BDS ANALYTICS Top Ten Cannabis Market Trends for PDF Free Download

BDS ANALYTICS Top Ten Cannabis Market Trends for 2019 Presented by: Roy Bingham CEO and Co-Founder roy@bdsanalytics.com Jessica Lukas VP, Consumer Insights Jessica@bdsanalytics.com

2018 PREDICTIONS https://bdsanalytics.com/bds-analytics-top-10-cannabis-market-trends-2018/

The State of Legal Marijuana Markets: Prohibition is Ending

2018 Second Best Year for Legalization Ever in U.S.

The legal global industry has grown at a 38% 4 year CAGR to $12B 14 Historic Global Legal Cannabis Spending ($USD Billions) 12 10 8 6 $12.2 4 2 $3.4 $4.7 $6.6 $9.2 0 2014 2015 2016 2017 2018 2019 2020 2021 2022 Growth: 38% 40% 39% 33% Source: Arcview & BDS Analytics Cannabis Intelligence Briefing 5

We project a 26% CAGR for the next 4 years to $32 Billion 35 30 25 Historic and Projected Global Legal Cannabis Spending ($USD Billions) 20 $31.7 15 10 5 0 $26.6 $21.5 $17.1 $12.2 $9.2 $3.4 $4.7 $6.6 2014 2015 2016 2017 2018 2019 2020 2021 2022 Growth: 38% 40% 39% 33% 39% 26% 24% 19% Source: Arcview & BDS Analytics Cannabis Intelligence Briefing 6

The USA will continue to be the world s largest market 35 Global Legal Cannabis Spending by region ($USD Billions) 30 25 2.6 3.6 5.9 20 15 10 5 0 0.6 1.2 0.6 $10.5 $3.4 $4.7 $6.6 $8.6 4.9 1.7 4 1.1 2.9 $19.1 $15.8 $13.1 2014 2015 2016 2017 2018 2019 2020 2021 2022 USA Canada ROW Source: Arcview & BDS Analytics Cannabis Intelligence Briefing $22.2 7

Although the top six markets account for 2/3 of USA 2018 dollar sales, it s no longer a Western State phenomenon WA $1B 2018 Dollar Sales OR $700M CA $2.5B NV $600M AZ $700M CO $1.5B Up and Coming Major States: FL MA MI NY? NJ? 8

Legal Cannabis is Evolving

Market share is shifting, as seen in Colorado over the past 4+ years *BDS Analytics GreenEdge POS Retail Data

Across the total US, this trend will continue Source: Acrview & BDS Analytics Cannabis Intelligence Briefing

With Concentrates and Edibles to see continual growth and market share gains in outyears Source: Acrview & BDS Analytics Cannabis Intelligence Briefing 12

But flower is not dead Source: Acrview & BDS Analytics Cannabis Intelligence Briefing

Now what? BDS Analytics Crystal Ball

BDS ANALYTICS 2019 Cannabis Market Trends In no particular order Out and About SOCIAL CONSUMPTION EMERGES Drink Me THE RISE OF BEVERAGES Boom(ers) Baby THE AGING CONSUMER Blurred Lines REC or Med it doesn t matter! THE Cannabinoid (for now) CBD CBD CBD All in the Name BRANDS FURTHER SOLIDIFIED Ease CONVENIENCE IS KING In Control GROWTH OF CONSISTENT, LOW-DOSE, DIALED Discerning Tastes REFOCUS ON THE CORE Value Equation DECLINING PRICES

Social OUT AND ABOUT Consumption Emerges

32% consume BEFORE getting together with others 71% Consume for Social/Recreational Purposes 28% attend a public event (concert, sporting event, etc.) after consuming 18% consume in public places

Social Occasions are already relevant

DRINK ME The Rise of Beverages

Cannabis Beverages: a small, yet growing portion of Edibles 2018 YTD Tracked Edible Sales: $612M* (15% of total sales) Beverages, 5% Pills, 7% Infused Foods, 11% Chocolates, 15% Tinctures, 17% Candy, 44% 2022 TOTAL US BDS Analytics Projections Edibles: Beverages: $3.4B $374M** *BDS Analytics Retail Sales Tracking Data: AZ, CA, CO, OR **Beverage projection is preliminary and may change in the coming months with additional research and modeling

BOOM(ers) BABY The Aging Consumer

BOOMERS: An important and growing segment, BUT they do not fit neatly in a box

67% of Boomer Consumers consume for Health/Medical Reasons Boomers are SIGNIFICANTLY MORE Medically Motivated Likely to consume to replace Rx/OTC Likely to want to ease aches/pains

59% of Boomer Consumers consume for Social/Rec Reasons BUT they also want to... RELAX UNWIND AND HAVE FUN

BLURRED LINES Rec or Med it doesn t matter!

