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Exploring the US Vape Market: Pricing Trends, Emergence of All-in-Ones, and Rise of In-House Brands

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The US vape market is a dynamic sector that holds significant opportunities for investors and traders. In his latest report, Pablo Zuanic, a senior analyst and managing partner at Zuanic & Associates, provides insights into the fundamental trends, challenges, and opportunities in this booming market.

The Growth and Position of Vape Sales

Vape sales in the US have been steadily growing, making it the second-largest category in the cannabis market, following flowers. In the third quarter of 2023, vape sales experienced a 3% year-on-year growth, capturing a 24% segment share. However, when compared across 11 states, vape sales lagged slightly behind the overall market pace, growing by 3.2% during the same period.

Price Deflation and the Rise of Disposable Vapes

One of the challenges facing the vape market is price deflation. Prices of vape products, especially in Massachusetts and Michigan, have significantly dropped, with declines of 37% and 33% respectively. Moreover, the increasing popularity of disposable cannabis vape products may trigger regulatory challenges. Despite the price reductions, there are still variations in vape prices among states, with Illinois leading at $66 per equivalent gram.

Vape Penetration Across States

Vape penetration varies significantly by state. More mature markets like California and Colorado exhibit higher rates of vape penetration, while β€œnewer” markets such as Massachusetts and Michigan have lower rates. Pennsylvania stands out with a high vape penetration rate of 37%.

The Rise of All-in-Ones (AIOs)

All-in-one disposables, known as AIOs, are gaining market share at the expense of traditional cartridges in states like California. AIOs have seen a significant increase in sales, outperforming cartridges in most states except Illinois and Nevada. In California, AIOs accounted for over 23% of sales in the third quarter of 2023, representing a significant growth from 11% in the same period in 2021. This trend signals a shift in consumer preferences towards more convenient and user-friendly options.

Local Brand Fragmentation

The vape market lacks distinct national brands, with most brands being local. However, there are a few exceptions such as STIIIZY and Select. Licensing and multi-state operator (MSO) penetration also vary among states. House brand penetration shows significant differences, with higher percentages in Massachusetts, Maryland, and Arizona.

Vape Parts Suppliers

The market opportunity for vape parts suppliers in the US is estimated to be around $700 million, with the global market being even larger. The report categorizes vape parts suppliers into three groups: CCELL distributors (SMORF), Advanced Vapor Devices (AVD), and ALD, the supplier for STIIIZY.

Market Share Trends Among Suppliers

CCELL distributors, such as Jupiter Research (TLLTF) and Greenlane Holdings (GNLN), have reportedly lost shares to AVD, ALD, and other smaller suppliers. Estimates suggest that CCELL’s market share has fallen from over 80% to around 40% in the last four years. This shift is attributed to MSOs diversifying their suppliers.

Future Prospects

Although CCELL has experienced significant share erosion, it is expected to innovate and manage margins effectively, potentially regaining some lost market share. As the cannabis market continues to grow, ample opportunities exist for vape parts suppliers and potential industry innovations.

Photo by E-Liquids UK on Unsplash.

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