INSIGHTS BLOG > Will High THC Cannabis Continue to Dominate Markets?

Will High THC Cannabis Continue to Dominate Markets?

Written on 08 May 2022

by Ruth Fisher, PhD

What Led to the Rise of High THC Cannabis?
Multidimensional Cannabis Dynamics
Flaws in the Argument For High THC Cannabis
Shifting the Paradigm
References

Demand for high THC potency currently drives the cannabis flower market. High THC cannabis will, indeed, get people high, but consumers seeking a more nuanced experience generally do better with cannabis that contains lower concentrations of THC and higher concentrations of other cannabinoids and terpenes. Many consumers, especially those in more mature markets, have learned this. Yet, demand for high THC cannabis still persists, even in more mature markets. As cannabis grower Sayra Small notes, “The most common question I get is ‘what is your highest THC strain?’ I inwardly roll my eyes because we all know that doesn’t make the best flower.”[1]

This analysis seeks to address two questions about consumer demand for high THC cannabis:

1. How did high THC cannabis come to be so popular?

2. Will demand for more nuanced cannabis products eventually come to dominate demand for high THC products?

What Led to the Rise of High THC Cannabis?

Recreational cannabis in the US has historically existed within the realm of black markets. Also, rec consumers have historically consumed cannabis to get high, that is, they have tended to value a single attribute of cannabis: its psychoactive properties.

Black Markets Concentrate Attributes

Due to the risky nature of black markets, suppliers tend to focus on products with concentrated amounts of desired products attributes. Opium in black markets was replaced by morphine, then by heroin, and much of that by crack. During Prohibition, alcohol black markets replaced beer with distilled spirits and moonshine.[2] Similarly, black markets in cannabis have focused on psychoactive flower (whether or not they recognized that THC was responsible for the psychoactivity), and suppliers have used technology to increase flower potency (THC concentration) over time.

When the desire to get high drives demand for cannabis, then the cannabis that best satisfies that desire – high THC potency cannabis – is deemed high quality cannabis. In other words, in the world of cannabis, for those who use cannabis to get high, quality has become synonymous with THC concentration. And when newbies enter the cannabis market seeking quality product, they quickly learn that quality means concentration.

Black Market Take-It-Or-Leave-It Transactions

During prohibition, black market supply was limited. The typical scenario was one in which a consumer who wanted to get high would find a trusted dealer to provide a sample of cannabis for the consumer to buy. The supplier generally had a single product for sale, and the consumer was faced with a simple take-it-or-leave-it offer: “Do you want to buy this sample at this price, yes or no?”

Users may have recognized that they had experienced different effects in the past from different samples. However, without (i) any real understanding of what causes those different effects (other than perhaps the traditional sativa-indica distinction), or (ii) any real options as to selection, the issue was really moot.

Under these conditions, that is, take-it-or-leave-it transactions, there was no real incentive for sellers or buyers to figure out what was responsible for differences in user experiences. And even if the desire was there, the science and technology was not widely available (if available at all) to figure it all out.

Multidimensional Cannabis Dynamics

Note: during the discussion, I use the following terms interchangeably:

Multidimensional cannabis

Multi-attribute cannabis

Variety cannabis

Nuanced cannabis

Legalization Enabled Multidimensional Cannabis

Eventually, however, cannabis was legalized, at which point dispensaries appeared with shelves full of different products. The take-or-leave-it propositions were replaced by, “Which product do you want?” When faced with such a decision, the response is generally, “Well, what’s the difference between the products?” Once consumers were given choices and sellers were forced to explain the differences, then suddenly it was not only desirable, but imperative, for people to figure out the relationships between cannabis product characteristics and the experiences they generated in users. All of a sudden there was a clear incentive to figure it all out.

Multidimensional cannabis markets have been enabled by the evolution of science and technology to support (i) a better understanding of how to generate predictable, desirable experiences from cannabis and (ii) the cultivation of varieties of cannabis products that will achieve desired outcomes.

