Market Overview

Ask Our Experts 1/19/20: Seasonality In Cannabis Demand

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Ask Our Experts 1/19/20: Seasonality In Cannabis Demand

By New Frontier Data

Q: To what extent does seasonality affect cannabis demand in the U.S.?

A: Not much research has been done on the seasonality of cannabis demand in the U.S., though it is common knowledge that demand for cannabis waxes and wanes throughout the year. For example, legal demand for flower on the West Coast has historically decreased significantly immediately following the outdoor harvest, and typically taken several months to rebound.

By examining revenues, spending behaviors, and average transaction amounts, one can calculate how demand is affected by seasonality. Using aggregated point of sale data, there are several key findings to be gleaned.

Before delving into the analysis, some disclosure about how seasonality is calculated: Generally, seasonality compares each period's results from the average results over an extended period, and seasonality is most commonly examined in terms of quarters or months. In this case, New Frontier Data calculated how transaction amounts for flower, edibles, extracts, vapes, tinctures, and topicals fluctuate due to seasonality. Any month with a number close to 1 implies that sales are in line with monthly averages. If there is a number that is greater than 1, there is a high level of seasonality, and any number significantly lower than 1 means that demand goes down relative to average. Months highlighted in green have values greater than 1.

Takeaways:

  • The data supports the conventional thought that spending for flower is seasonal and picks up the closer one gets to the fall harvest, when flower inventory is lowest and prices are higher.
  • Vape spends are rather consistent throughout the year, with minimal seasonality detected in the fall, perhaps due to an availability of more strain which drives new products.
  • Topicals and tinctures appear to be rather counter-cyclical, where spending amounts increase when flower, vape, and extract spends decrease.
  • Edible demand fluctuates over time and has some winter and springtime seasonality, though spending is rather consistent overall.

Retailers and suppliers will utilize such data differently. Suppliers will determine the months where there is the highest level of demand and spending, and increase supply during those months to maximize their revenues. Retailers, conversely, will be inclined to adjust their pricing strategies in months with lower spends (to try and increase demand), or hold off on inventory purchases (to avoid idle inventory).

Currently, the level of sophistication among suppliers' and retailers' use of data in management decisions is rather low (if evolving). As the market matures, however, seasonality data and other economic indicators should play a larger role within the cannabis space.

The post Ask Our Experts 1/19/20: Seasonality in Cannabis Demand appeared first on New Frontier Data.

The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

Image by Eugenio Cuppone from Pixabay

Posted-In: CBD Hemp New Frontier DataCannabis News Emerging Market ETFs Markets ETFs

 

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