Marijuana consumers are considering their wallets when purchasing weed, and all they want is cheap marijuana with high THC content.
In the past few years, several marijuana companies have developed high-quality, premium products, and these products are displayed on dispensary shelves. The companies believed that marijuana consumers would prefer luxurious marijuana products, just like the way beer consumers gravitate toward craft beer and aged whiskey in the spirits industry. The older generation and newbies are most likely to buy top-of-the-line marijuana to ease their concerns about the new world of cannabis, the companies thought.
Some of the marijuana companies thought that consumers would purchase a gram of weed at $100, but this is not happening. After Canada launched its marijuana market, marijuana consumers have shifted towards cheaper marijuana products, and mid-to-high quality products have lost their market share.
On a conference call last week, the CFO of Aurora Cannabis Glen Ibbott said that last summer, the Canadian marijuana market had only 2% of cheap weed in their supply. The number has now increased to 17% with cheap pot going for even less than C$9, which is equivalent to $6.79 in U.S. dollars. At the same time, the high-quality marijuana market share has dropped to 17% from the previous mid-30s.
The drop in the premium products market share has affected Aurora Cannabis very severely since the company’s primary focus is selling premium quality products. In the past twelve months, Aurora Cannabis posted $1 billion quarterly losses, and its pot stock prices dropped by 80%. The CEO of Aurora Cannabis Terry Booth announced that he would be resigning and that the company would also implement a cost-cutting plan. Last week Aurora Cannabis announced the launch of a cheaper marijuana product known as The Daily Special.
Marijuana consumers are speaking with their wallets, and all they want is cheap marijuana that has a high THC concentration, meaning consumers want big highs at low cost. Speaking with MarketWatch, PI Financial Analyst Jason Zanderberg said that he expected that the demand for affordable marijuana would eventually arise and that many executives and insiders were caught unawares because it happened earlier than they had expected.
Zanderberg further said that although the production of marijuana is more than its demand in the market today, he did not expect the price of weed to drop this soon with just over one year since Canada legalized recreational cannabis.
These findings in Canada are likely to provide related companies like Champignon Brands Inc. and Plus Products Inc. (CSE: PLUS) (OTCQX: PLPRF) since such insights can reshape the direction that a company had planned to take.
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