Researchers, cultivators, and consumers have discovered that multi-attribute cannabis products offer nuances in psychoactivity (e.g., a “head high” vs. a “body high”), as well as nuances in effects on, for example, mood, energy, clarity, and appetite. A comparison between high THC cannabis and more multifaceted cannabis would thus appear to be like that depicted in Figure 1.

Figure 1

So, a more sophisticated recognition of the varied experiences that cannabis has to offer – other than simply enabling people to get wasted – would thus define quality in terms of the quality and diversity of cannabis compounds, together with the factors that promote such diversity. That is, quality cannabis would consider such factors as:

The diversity and potency of compounds it contains (constituent compounds, individual concentrations, and concentration ratios)

The nature of cultivation (organic vs. inorganic, indoors vs. greenhouse vs. outdoors)

The nature of curing methods used (dried vs. frozen)

The nature of extraction methods used (solvent-based vs. solventless)

Attention to handling and packaging (e.g., to preserve compound contents)

High THC Is Squeezing Out Variety

As cannabis markets have matured, many consumers have, indeed, become more sophisticated, and demand for more varied cannabis products has emerged. Sophisticated consumers increasingly seek more nuanced cannabis experiences provided by products that contain different combinations of minor cannabinoids and terpenes.

Yet, the staying power of the “quality = high THC” paradigm is strong, which, perhaps, is not so surprising. The idea that potency defines quality is such a clear, convenient, and just plain simple concept that makes it excessively quick and easy for anyone to distinguish high quality products from the rest. No fuss, no mess. The ease and intuitiveness of it all makes it so very easy for people to latch onto the paradigm and so very difficult for them to give up.

Thus, even in more mature markets, demand for high THC flower persists, and, unfortunately, in many cases it’s driving out supply of more varied cannabis products. For example, Brad Bogus of Confident Cannabis says that people in the industry know THC potency is not the most important factor in quality cannabis, “but the market is out of step”:

Every operator I talk to exhibits a desire to lower the THC potency of the market, but at the same time they’ll also talk out of the other side of their mouths with the comment “but high THC is what sells.”[3]

The same holds true outside the US. In Canada, for example, Nick Sosiak, CFO of Quebec-based Cannara Biotech, laments that “THC reigns supreme”:

If you have the highest THC, you’ll beat all your competitors... You can put it in a baggie and write 35% THC on it, and it’ll win out.[4]

Flaws in the Argument For High THC Cannabis

“Enlightened” cannabis consumers believe that people who just want high THC cannabis are uninformed. The enlightened believe that high THC’ers would achieve better experiences by understanding cannabis nuance and selecting those products that will provide a more tailored consumption experience.

High THC’ers don’t want to hear it. They just want to get high. They argue that since THC is the compound in cannabis that makes you high, then focusing on high THC cannabis is the most cost-effective way of getting high. In a nutshell, high THC cannabis provides the most bang for the buck.[5]

Taken to its essence, the first part of the argument is equivalent to saying: since THC is the compound that generates intoxication, and since the intent is solely to experience intoxication, then THC is the only important compound in the plant. So, then, the most cost-effective way to buy cannabis must be to buy cannabis with the highest ratio of THC to all other plant compounds and biomass. In this case, though, wouldn’t THC isolate be the most cost-effective cannabis? Why bother with flower? Why not ingest isolate?

The second part of the argument in favor of high THC cannabis is that it provides the most bang for your buck. Yet, this isn’t usually the case: The price of high THC cannabis often runs at a premium,[6] which means you pay a higher price per mg of THC in high THC cannabis than you pay per mg of THC in cannabis that is less concentrated. In this case, high THC cannabis provides the most bang for your buck only in the sense that you ingest a larger number of mg of THC per hit. But that metric is generally meaningless, because you can always make up for lack of potency by taking larger doses. If you can achieve the same number of mg of THC at a lower price simply by taking an additional hit or two from a lower potency product, then you actually achieve less bang for your buck – not more – with the high THC cannabis.

