Shelf Space in Dispensaries Becoming ‘Pay-to-Play’ As Premium Brands Increase
As the popularity of both recreational and medical marijuana dispensaries increases, a significant number of premium cannabis brands are surfacing to fill the steady demand. While once a game with low competition, the big names in cannabis have begun to battle for prime real estate on the most viewed shelves. You might not see this at all dispensaries, but many in Colorado are finding that premium cannabis brands will pay a pretty penny to have their products featured on premium shelf space.
What’s Causing the Shift?
Between 2017 and 2019 Colorado state saw a 13.27% increase in the number of recreational dispensaries popping up, and in 2017 alone there were 207 brands in the industry that were generating over $100,000 in annual revenue. These comprised of 51 vape brands, 13 topical brands, 43 edibles brands, 92 concentrates brands, and 8 brands that focus on beverages.
In 2019, the market increased by 22.71% as a total of 254 brands hit the six-figure revenue mark. 76 of these were vape brands, among 21 topicals, 51 edibles, 96 concentrates, and 10 beverage brands. More brands equate to more competition for premium shelf space as both supply and demand increase, and both recreational and medical marijuana dispensaries are feeling the impact.
Charging a premium for prime shelf space is known as “slotting”, and it isn’t an uncommon practice. Many retailers have embraced the slotting method since the 1980s as manufacturer brands demand to be seen and are willing to fork over the additional investment to do so. In the world of medical marijuana dispensaries, however, this practice hasn’t been necessary in the past with less demand and is a new process that many dispensaries will have to learn quickly.
How Does This Impact Dispensaries?
Slotting fees can range between $500 to $15,000 per month for the best shelves, and brands are required to pay-to-play if they want to be noticed. While there is debate on whether this has the potential to hurt smaller brands that don’t have the same budgets as others, the concept isn’t likely to disappear as the industry continues to mirror more of the established retail methods used in other markets.
Recreational and medical marijuana dispensaries will need to get used to charging these slotting fees and living up to their end of the bargain. Businesses in 2017 through 2019 may have already encountered the method during the popularity of vape products which saw a significant 49% rise in Colorado during this period, but for many, this pay-to-play era will be a new experience.
There are some potential downsides as well, despite the additional revenue that slotting can generate. Customers that encounter a poor experience buying from brands that have secured prime shelving real estate may question why lower quality options are being displayed centrally in the store. This can hurt the reputation of recreational or medical marijuana dispensaries if it becomes a common occurrence.
What to Know Before You Buy
Slotting fees aren’t new and provide an opportunity for popular brands to compete and showcase their best products, but it’s important to realize that just because they’ve paid to be there, it doesn’t mean that their products necessarily top those of other brands. Also, you won’t see all dispensaries practicing the slotting method, so be sure to conduct your own research prior to purchasing.
To access medical marijuana dispensaries with ease, set an appointment with Medical Alternatives Clinic today to discuss your condition and schedule an appointment with our MMJ doctors in Colorado Springs or Pueblo.