Not for Tobacco Use Only: The Cannabis Accessories Market
Recreational cannabis market demand is driving sales not just for the green stuff itself, but for marijuana lifestyle products and smoking accessories as well.
The growth of the cannabis market into a multibillion-dollar legal industry has had massive implications for a range of ancillary cannabis-related businesses. First among these is the market for cannabis accessories. Pipes, grinders, rolling papers and a world of other products that, prior to legalization, were socially relegated to the local head shop.
Today, the legalization of adult-use recreational cannabis has allowed retailers to finally dispense with the pretense that a bong is “for tobacco use only”. The legitimization of cannabis now involves not only breaking stigmas and taking previously viewed niche products into the mainstream but also creating opportunity and driving demand for unprecedented growth in the cannabis accessories space.
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High Tide Inc. (CSE:HITI) is an Alberta-based, retail-focused cannabis corporation that designs and sells premium-quality smoking accessories to wholesale clients and retail customers, and also sells cannabis products to retail consumers, through two business segments operating across five subsidiaries: RGR Canada, Famous Brandz, Smoker’s Corner, Canna Cabana and KushBar.Send me an Investor Kit
From provincial government-operated outlets to franchised retail networks, there are now hundreds of new cannabis retail stores expected to open across Canada. On top of selling dried flower and oil extracts, each of these shops needs to carry a wide selection of accessories, in a variety of styles, from a range of brands. Any new cannabis customer coming into a dispensary is likely to also pick up a vaporizer (aka ‘vape’), a water pipe (aka ‘bong’), or at least a package of rolling papers and a lighter. Therefore, each dispensary is likely to see 10 to 20 percent of its sales coming from cannabis accessories.
On top of storefront retail, the online world of cannabis accessory sales is heating up, as smoking accessories are subject to fewer branding restrictions when sold through e-retailers. With cannabis now out of the shadows and its associated stigma waning, cannabis accessories are becoming a viable gift item for both the cannabis connoisseur and amateur alike.
As the legal cannabis industry continues to take shape in Canada and beyond, there will be more retail outlets needing a steady supply of the ancillary products to pair with cannabis. There will also be more consumers looking to replace or upgrade their cannabis experience with an evolving range of accessories. This spells good things for cannabis accessory manufacturers and distributors.
The wide world of cannabis accessories
Just like the cannabis industry itself, the cannabis accessories industry is evolving. By far the hottest category and biggest growth area in the market is vaporizers and everything that goes along with them. Already a rapidly growing market driven by the tobacco industry, vaporizers are seeing a further surge in popularity driven by cannabis legalization as consumers are attracted to the convenient size, lack of cannabis smell and reduced impact on lung health offered by not combusting cannabis through a vaporizer. Vaporizers often come with their own suite of proprietary accessories, like batteries, chargers, cases and other modifications, that carry high margins and bring customers back to the retail store on a recurring basis.
Classic smoking accessories like water pipes, hand pipes and more are not going away either. As these products are usually made of glass and become dirty over time, they need to be at least cleaned or sometimes replaced after a period of use, thereby ensuring that accessories retailers and distributors continue to see repeat business from customers.
The power of branding
Like the cannabis market itself, the cannabis accessories space is full of options for consumers and this makes effective branding all the more vital to stand out and be differentiated in a crowded market. Now that the era of legal cannabis has arrived, today’s cannabis consumers represent a diverse array of people, which creates more branding opportunities than ever before.
Traditionally, there was a counter-cultural approach to branding smoking accessories and that segment of the market is of course still there, but today’s companies are increasingly reaching out to a more mainstream crowd with new and evolving brands. Recognizability is also a strong sales driver which is why, wherever regulations allow, licensing can be a powerful tool for selling accessories. Big cannabis-associated names like Snoop Dogg, the Trailer Park Boys, The Tragically Hip and Cheech and Chong have already signed agreements with smoking accessories companies to market their brands to the cannabis consumer market.
In Canada, the rules that regulate cannabis accessories sales and branding are less stringent that those that govern cannabis products, but there are still important restrictions that smoking accessories companies need to observe. When displayed inside a retail outlet, for example, cannabis accessories will be subject to many of the same restrictions of cannabis itself. Celebrity endorsed products cannot be sold on the same site as cannabis products, which means that such products are primarily sold online or in accessories-only headshops.
Key players in the Canadian cannabis accessories market
Since being founded in 2009, Alberta-based smoking accessory manufacturer and distributor High Tide (CSE:HITI) has grown into one of the country’s major cannabis accessories players. The company operates across six subsidiaries and currently has 19 retail storefronts across Canada between its Smoker’s Corner and Canna Cabana businesses.
In the post-legalization era, High Tide is expanding its network of Canna Cabana stores that sell both recreational cannabis products as well as the company’s accessory products. High Tide plans to eventually have over 120 locations across Canada. Through its wholesale-focused subsidiary Famous Brandz, High Tide has partnered with high profile celebrities and brands including Snoop Dogg, the Trailer Park Boys, Kevin Smith’s Jay and Silent Bob characters, Cheech & Chong’s Up in Smoke, Guns N’ Roses, Sublime and others to produce licensed cannabis accessories.
The accessories market is shaping up to be big and will share the spotlight with the cannabis market itself. In September 2018, Ontario Cannabis Stores, the province’s government-run retail outlet, announced its official cannabis accessory partners. Along with High Tide’s Famous Brandz subsidiary, these include Humble+Fume, Crown Cannabis Canada, Maqabim Distributors, Hiku Brands (CSE:HIKU), Aurora Cannabis (TSX:ACB), Cannavolve, Greenlane and HBI Canada.
From the day Prime Minister Justin Trudeau announced that cannabis would become legal in Canada, there has been a mad rush of investors eager to get involved with the cannabis business. That mad rush has created a follow-on surge of investment in accessories players as the logical extension of the cannabis market. Cannabis legalization is a boon not just for licensed producers growing the commodity products, but also for complementary industries providing the tools to consume cannabis.
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