Cannabis Concentrates in 2021: A Grasslands Trend Report by Grasslands

CANNABIS CONCENTRATES IN 2021: A GRASSLANDS TREND REPORT

FEATURING INSIGHTS FROM: Clear Cannabis Inc. • DaVinci Vaporizers • Olio • PHYX by Spherex • Seed & Smith • Willie’s Reserve

INTRODUCTION Cannabis flower (a.k.a. bud) has been concentrated and ingested for centuries—from hashish, the early compressed form of cannabis that spread through Central Asia and the Middle East pre-1100s, to the cannabis-based tinctures that lined U.S. corner store shelves in the 1910s. While already an intoxicating plant on its own, cannacurious consumers have long invented, experimented and passed along ways to amplify the effects of the cannabis plant, for both medical use and recreational enjoyment. In 2021, we are living in one of the most culturally and politically cannabis-friendly climates in history, with governing bodies moving toward national legalization. While cannabis flower is the bestseller in most legal markets, cannabis concentrates are gaining traction fast, offering producers a way to tweak the cannabis experience, adjusting flavors and potency to better fit the desired experience of cannabis consumers. According to Marijuana Venture Magazine, data from 2019 industry sales found flower still held the largest market share at 37%, but vapes (32%), edibles (13%) and extracts (10%) took up the next three spots—and if we add together the two concentrate-centric categories, including vapes and extracts, we see that those combined outsold cannabis flower. With expanded consumer education and familiarity, we see individuals venturing away from their usual flower order, fuelling newfound demand in the fast-rising concentrates market. The Covid-19 pandemic has been incalculably problematic for every industry, cannabis included. After cannabis was deemed an essential industry by many state governments, dispensaries saw increased sales and new buying trends while adapting to social distancing and other guidelines. According to Marijuana Business Daily, concentrates sales grew more than 40% in 2020, and the category accounted for a larger share of the cannabis market than any other year. With all the extra time spent at home, consumers are proving to be more experimental in their purchasing habits as they veer away from flower and explore new forms of concentrates, including resin and rosin, new dabbing and vaping technology, and stronger edibles. In Grasslands’ First Annual Concentrates Trend Report, industry-leading experts and pioneers of the legal cannabis market break down the industryshaping product decisions consumers and industry stakeholders will make in the coming year. These experts and trendsetters share their predictions for the concentrates category on: • • • • • •

Scientific advancements that elevate and transform ancient hash-making techniques Health-conscious consumption methods and purchasing trends Pandemic-inspired shifts among long-held social mores Cannabis concentrate-infused beverages sweeping the wellness world Vaping consumer preferences for enhanced flavor and new tech The driving demand for premium concentrates

TABLE OF CONTENTS 4

A Healthier Way to Consume Cannabis: Clean-Tech Vapes Give Consumers Control, Peace of Mind

When Sharing is Not Caring: Trending Toward Single-Use Cannabis Vape Pens Amid Covid-19

Proprietary Vape Pods Are The Future of Legal, Lab-Tested Cannabis Concentrates

Consumers Value That “Fresh Cannabis” Taste and Experience, Even With Their Concentrates

Premium Product Demand Emerges in Solventless Cannabis Concentrates

Conclusion

Meet the Experts

Glossary

TREND #1:

A Healthier Way to Consume Cannabis: Clean-Tech Vapes Give Consumers Control, Peace of Mind WHAT’S NOW: Following the 2020 election, over 100 million people will have access to legal cannabis, and 60% of those consumers report their health is a driver for cannabis use. High-tech cannabis vaporizers allow consumers to tailor their consumption experiences by controlling temperature, dose and airflow. But few modern vaporizers combine those features with clean-tech hardware designed to protect consumers’ health.

WHAT’S NEXT: With more vaporizer options than ever before, consumers are trending towards higher-end hardware they can trust. And through the use of medical-grade materials, clean-tech vaporizers can prevent contaminants from entering the airpath while the various control features put the consumer in the driver’s seat of their high.

Cortney Smith CEO & Founder

TREND #2:

When Sharing is Not Caring: Trending Toward SingleUse Cannabis Vape Pens Amid Covid-19 WHAT’S NOW: Consuming cannabis has always been a social activity—even via the ultra-modern consumption methods of dabbing and vaporizing. Now consumers are reevaluating the sharing-iscaring mantra as we’re limiting respiratory proximity in the face of a global pandemic.

WHAT’S NEXT: Covid-19 has impacted every single social activity, smoke seshes included. As consumers transition to a “Puff, puff, don’t pass” model of consumption, we’re also seeing changing purchasing habits—with the sale of personal single-use cannabis vapes picking up speed in 2021 in markets across the country.