An alternative counter-argument to the idea that high THC provides the most bang for your buck is the fact that people respond differently to THC.[7] While some people can get wasted on 10 mg (or less) of THC, others may require twice as much to achieve the same level of psychoactivity. In other words, it’s not the absolutely amount of THC that matters, but rather, the amount needed, given a particular individual’s tolerance. In other words, someone with a relatively low tolerance doesn’t need much of even a moderately potent cannabis product to achieve a high level of psychoactivity. In this case, buying high THC cannabis is overkill – the users is overshooting the amount of THC needed to get totally wasted. So, again, given the price premium on high THC cannabis, the person with a low tolerance will get more bang for their buck with a moderately strong product.

Yet another counter-argument to be made to the high THC cannabis claim is that what’s important for the level of psychoactivity achieved is not the concentration of THC in the cannabis sample, but rather, the portion of THC that makes it into the brain, that is, THC bioavailability. We know that cannabis exhibits an entourage effect, where taking multiple cannabis compounds together tends to increase absorption relative to the case of ingesting isolates. So then it’s quite possible that one may achieve the same effective dose of THC in the brain by ingesting either (i) a given dose of high THC cannabis or (ii) the same dose of a lower potency cannabis product that contains more, say, CBD and/or myrcene (which are both known to enhance absorption through the blood brain barrier[8]). Again, given the price premium on high THC cannabis, the person with a low tolerance will get more bang for their buck with a moderately strong variety product.

A final argument is this: A big problem with the high-THC-is-best argument is that the so-called “unsophisticated” consumers are making a false comparison: When comparing single-attribute cannabis with multi-dimensional cannabis, high-THC’ers think they’re comparing the two sets of bundles displayed in Figure 1. In reality, however, high THC products do have other attributes, but the high-THC’ers simply aren’t consciously recognizing them. Consider, for example, Johnny Baldwin’s, “Top 5 Highest THC Strains of 2022: The Strongest Weed To Get Wasted.”[9] This article provides nuanced descriptions of the effects generated by different high THC cannabis cultivars for people specifically looking “to get wasted”:

Godfather OG: “… so the high is both mind- and body-blowing. It starts with a euphoric feeling that immediately whisks away all stress, and which quickly expands to blast your body as well. Don’t be surprised to get a wicked case of couch-lock, but you’ll enjoy it immensely.”

Gorilla Glue 4: “…it hits hard and it hits fast. Save it for the evening since in addition to its full-blast and immediately uplifting high, it normally causes body lock… Many medical marijuana patients choose GG4 to treat depression since it reduces anxiety and produces a pleasant, chill feeling.”

Bubba Kush: “produces a dreamy and powerful euphoria that eliminates stress while making muscles heavy before you may need to hit the couch… experienced indica smokers often say they can maintain focus (and conversations) during this high. Either way, you’ll probably have a major case of the munchies.”

Bruce Banner #3: “It’s a 60/40 Sativa-dominant strain which doesn’t lock your body up like some of the choices we’ve already listed; you’ll be able to (almost) fully function while enjoying the intense, creative and euphoric head high and overall mellow relaxation.”

When you read these descriptions which are written for people specifically seeking to get high, it becomes very apparent that there are nuances to even high THC cultivars of cannabis. People might not be explicitly or consciously recognizing the nuances, but that doesn’t mean they don’t exist. And in particular, I wonder how someone who purports to only care about getting high justifies the choice he/she makes, given a selection of high THC cultivars such as those described above.

What this suggests is that perhaps reframing the situation – helping high THC’ers understand that they’re already recognizing nuances in cannabis – might in fact shift the focus away from high THC. That is, the door for high THC’ers is already open to variety cannabis. So perhaps all that’s needed is to help them walk through that open door.

Shifting the Paradigm

The Current Environment Reinforces the High THC Paradigm

Being able to select a sample of cannabis that will generate a specific, multi-dimensional experience seems preferrable to selecting a sample that will simply get you high. If this is, in fact, the case, then as soon as the availability of choice in cannabis products led to the development of multidimensional cannabis markets (as described earlier), how is that demand for unidimensional (high THC) products not only still remains, but actually continues to dominate in many markets?

