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Data Dive: Vape Scare

by Eric Peterson on December 16, 2019, 04:24 pm MST

After the death of an Illinois man on August 23, 2019, was attributed to a vaping-related illness, the trajectory for legal vape product sales hit its first downturn since cannabis reform catalyzed the sector. More than 1,000 cases followed in nearly every U.S. state, along with more than 20 more fatalities.

The Center for Disease Control concluded in November that vitamin E acetate used as a filler in vape oil on the illicit market caused the outbreak.

Regardless, the immediate effect on vape products in regulated markets was pronounced. According to Boulder, Colorado-based BDS Analytics' Vape Issue Fact Sheet from November 2019, vape sales in California, Colorado, Oregon, Arizona, and Nevada combined dipped 21 percent from August to September. All of the markets saw declines, ranging from 12 percent in Arizona to 28 percent in Oregon.

However, September 2019 still saw gains over September 2018, but growth was slower than any other month of the year, clocking in at just 5.4 percent, according to BDS Analytics data. For comparison, that number was 27.2 percent in August 2019 and 91.3 percent in January 2019. While the fact sheet noted September usually marks the beginning of a seasonal slowdown, the slowdown in 2019 was markedly more pronounced than it was in years prior.

Chart courtesy BDS Analytics

A sustained boom

The total market for vape products in the aforementioned five states was $126.4 million for the month of September 2019. The five-state total for all of 2018 was $1.3 billion, so even the off month was a higher total than average month in 2018.

The Colorado vape market hit $220 million in 2018, as California's soared to $690 million. For the first nine months of 2019, Colorado already eclipsed the 2018 total with $230 million in vape sales (as the category's total share of the market ticked up to 18 percent from 14 percent) as California was up about 20 percent at $660 million through September 2019 as vape shares increased from 27 percent to 30 percent.

For the five states tracked by the BDS GreenEdge platform as of August 2019, vape products' total share of the market was up two points to 24 percent in 2019, as edibles remained static at 16 percent and the leading share of flower and pre-rolled joints dropped from 48 percent from 46 percent.

The number of vape brands also continues to rise. Colorado had 120 as of September, up from 105 in 2018; California is up from 199 vape brands in 2018 to 263; and the five-state total rose to 552 from 415 in 2018, a 33 percent year-over-year uptick.

Chart courtesy BDS Analytics.

BDS estimated the broader U.S. vape market was about $1.6 billion in 2018 and should rise to $2.5 billion in 2019. The firm's forecast doesn't see the vitamin E acetate crisis having a long-term negative impact: The 2024 projection of $10.6 billion represents 35.3 percent of the entire U.S. cannabis market.

The regulated vape market has surpassed the illicit vape market, estimated at about $2 billion to $2.5 billion of the $51.8 billion illicit cannabis market in 2019, whereas the total illicit market is still about four times the size of the regulated market. 

Vaping demographics

BDS research published in Q1 2019 looked at vape consumers in the then-seven fully legal states (California, Colorado, Oregon, Washington, Nevada, Alaska, and Massachusetts) and found 37 percent of inhalables customers (who make up 76 percent of the cannabis consumers)  used vapes and 19 percent preferred vapes. The demographics: an average age of 43, 65 percent male, and 40 percent of them are college graduates.

Users tended to prefer vapes primarily for ease of use, portability, and the ability to be discreet, but health and safety weren't far down the list. That means the biggest long-term effect of the 2019 vape health crisis could be a stronger position for vape manufacturers in regulated markets that are focused on accountability, transparency, and quality in their supply chains.

BDS Analytics found that a whopping 71 percent of new cannabis users are entering the market due to health and medical benefits, more than any other cited reason, another factor that supports the argument for regulated cannabis markets.

This is the latest in a series of data-driven features for CompanyWeek's Cannabis Manufacturing Report produced with the help of BDS Analytics. Headquartered in Boulder, Colorado, BDS Analytics provides businesses with comprehensive, actionable, and accurate cannabinoid market intelligence and consumer research. To learn more about how you can utilize the company's industry-leading market research, visit www.bdsanalytics.com.

Eric Peterson is editor of the CompanyWeek Cannabis Manufacturing Report. Contact him at rambleusa@gmail.com.

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