Majority agree with some form of legalization ~80% of US and CAN adults agree there should be some form of legal marijuana usage 64% in US 88% Consumers in Med/Adult States 57% in CAN agree marijuana has medical benefits BDS Analytics Consumer Research: US adults 21+ and CAN adults 18+

In our conservative models, Adult Use sales drive growth in US and CAN 25 Projected US Legal Cannabis Spending ($USD Billions) 20 15 10 5 0 $13.8 $15.7 $11.5 $9.1 $2.6 $6.7 $5.9 $7.1 $7.7 $4.3 $5.3 $6.3 2017 2018 2019 2020 2021 2022 Medical Adult-Use Source: Acrview & BDS Analytics Cannabis Intelligence Briefing 27

AND Canada will grow to $5.4B by 2022, with most coming from Adult Use More conservative than some are forecasting because of limitations like no extracts, potency limits, government ran/operated, etc. As restrictions are lifted, the market size will grow $6.0 Projected Canada Legal Cannabis Spending ($USD Billions) $5.0 $4.0 $3.0 $2.0 $2.1 $3.1 $3.9 $4.9 $1.0 $0.0 $0.7 $0.6 $0.6 $0.6 $0.6 $0.5 $0.5 2017 2018 2019 2020 2021 2022 Medical Spending Adult-Use Spending Source: Acrview & BDS Analytics Cannabis Intelligence Briefing 28

Millions Spectacular growth of Adult Use markets since opening $120 $100 $80 $60 $40 $20 CO - Adult Use CO - Medical WA - Adult Use OR - Adult Use OR - Medical $0 *BDS Analytics GreenEdge POS Retail Data

Medical Markets thrive in the absence of an Adult Use market $70 $60 $50 $40 $30 $20 $10 $- AZ Medical ($Millions) AZ Medical *BDS Analytics GreenEdge POS Retail Data

BUT looking at Medical Channels vs. Adult Use Channels is not that simple 71% Recreational & Social 33% US Consumers 28% CAN Consumers Health or 56% Medical Consume for both Recreational & Social AND Health or Medical reasons BDS Analytics Consumer Research across Cannabis Consumers: US adults 21+ in Legal Level 1 States and 18+ Total Canada

The more open the market, the more products, education, de-stigmatization and greater acceptance of health or medical cannabis use for me 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Level 1 Level 2 Level 3 Level 4 Level 5 MED/ADULT STATES PAST 6 MONTHS Recreational/Social Health/Medical RESTRICTED STATES PAST 2 YEARS Base: US, Q3 2018 32

Even among Pain Management Cannabis Consumers, consumption is multi-faceted Base: US Level 1 and 2 States, Q1 2018 58% of past 6 month Consumers are PAIN MANAGEMENT CONSUMERS Recreational & Social 73% Pain Management Consumers Health or Medical 66% Pain Management Consumers Quality of Life 46% Pain Management Consumers

It is NOT just about THC CBD is exploding

THE Cannabinoid

Consumption of non-psychoactive Hemp/CBD is much more prevalent among cannabis consumers % of Adults who have consumed non-psychoactive hemp/cbd % of who have consumed Hemp/CBD Products By Consumer Type Rejecter Acceptor Consumer Q3 2018 C11H. Which of the following products containing non-psychoactive hemp, hemp extracts, CBD, or cannabis terpenes have you consumed? BASE: Based on weighted completes of adults living in Canada Based on weighted completes of adults living in the US Indicates significantly higher at 95% CI

In the US, nonpsychoactive hemp/cbd product purchasing largely falls in ingestibles (or edibles) and topicals Ingestibles: 53% Oils, Tinctures Food Pills, capsules, tablets Supplements/Vitamins Beverages Top Categories Purchased (outside of dispensaries): Topicals: 24% Creams, balms, salves Beauty Care Skin Care Patches Inhalables: 11% Other: 12% Base: Total US and Total CAN, Q3 2018