I believe the answer is that the current market environment reinforces the high THC cannabis paradigm, in several respects. First, as mentioned earlier, the simplicity and ease of the idea that high THC is synonymous with quality cannabis makes it easy for cannabis newbies to latch onto. Second, regardless of whether or not a lesson was easily come by, once people have learned something (and especially when they’ve taught it to others), it becomes very difficult for them to be convinced to change their mind.[10]

A third aspect of the current market environment that reinforces the high THC paradigm is the limited amount of shelf-space in dispensaries. Because space in limited, dispensaries will naturally increase the share of space devoted to higher volume products at the expense of space for lower volume products. Recall Brad Bogus’s comment, “but high THC is what sells.”[11]

Fourth, the recommendations by cannabis budtenders carry a lot of weight with customers,[12] and many budtenders are not well-educated about multi-dimensional cannabis. They recommend what they know, and what many of them know is the Quality = High-THC paradigm.[13]

A final aspect of the self-reinforcing high THC paradigm is the incentive structure faced by cannabis cultivators. Legacy black market growers have been honing high THC cannabis for decades. The seed stock for high THC cannabis is thus much better than that for variety cannabis.[14] At the same time, there are currently price premiums available for supplies of high THC cannabis. So even if growers prefer to cultivate multidimensional varieties, it’s hard to pass up the higher prices to be earned for the high THC varieties.[15]

So we see that several supply and demand factors – involving consumers, dispensaries, and growers – thus reinforce the Quality = High-THC paradigm, making it difficult for the industry to transition to a multi-attribute cannabis paradigm.

Envisioning Cannabis Markets: Old vs. New Paradigms

The Current Situation

The current environment can be characterized as follows:

Many dispensary owners are not willing to spend the time and money to educate budtenders and/or to have budtenders spend time educating customers when budtenders could instead devote that time to generating greater sales volumes.

There is substantial demand for high THC cannabis, and growers and dispensary owners alike have every incentive to simply satisfy that demand.

There is demand for high quality variety cannabis: “Savvy consumers who are shopping for more than THC content will pay a premium for terpene and cannabinoid content.”[16] However, it's not clear what the relative sizes are of the premium variety vs. the premium high THC consumer groups (i.e., the two ends of the spectrum in Figure 2).

Taken together, the spectrum of demand appears to be something like that depicted in Figure 2, where the different categories of consumer are as follows:

(Dark Blue) Premium Variety: These consumers are well-educated about the nuances of cannabis and are willing to pay a price premium for high quality, nuanced cannabis, that is, cannabis rich in terpenes and cannabinoids that has been grown and processed with care. Note that the best products for many well-educated consumers are high THC products, but these are generally also rich in other cannabinoids and terpenes. The issue isn’t about being pro- or anti-THC; rather, it’s about whether THC contributes to the experience or whether THC is the experience.

(Light Blue) Moderate Variety: These consumers are moderately- to well-educated about the nuances of cannabis and are looking for moderately priced product that provide good consumption experiences.

(Yellow) Newbies: These are consumers with none-to-little education about cannabis. Most will probably start with moderately priced products and go from there, based on how their initial experiences turn out. They may be influenced either by the variety crowd or by the high THC crowd.

(Light Orange) Moderate High THC: These consumers have been colored by the Quality = High THC paradigm but are happy with moderately high levels of THC at moderate prices.

(Dark Orange) Premium High THC: These consumers have been colored by the Quality = High THC paradigm and are willing to pay price premiums for the highest THC products available.

Figure 2

Now let’s consider how well each of the different sets of market participants are faring from the current market situation (see Figure 3).

Figure 3

Cultivators are growing (relatively) rich varieties of high quality cultivars (rich in cannabinoids and terpenes) and rich varieties of high THC cultivars. There is a moderate-to-rich selection of moderately high THC products, as a carryover from THC-focused Black Market supply during Prohibition. There is a relatively weak selection of products that are low in THC and/or moderate in variety.

The premium variety and premium high THC products are highly profitable for growers and dispensaries to supply. All other products along the spectrum that fall between these two extremes are not so profitable.

Consumers of high quality variety products have rich experiences. Consumers of high THC products have moderate experiences. All other consumers have weak-to-moderate experiences, since they have not been matched with their ideal products.