Rick Batenburg III Chief Investment Officer

TREND #3:

Proprietary Vape Pods Are The Future of Legal, Lab-Tested Cannabis Concentrates WHAT’S NOW: Convenience, price and potency are some of the main reasons consumers choose vaporizer cartridges, typically purchasing the ubiquitous 510-thread carts that were the main driver in concentrate sales leading up to the vape (or EVALI) crisis. While practical for cannabis companies, this widely available format has created a vast illicit market popular with bootleggers selling illegal, unregulated and sometimes deadly products, as witnessed in the bootleg-centric vape crisis.

WHAT’S NEXT: Despite EVALI, concentrate cartridges are back on track, with October 2020 reporting sales of more than $160 Million and plenty more to come in 2021. This is, in part, because brands are prioritizing a new type of vape tech—proprietary vaporizer systems, such as CCELL’s DART. Known for their singular design, these vape systems (including interlocking pods and batteries) are specific to the manufacturer and therefore significantly less hackable. Consumers are not only looking for a better consumption experience, but a safer consumption experience.

Brooks Lustig Chief Executive Officer

TREND #4:

Powered by Calorie-Free Concentrates, Cannabis Beverages Are Going Mainstream WHAT’S NOW: 2020 shone a spotlight on respiratory illness and lung disease, affecting the consumption patterns of cannabis consumers nationwide. Those looking to avoid smoking and vaping are leaning into alternative consumption methods such as edibles. And those interested in finding healthier vices are looking for alternatives to pot brownies and sugarcoated weed gummies.

WHAT’S NEXT: Enter cannabis beverages, which introduce a third choice to leisure consumerism. By capitalizing on consumers’ shifting preferences, longestablished brands like Anheuser-Busch and Molson Coors are already expanding their cannabis drink offerings and developing partnerships for infused beverage manufacturing—and they join a thriving native cannabis market that is ready to meet the wellness-driven consumer demand ahead.

Dan Gardenswartz CFO & COO

TREND #5:

Consumers Value That “Fresh Cannabis” Taste and Experience, Even With Their Concentrates WHAT’S NOW: Vaporizer cartridges have become immensely popular, slated to make up nearly 80% of overall U.S. concentrate sales in 2022. A majority of consumers embrace beginner-friendly vaping, and they’re choosing price-friendly cannabis distillate vapes because they value THC potency over taste and flavor.

WHAT’S NEXT: While there will always be price-per-milligram shoppers, live resin vape cartridges are the next big thing. Modern consumers are looking for concentrates that preserve the botanical aroma and translate into a unique flavor profile, and live resin is considered a novel cannabis concentrate due to its distinguished qualities and unique production method. Vaporizing live resin concentrate is as close as you’ll get to smoking cannabis flower (without actually smoking the flower), and more consumers are making the switch for this “fresh cannabis experience.” Live resin is a boutique concentrate that will skyrocket in 2021.

Elizabeth Hogan VP of Brands

TREND #6:

Premium Product Demand Emerges in Solventless Cannabis Concentrates WHAT’S NOW: Products favoring THC potency have long dominated the concentrates market. Many brands create concentrates such as sugar, shatter and wax to cater to more experienced consumers while keeping production costs low. But as with any other CPG market, consumers’ tastes are shifting—creating space for different products at varying price points.

WHAT’S NEXT: Consumers have become savvier on how their products are manufactured, and many have recognized that solventless concentrates, such as rosin, offer broad cannabinoid and terpene profiles without the trace residual solvents. While the process for creating rosin is more expensive and time consuming, similar industries like wine have found that in the midst of pandemic-driven uncertainty, consumers are more likely to treat themselves to higher priced goods. In 2021, cannabis consumers turned connoisseurs will purchase more solventless concentrate products, like rosin and water hash, driving greater demand for craft products for dabbing and vaping.

Zack Klimko Partner

CONCLUSION As cannabis continues to be legalized and normalized around the world, there will be a growing consumer preference for innovative and convenient ways to get high— and that demand will fuel even more research into new extraction methods as cannabinoids and terpenes will continue to drive the concentrates market. The stay-at-home orders of 2020 have bumped cannabis sales in all legal states. As new cannabis markets evolve from emerging to mature, concentrates are the longplay category that will establish the market leaders of the next decade. Brands that are dedicated to safe extraction practices and quality manufacturing, paired with strong marketing and storytelling, will be well positioned to capitalize on the surging consumer demand for concentrates.

MEET THE EXPERTS

Cortney Smith is Founder and Chief Executive Officer of DaVinci, a national advanced vaporizer technology brand that leads the industry in safety and innovation. His role includes directing the overall operations and resources of the company, establishing long-range strategy and initiatives, and spearheading the development of new products.

Rick Batenburg III is a Founding Partner and Chief Investment Officer of Cliintel Capital Management Group (CCMG) and on the Board of Directors at Clear Cannabis, Inc. After cannabis was legalized in Colorado, January of 2014, Rick saw an opportunity in an emerging market. Rick launched CCMG as a first of its kind vertical conglomerate of cannabis companies that are licensed legally through the funding with the Marijuana Enforcement Division and the SEC.

