This story has been updated with a statement from Wonderbrett CEO Matt Costa.

Headset data on California’s highest-grossing flower brands depicts a hypercompetitive market where the 25 bestsellers account for barely one-third of sales. Insiders say the list, shared exclusively with WeedWeek, shows how premium brands are struggling to adapt in the face of improving quality from greenhouse grows and an abundance of inexpensive, high quality product.

Flower’s market share has fallen to about 37% of the total state market but it still represents the single most important product category. California’s flower market does nearly $2B in sales annually.

• The top sellers include a range of flower types, from budget green house to top shelf indoor 
• Colorado, the second largest state market, has just over $2B in total cannabis sales.

“At the very top, quality still seems to matter,” Arun Kurichety, COO at brand incubator Petalfast said. “But past some of those top tier brands, most cannabis products are still competing on potency and price.” 

• A sales executive at a premium indoor flower brand that has seen some slippage confirmed the assessment: “It comes down to price pressure from value indoor brands.”

Relative to edibles and vapes, execs say flower struggles to command brand loyalty amid an excess of quality products and a culture of buyers always hunting for the latest fire. Plus the barrage of deals available encourage brand hopping. Some execs see a race to the bottom.  

• Joey Brabo, co-owner and critic with media company Respect My Region, noted that the top five brands, whatever their subcategory, all probably get a boost from their large product selection. “They’re able to take up a lot of shelf space,” he said.
• An exec at a large delivery service said that as the market continues to be very challenging, he’s seeing more brands turn to buying white label flower, which delivers higher margins than growing their own.
• In 2018, one observer noted, “house” brands were accounted for about half of the top 30 brands. By 2019, it had dropped to 14% and has held around there since. “In short, the flower market has turned to brands and I believe that is a good thing.”

Amid market conditions like this, conventional wisdom dictates that consolidation is coming. “I almost hope that the market doesn’t quite consolidate the way everyone is predicting,” Evan Schneider, a former exec with delivery service Amuse said. “It would be a shame to lose all the incredible brands that have developed over the years.”

Brands on the move

Here are some of the brands that caught insiders’ attention:

• Almost everyone mentioned Yada Yada, which launched last year. Greenhouse-grown in Santa Barbara Co., it competes with formidable operators like Glass House and Pacific Stone.  Yada Yada’s approach takes pop on the shelf yellow packaging and puts it on affordable bags of unconventional sized products. So consumers get 5g for the price of many an eighth. “Yada Yada is a relatively new top seller for us,” The Artist Tree co-founder Lauren Fontein said. “It performs well because of its entry level price point.”
• Indoor premium brand Cannabiotix, known for its Cereal Milk strain, has won a cult following for consistently high quality flower. It’s prize as the state’s top grossing brand is 3.9% market share. Still, under these circumstances that looks like a moat. Second place Glass House, is at 2.3%. 
• In January 2021, I wrote, based on Headset rival BDSA’s data, that Connected and its sister brand Alien Labs could see the highest gross while selling flower for twice the price of their competitors. The new Headset data shows that the two brands combined gained market share, though they do not have as dominant a position.* Both brands remain favorites of connoisseurs, though observers suggested that as brands scale their prices and quality can come under pressure. Greg Fodell, Connected’s VP, corporate development, acknowledged that market conditions could hit its prices, but said testing at Connected’s newly-opened facility shows product quality has improved.  
• Wonderbrett, which opened a flagship dispensary on LA’s trendy Fairfax Ave. last year saw a drop in share. The drop is “probably a reflection of how difficult it is to be a premium flower brand at the moment,” former Amuse exec Schneider, a fan of the brand, said.
• Value brand Lolo, which has nearly doubled its market share this year, has the pithy slogan “cheap gas & white ash.” Indoor eighths go for $20 and smalls for $16. Bargain hunters snap up the 21g of pre-ground or “ready to roll” flower for $30.

*A note on the data: Headset says its California data comes from approximately 250 storefront and delivery retailers which it then “de-biases” to provide a picture of the entire market. Rival BDSA, which gathers and assesses data with roughly similar methods, declined to provide a comparable list. The two companies’ can differ on individual brands, and each has its partisans. (Headset is a client of WeedWeek advertiser Mattio Communications.)

Update: 7/13/22

Wonderbrett CEO Matt Costa provided the following statement:

The decline in market share can be attributed to two main factors. First and foremost, is the identification of the “good–acting” retailers and partners, and focusing on them as it relates to overall market share. Second, there is a massive problem in California as it relates to AR, with no repercussions for non or late payments. We are a for-profit–company that wants to hyper–focus on selling product, rather than giving it away, or financing other people‘s businesses. As a result of this serious market factor, we have consolidated our efforts to focus only on the goodactors, which dramatically lowered the overall market sales potential. But, this will increase sales efficiency and company profitability. We believe this is a winning strategy given the state of our economy and one that’s necessary for Wonderbrett’s survival. 

In addition, we held the line as it relates to wholesale sales price. This in turn has slowed topline sales because of consumer out-the-door pricing, which is grossly affected by retailer markups and excessive taxes.  We are addressing this with our retailers and partners this quarter and will begin split–testing wholesale price points to find the sweet spot we want to live in.  We are not and have never wished to be the biggest weed brand in California. Rather, we strive to be the best at what we do and believe that some level of scarcity is the best path for success in the premium category.