Canadian companies hope bargain-basement bud is key to putting brakes on black market

People who buy cannabis by the ounce have been toughest to convert

Canada’s cannabis companies would like to draw your attention to their growing bargain bin.

With legal cannabis sales accounting for just 15 percent of the $908 million the industry raked in as of last September, according to Statistics Canada, pot producers are taking aim at the black market by offering deep discounts.

“There have been a number of companies introducing lower priced products, with a particular focus of hitting around $5 a gram at the retail level,” Robyn Rabinovich, a cannabis business strategist for Hill+Knowlton Strategies, told The GrowthOp.

The trend started with Hexo Corp., which dropped the price of its Original Stash brand to $4.49 per gram in Ontario in late November, Rabinovich said. Aurora soon followed suit, offering its Daily Special brand for $5 a gram.

“Some companies have reduced their pricing and kept the products under their existing brand, while other companies have created value brands that will own the value-focused segment of the market and drive home a unique value proposition within their portfolio,” Rabinovich said.

“Product segmentation is not unique to cannabis, if you look at Johnnie Walker Walker, for example, you can see a perfect example of this through their Red Label, Black Label and Blue Label products,” she said.

Companies are constantly exploring ways to stay competitive in a tough market, Rabinovich said, but price adjustments alone won’t stop the dominance of the black market.

Canopy Growth is hoping Twd. 28, the discount brand it plans to launch in April, will help the legal market win over consumers who are accustomed to buying bud in bulk. The brand will be priced at $4 per gram, but will only be available in one-ounce increments.

“All of this is designed to draw consumers from the illicit market and into legal channels,” Adam Greenblatt, Canopy’s head of business development, told CNBC.

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