The legalization of recreational cannabis in over 18 US states and Canada has brought the industry to create new appealing products to satisfy the consumers' demand.

Cannabis flowers are not the only product consumed in legal cannabis states. The use of new, less invasive ways to consume cannabis is rising among enthusiasts.

A recent report by Headset, a data-driven tech company that provides a cannabis market and business intelligence solution for the cannabis industry, shows the relative popularity of cannabis product categories ebb and flow, even in mature markets.

In a nutshell: Flower market share is declining in both the US and Canada. Sublingual strips are driving significant growth to Canada's tincture and sublingual category. Finally, the beverage category is one of the few product categories that saw positive market share growth in both the US and Canada.

In particular, beverages and pre-rolls saw the most robust year-over-year growth rates in the United States in 2021, while tincture & sublingual products in Canada, released in late 2020 with other so-called "cannabis 2.0" products, saw over 3000% growth year over year.

By analyzing the insights, tincture & sublingual products in Canada, which entered the market in late 2020 with other 'Cannabis 2.0' products, saw over 3000% growth year over year.

In the US, beverages (+45%) and pre-rolls (+29%) saw the most robust year-over-year growth in 2021, while the sublingual's category (-8%) declined in total sales.

In Canada, total market year-over-year sales growth was about 61%. Sales of cannabis 2.0 products grew significantly in 2021, although they didn't start selling until late 2020. Tincture & Sublingual category's sales worth $4 million (+3167%). "This is still the smallest category in Canadian cannabis, but still clearly one worth watching," the report read.

Cannabis flower market share is in decline

Surprisingly, the flower category's market share declined in 2021, both in US and Canada markets. Flower's market share was volatile in the US due to the COVID-19 pandemic. The category's share raised in September 2020, but it tailed off starting from May 2021. In Canada, flower market share has dropped steadily over the past two years. 

In late 2021, the top 10% of Flower customers supplied 60% of US Flower sales and 78% of Flower sales in Canada.

Heavy flower consumers had the highest spend between mid-2020 and mid-2021 before that value began to drop in late 2021. Successively, flower spending continued to fall in the US and rebounded upwards in Canada. 

Headset's analysts argued that the decrease in flower market share is probably not caused by less purchasing, but fewer customers may choose flowers. They also explained that the flower market share is higher. Still, basket penetration, which is the core retail driver, is lower than in the US, indicating that Canadian customers purchasing flowers are purchasing relatively more of it per transaction/or relatively more overall. 

"Despite this interesting nuance in the analysis, the most important takeaway here is that in Canada, Flower products are showing up in a smaller proportion of cannabis transactions over time," the report read.

However, the most traditional way to consume cannabis has still the highest-revenue category in both countries, although it is now less significant than ever before.

The cannabis beverage market is growing

The purchasing of cannabis beverages is progressively increasing, according to the report. 

Beverage basket penetration doubled in the US from 2% in January 2020 to 3.7% in December 2021. In Canada, it held relatively steady at around 4% through the past year but then hit an all-time high of 4.5% in December 2021.

Canada's tincture and sublingual category is booming

The top five Canadian product segments include the tincture and sublingual category, pre-rolls, topicals, concentrates, and flowers (and ground flowers). Although mixed strain Pre-Rolls and ground flowers' performance were very positive, tincture and sublingual categories dominated the Canadian market. 

The report highlighted that just a couple of products in particular supplied more than 70% of the category's sales in 2021, contributing to the vast majority of sales.