sell.
As you can see, the data don’t lie.
In Colorado, true to seasonal trends, October was a slower month, but note that all product categories were equally effected. In Oregon, we see that sales declines effected some categories more than others. In October edibles sales dropped 22% and topicals dropped 19%. In November, topicals recovered slightly, edibles still suffered but concentrates saw the bulk of the loses, with sales dropping 21%. Note that flower doesn’t drop in November or October, perhaps suggesting that consumers were substituting flower or pre-rolls for other purchases? Just a hypothesis.
But now we get to the core of the problem, look at December.
What I discovered was that, yes (duh,) Oregon cannabis sales dropped in October and November (particularly for edibles and concentrates), but where we really lost out was actually in December, where we failed to see hardly any lift from the holiday season.
In Colorado and Washington, fall declines are resolved in December due to a surge in holiday spending…
But in Oregon, because there was so little inventory to begin with, and because of the testing regulations (and probably due to other issues that I am not aware of,) the market barely lifted at all. This a biggie since dispensary sales on 4/20, July and August and the holidays combined usually make up +50% of total sales.
If I really geek out and apply the average holiday lift growth rates from WA and CO to our categories for December, I calculate that the slowdown cost Oregon cannabis dispensaries/companies more than $2 Million dollars in lost holiday revenue, and cost the state almost $500K in tax revenue. (This is me talking not BDS Analytics, I had to sort of wing that calculation.)
Also, fewer people are going to Oregon dispensaries, so that could be another reason why sales slowed. Is it because they couldn’t get what they wanted so they went back to the black market, or bought wine or beer as gifts instead? I don’t have the data to support that but I bet that is the case.
In fact, daily transactions per location across the state have declined. Here we can see that in December of last year, where we should have seen an uptick in daily transactions due to the holidays, daily transactions actually decreased.
The bottom line:
It will be interesting to see how sales evolve into 2017 – with Jan. 1st creating even more of a slowdown. Thanks for your time y’all. I hope this isn’t pouring salt on your wounds.
If you’re interested in working with me or with BDS Analytics, email me at claire (at) bdsanalytics (dot) come. Let’s chat!