Article by Sam Riches, Growth Op
The latest quarterly report from the Ontario Cannabis Store (OCS) says that the legal industry has reached a turning point.
“This quarter marks a milestone for the sector on the critical front of pricing,” Cheri Mara, chief commercial officer at the OCS, writes in the report’s introduction. For the first time, Mara notes, the price of weed from the OCS is less — at an average of $7.05 a gram — than the average price on the illicit market ($7.98 a gram).
“The fact that consumers now have the choice to purchase regulated, tested, traceable product from Health Canada-Licensed Producers [LPs] for prices equal to or below what they are used to paying is a clear step forward,” she writes.
A separate report, released yesterday by market research firm Brightfield Group, points out that the position in the legal market that “has truly surged in recent months is budget brands.”
“Budget brands are well-positioned to compete with the illicit market as they are now comparable in price. The heavy economic impact of COVID will also make consumers more likely to look for cheap bud as opposed to treating themselves to luxury or novel items,” the report states, before highlighting a few licenced producers that are performing well with a budget-conscious approach.
These include Aurora’s Daily Special, Hexo’s Original Stash, Canopy Growth’s Twd., and B.C-based Pure Sunfarms, which is owned by Village Farms, one of North America’s largest and longest-running greenhouse growers.
Mandesh Dosanjh, president and CEO of Pure Sunfarms, disagrees with the “budget” characterization. “We’re not a value brand,” Dosanjh tells The GrowthOp. “Pure Sunfarms is about quality, B.C.-grown cannabis, at prices customers should demand and expect.”
Dosanjh says the company doesn’t think about its products as value or budget offerings, but, instead, as reflective of a legal industry that is still finding its footing and going through a period of price normalization.
“I don’t know how you sell people products at a price point vastly different than what they’re used to,” he says. “And I’m not sure why the other LPs did that.”
As legal producers pushed out high-price pot and the legacy market continued to thrive, Dosanjh says there was an opportunity for Pure Sunfarms to compete at a price point that Canadians are used to.
The company entered the recreational market in September 2019 with eight cannabis strains. Within two months, it was the top-selling brand by weight and dollar sales at the OCS. Three of the seven best-selling strains in the province were Pure Sunfarms strains, including White Rhino, Island Honey and the top-selling Afghan Kush, which currently retails at the OCS from $6.10 a gram.
In March of this year, looking for another way to compete with the illicit market and offer Canadians a format they are used to, Pure Sunfarms released ounce-sized bags — indica, sativa and hybrid strains — for $117.60, taxes in.
“We knew that there was a customer who wanted a large format at a really good price point,” Dosanjh says. “So we said, ‘Let’s service the market with these indica, sativa, hybrid packages, which are very aggressively priced.’”
The timing also worked in the company’s favour. As customers began to stock up in the wake of the COVID-19 shutdown, the 28-gram bags became hot-ticket items. “We saw a huge uptake in that product segment,” Dosanjh says, noting that the company has started offering strain-specific, large-format products, including ounces of Pink Kush and Death Bubba, strains that it believes will resonate with legacy consumers.
It’s not just about hitting notes that customers are already familiar with, however. Though the majority of consumers are still using THC percentage to guide their purchasing, Dosanjh believes that will change in the future and his company, which is in a state of perpetual harvest and grows its cannabis in two greenhouses in Delta, B.C., is always looking for new strains to trial.
Previously, the company sold a strain with mid-levels of THC called Purple Sun God, which was bred to feature elevated levels of cannabigerol (CBG). Like CBD, CBG is a non-intoxicating compound, and early research suggests it could be beneficial in fighting inflammation, pain, depression and anxiety, as well as illnesses like irritable bowel syndrome, Crohn’s disease and glaucoma.
Pure Sunfarms has paused production of Purple Sun God for now, but Dosanjh says the company will likely be bringing it back in the future.