What we see in consumer claimed purchasing in the general market mirrors regulated dispensary channel dollar sales The dispensary channel AND shoppers are a lead indicator of where the CBD market will go ALL BDS ANALYTICS TRACKED DISPENSARY CHANNEL 2018 High CBD, 9% DISPENSARY CHANNEL HIGH CBD MARKET SHARE 2018 Others, 5% Topicals, 14% Non-CBD, 91% Concentrates, 28% Ingestibles, 54% Up from 5% in 2017 BDS Analytics 2018 YTD (through Oct) GreenEdge Retail Sales Data *TOTAL DOLLAR SALES 2018 AZ, CA, CO, OR

Consumer education is needed How much do you agree or disagree that...? There are no differences in the effects of CBD or THC 69% incorrect or do not know 69% incorrect or do not know Any product containing hemp will cause effects such as feeling high, relaxed, sleepy, etc. 66% incorrect or do not know 65% incorrect or do not know Base: Total US and Total CAN, Q3 2018

ALL IN A NAME

Branded products continue to see tremendous growth ~45% of sales Colorado Cannabis Retail Dollar Sales Branded vs. Generic Products 19% 26% 32% 38% 44% 81% 74% 68% 62% 56% 2014 2015 2016 2017 2018 *BDS Analytics GreenEdge POS Retail Data 41

Branded products continue to see tremendous growth ~45% of sales Colorado Cannabis Retail Dollar Sales Branded vs. Generic Products 19% 26% 32% 38% 44% COLORADO EDIBLE SALES: 81% 96% BRANDED 74% 68% 62% 56% 2014 2015 2016 2017 2018 *BDS Analytics GreenEdge POS Retail Data 42

Some brands take the express route to the top 25% Market Share Trends of Top Five CO Edible Brands 20% 15% 10% 5% 0% 2015 Q1 2015 Q2 2015 Q3 2015 Q4 2016 Q1 2016 Q2 2016 Q3 2016 Q4 2017 Q1 2017 Q2 2017 Q3 2017 Q4 2018 Q1 2018 Q2 2018 Q3

The battle is on for brand share leadership Top 5 Brands share in concentrates CO % 39% 65% 61% 35% Others Top 5 Q3 2015 Q3 2018

EASE Convenience is King

Location is key when choosing a dispensary

LARGELY influenced by the convenience of the consumption form when choosing a product 50%are qualifying as a top 5 influencer THUS DOLLAR SALES. VAPE +67% EDIBLES +28%

The ULTIMATE Convenience: Delivery matters across all industries; Cannabis is no different

Growth of IN CONTROL Consistent, Low- Dose, Dialed

33% of Edibles Consumers prefer Low-Dose (<10mg) Micro (<2.5mg): +108% Low (>2.5, <10): +71% Edibles: +28% 40% of Edibles Consumers have chosen products based on CBD content of these, 27% PREFER 10:1 or HIGHER High CBD: +67%

Consistency AND trust matter; Consumers want a good experience Among Consumers Top Hurdles Among Non-Consumers #1: It does not fit my lifestyle #2: I don t like how it makes me feel

Consumers are STRONGLY influenced by familiarity/recommendations It is something I have used before (60%), Friend/Family Recommendation (45%), Budtender Recommendation (41%)

DISCERNING TASTES Refocus on the Core

Willing to Spend MORE for Quality Care that Products are LOCALLY Grown Keep up with the LATEST Technology Prefer LOCAL, NATURAL, ORGANIC, SOCIAL INTERSTED Brands DISCERNING consumers are influencers, early adopters, and lead indicators

More likely to be influenced by Processing Method, Terpenes, Additional Cannabinoids, Growing Methods, Where Grown, Natural/Organic, Packaging DISCERNING consumers are influencers, early adopters, and lead indicators

VALUE EQUATION Declining Prices

Price is still the #1 driver of consumer product choice

Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Oregon has seen steady declines in flower price per gram $12.00 Average Retail price of flower in Oregon $ per gram (pre-tax) $10.00 $9.27 $8.00 $6.00 $4.00 $4.27 $2.00 $-

Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 All category prices have steadily decreased in CO concentrates down 2% in 3 years Average Retail price of concentrates in Colorado (pre-tax) $35.00 $30.00 $25.00 $20.00 $15.00 $10.00 $5.00 $30.14 $23.97 $-

But in California the already high prices continued to rise and actually rose faster after January 1, 2018. Average Retail price of edibles in CA (pre-tax) $25.00 $20.93 $20.00 $15.00 $14.43 $10.00 $5.00 $-

Fewer, Bigger, Better (???)

It s a New Game: What does that mean for your business? Presented by: Roy Bingham CEO and Co-Founder roy@bdsanalytics.com Jessica Lukas VP, Consumer Insights Jessica@bdsanalytics.com