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[email protected] | www.intro-blue.com | Volume 54 | 7/29/20 CANNABIS BRANDS – THE RACE FOR THE TOP SPOT HAS JUST BEGUN In our June 24 Stash report, we discussed why brand presence, shelf space, and market share are among the key KPIs for cannabis investors to monitor. We had also highlighted that cannabis brands are a state-specific asset, with no dominant brand across U.S. states, suggesting that local brands currently have an edge over national players that are yet to establish themselves as the number one choice of consumers. Our thesis was supported by a July 7 news article in the Marijuana Business Daily which found that the addition in number of cannabis brands in the U.S. is outpacing the increase in retail store count, resulting in increased competition for retail shelf space in key adult-use markets. This is forcing brands to pay slotting fees ranging from $500 to $15,000 per month for premium space on cannabis retailers’ shelves. This pay-to-play practice/slotting fees – especially in key in key states like California and Nevada – has gathered pace with the rise in popularity of cannabis products (especially vape products), implying that consumers are relatively more brand conscious while buying cannabis in other product formats vs. when buying dried flower. Lack of dominant brands is a reality in the Canadian market too, as brand awareness is not translating into higher sales with consumers basing their purchase decisions on price rather than brand names or packaging. Canada legalized sale of cannabis products – Cannabis 2.0 – in December 2019 and a survey of 3,000 cannabis consumers by Brightfield Group found that despite the brand building push by most LPs, the vast majority of brands have awareness levels ranging between just 1% and 15%.