The document analyzes cannabis sales trends in 2017. Key points include: - Sales growth slowed after April 2017 but steady growth continued with fewer spikes. - Flower remains dominant but vapor pens saw the fastest growth at 33%. Edibles saw the lowest reduction in growth. - Average basket price and item price fell slightly but consumers bought more products per basket. - More retailers carried more brands, with the largest carrying over 60 brands. The number of products per brand also increased significantly. - Millennials aged 50% of the market and favored stronger products like concentrates more.

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ANALYSIS OF A MATURE MARKET
WA 2017 YEAR-END-REVIEW
3 Years of Sales
Growth slowing but not stopped
What will California or Canada be 3 yrs on
Cannabis after the converts have been converted

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WHAT IS HEADSET?
The data layer for the cannabis industry

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AN INTERCONNECTED SUITE OF PRODUCTS
Operational Intelligence
Intuitive visualizations and reporting enabling retailers to better understand
operations and drive quick decisions, saving time and money.
Market Intelligence
Highlighting market trends so operators can better understand the competitive
landscape, discover opportunity, and keep ahead of new products
introductions.
Supply Chain Intelligence
Supply chain optimizations through data that enables a collaborative
relationship between supplier, distributor and retailer through real-time data
sharing

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WHAT HAVE WE LEARNED
Sales Growth Patterns
Category Sales
Pricing Stablization
Purchasing Habits
Retail Success Drivers

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2017 Growth Rates Slowing After April
Not ceding any gains, just slower pace of growth
Both years slow growth rate Jan/Feb (Holiday)
STEADY GROWTH, FEWER SPIKES
Patterns emerging

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CATEGORY SALES TRENDS
Flower remaining dominant, but emerging runner-ups
Understanding category trends gives us insight into consumer preferences

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Flower market share declined 2.5%
Smaller drop than 2015 to 2016 (8.5%)
Flower slightly more popular in rural stores
WHERE HAVE THE FLOWERS GONE
Slow decline of flower sales

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Flower has lion-share of market, but slowest growth at 3%
Vapor pens led at 33% growth
Edibles lowest reduction in growth, dropping only 25%
CATEGORY SALES GROWTH VS 2016
Flower sales slowest grower

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Popular categories have more new products: Concentrates, Flower, Pre-Roll, Vapor Pens
Edibles lowest percentage new products to sales, saturated market
FADING NOVELTY, NEW OPPORTUNITY
Popularity means more products

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Better retailer adoption of emerging categories
AIP settling in
AIP price gains in Flower / Tinctures & Sublinguals
Technology driven (vapor pens) could see further drops
WORKING OUT THE AVERAGES
Pricing stabilizing across the board

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Average basket price fallen slightly
Average Item Price Falling
Consumers buying 10% more products
BASKET ANALYSIS
Basket representative of a single transaction

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Flower leader of single category baskets
Beverages frequently bought with other products
Edibles, capsules and pre-rolls with low priced items
show highest number of items per basket
83% of baskets contained 1 item
BASKET BUDDIES
Basket trends and patterns

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BASKET BUDDIES (CONTD)
Basket trends and patterns

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70% of stores carrying 60 or more brands vs. 2015 7%
BRAND EXPANSION & ADOPTION
More retailers carrying more brands

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Over 44% of stores performed more than 7,500
transactions per month, up from 34% in 2015
More products = more reasons to come back
2015 1% > 1000 products
2017 11% > 1400 products
PRODUCT DIVERSIFICATION
Brand diversity largest for 2017

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2.5x increase in number of products per brand
Average number of products per brand 140 vs. 63 in 2015
MORE BRANDS MORE PRODUCTS
A diversification machine

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Biggest churn in ‘strain’ based products
More product introductions means more discontinuations
PRODUCTS PUT TO PASTURE
Product discontinuation

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2017 20.7% of market to top 10 brands
9.5% increase vs. 2016
40% of sales brands > 4 categories
8% of sales brands = 1 category
TOP BRANDS TAKE LION’S SHARE
2017 was great for bigger brands

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Millennials account for 50% of market
Gen X 34%
Baby Boomers 16%
Male to Female Ratio: 2:1
WHO’S BUYING ALL THAT WEED?
Millennial males big drivers

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Millennials account for 66% of concentrates
Topicals and Tinctures to Baby Boomers @ 35%
AND HOW ARE THEY BUYING?
Younger audience likes stronger stuff

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THE OUTLOOK IS BRIGHT
2018 and on great for emerging markets
Industry ballooning with every new state that legalizes
Big winners on retail were stores who improved
selection
Brand competition in established markets is the new
narrative
Brands with more categories and products more
successful. Get customers, give new products
Vapor pens rising star growth