Brooks Lustig co-founded Seed & Smith in 2014 and has since used his extensive experience in business growth, cultivation best practices and regulatory compliance to help launch the company into one of the most successful brands on the market. Seed & Smith today is one of Colorado’s most awardwinning producers of flower, concentrate, and vapor products and leads the industry in transparency and purity practices.

Daniel Gardenswartz is Chief Financial Officer and Chief Operating Officer of Spherex, an innovative cannabis extraction company and producer of topshelf vape cartridges, dablicators and infused products. He oversees all financial aspects of the company; assists in operational management, including global supply chain activities; and directs brand-guided growth strategies.

Elizabeth Hogan is Co-Founder and Vice President of Brands for GCH Inc. Established in 2014 with artist and advocate Willie Nelson, GCH Inc. owns and operates the flagship brands Willie’s Reserve and Willie’s Remedy. Ms. Hogan leads development of the company’s brand portfolio, and is responsible for strategy, marketing and aligning product and partner opportunities in the evolving consumer cannabis market. Her efforts have helped elevate the Willie’s Reserve cannabis product line and Willie’s Remedy hemp-derived products as iconic American brands.

Zach Klimko is Partner at Olio and has spent the better part of a decade in the regulated cannabis space, with a wide variety of roles that include operations management in cultivation, manufacturing and retail. He has worked with Veritas Fine Cannabis Co-Founder Mike Leibowitz on a variety of cannabis business endeavors, and currently oversees more than 120 employees, eight facilities and 14 business licenses.

GLOSSARY 510-thread Cartridge — A 510-thread cartridge is the most common type of vape cartridge. A vape cart is a glass cartridge pre-filled with a gram or half-gram of cannabis oil. This oil contain various combinations of cannabinoids and terpenes extracted from cannabis. 510 describes the type of threading that is used to screw the bottom of the cartridge to the appropriate vape battery. (Leafly) Concentrates — Cannabis oils, concentrates, and extracts—these all serve as umbrella terms under which sits a warehouse of different products: vape oil, hash, tinctures, dabs, CBD oil, and every other product dreamed up by cannabis chemists. (Weedmaps) CPG — Consumer packaged goods (CPG) are items used daily by average consumers that require routine replacement or replenishment, such as food, beverages, clothes, tobacco, makeup, and household products. (Investopedia) Dab / Dabbing — The act of “dabbing” concentrates onto a hot surface, producing a vapor. Can also used as a noun, meaning a small amount of concentrate (a dab’s worth). (The Cannabist) Distillate — A runny, translucent oil devoid of the waxes or undesirable compounds from the original plant. Distillate is desirable due to its potency and versatility. It can be used to dab, vaporize, and mix in as an ingredient in edibles, topicals, and other products. Distillate concentrates are achieved through an extensive refinement process that separates compounds from cannabis plant matter. (Weedmaps) EVALI — The name given by the Centers for Disease Control and Prevention (CDC) to the dangerous, newly identified lung disease linked to vaping. The name EVALI is an acronym that stands for e-cigarette or vaping product use-associated lung injury. (Yale Medicine) Live Resin — The process, as well as the resulting concentrate, that is extracted from fresh cannabis plant material that was not dried or cured. This method is used to retain the terpenes that are lost during the drying and curing process. Products that have been extracted using the live resin process — freezing the cannabis plant material and extracting it — have been associated as high-quality, flavorful concentrates due to the high amounts of terpenes. (Weedmaps) Price-per-milligram Shoppers — Used to describe budget-conscious consumers who purchase cannabis products by calculating how much money is being paid per milligram of THC or CBD in the package. Rosin — Rosin refers to an extraction process that utilizes a combination of heat and pressure to nearly instantaneously squeeze resinous sap from your initial starting material. The term “rosin” originated as a method of making a product used to create friction with violin bows. (Leafly) Shatter — Shatter is one of the most versatile textures. In fact, many other textures, such as budder and crumble, start off as shatter. Shatter is known for its resemblance to brittle glass, which shatters on contact, but can also have a “snap and pull” consistency that gives it elastic-like properties. (Weedmaps) Solventless Concentrates — Coined originally by internet cannabis personality and Colorado resident Paul Tokin, solventless wax (or sometimes solventless oil) refers to the highest grade of water hash, which looks and smokes similar to solvent-based hashes and is capable of being dabbed. (The Cannabist) Sugar — A term used for any concentrate that has a similar consistency to wet, sappy sugar. They’re not uniform in nature and typically have colors ranging from a bright yellow to a deep amber. (Weedmaps) Water Hash — Water hash is one of the most popular methods for making hash at home because it only involves a set of microscreen extraction bags, ice, and water. (The Cannabist) Wax — A kind of cannabis concentrate named for its appearance and texture. It has an opaque appearance and a thick, malleable, and — surprise, surprise — wax-like consistency. (Weedmaps)