The Ideal Situation

My conceptualization of what the industry could look like if consumers were more informed and matched with the products that would generate (close to) their ideally desired experiences is this (see Figure 4):

Figure 4

Cultivators are growing rich varieties of high quality cultivars (rich in cannabinoids and terpenes) and weak-to-moderate varieties of high THC cultivars. There is a moderate-to-rich selection of products in between these two extremes.

The premium variety products are highly profitable for growers and dispensaries to supply. All other products along the spectrum provide good experiences for users and decent profitability for suppliers. Not everyone wants to or is able to purchase premium products at premium prices. However, people who are provided good products at value prices will enjoy good experiences.

Consumers of high quality variety products have rich experiences. All other consumers who purchase good products that provide value for their money will enjoy moderate to rich experiences.

In short, the value generated by cannabis markets overall will be optimized when budtenders and consumers are educated so that consumers end up buying (moderately good or) the best products that will give them their desired consumption experiences. In this case, a wide variety of products will be supplied by growers and dispensaries, since consumers will be willing to pay at least moderate prices to be matched with such variety.

What’s Needed to Shift Paradigms

We already know that what’s needed to transition from the Quality = High THC paradigm to the Quality = Variety paradigm is widespread education for all market participants. Growers, budtenders, and consumers (and all the other cannabis people) must understand:

The nature of cannabis’s many nuances,

The different experiences consumers seek, and

The value of providing each consumer with the product(s) that will generate his or her desired consumption experience.

Yet, there’s another need that must also be met for the transition to the Quality = Variety paradigm to actually occur: The benefits must be worth the costs. Specifically, the value of consumer education – in terms of the benefits generated by matching consumers to their appropriate products – must outweigh the costs of becoming informed.

Cost of Education

Generally speaking, the costs of education include the time, effort, and opportunity costs (what people could be doing with the time and effort they spend on education) associated with becoming informed.

Dispensary Owners: The costs to dispensary owners of educating their budtenders include:

Costs of educational materials

Wages paid to budtenders plus lost sales budtenders could have made during the time they spend learning about cannabis

Wages paid to budtenders plus lost sales budtenders could have made during the time they spend teaching customers about cannabis and helping customers find their appropriate products

Consumers: The costs to consumers of becoming educated about cannabis include:

Costs of educational materials

Opportunity costs of the time they spend learning about cannabis (i.e., what they could have done if they had not spent their time learning about cannabis)

Opportunity costs of the time they spend finding their ideal cannabis products (as opposed to simply selecting a high THC product)

Value of Education

Dispensary Owners: The value to dispensary owners of having informed budtenders and customers is a greater willingness-to-pay by customers for variety cannabis products.

Consumers: The value to consumers of finding the appropriate product that generates the experience they seek is the value of the better consumption experience.

Anyone who’s had a great cannabis experience using the right product to meet his or her needs understands the value of that experience, relative to the experience he or she has had when the product used wasn’t great. And what’s at stake is not simply a one-shot deal: People who have had a really good experience are infinitely more likely to become repeat users than people whose experiences weren’t great.

It should be clear that the value to be gained from matching cannabis users to their appropriate products is huge, both for the consumers themselves, as well as for the suppliers who stand to profit from enjoyable experiences.

Value > Cost

Dispensary Owners: Dispensary owners will only invest in educating budtenders and in having budtenders educate consumers if those costs are more than made up for in higher revenues. In other words, educated consumers on the whole must be willing to pay higher prices for the better consumption experiences generated from the more appropriate cannabis products they end up with. More specifically, if any of the following conditions hold, then spending resources trying to educate budtenders and consumers will not be profitable:

(i) The benefits of education are low (i.e., consumers are equally or almost as happy by paying less for a less appropriate product, that is, the left-hand side of equation [3] in Figure 5 is small).

(ii) The costs of education are high (i.e., the right-hand side of equation [3] in Figure 5 is large); or

(iii) Consumers buy higher priced cannabis products when they’re less-informed, such as the premium-priced high THC products (i.e., the right-hand side of equation [3] in Figure 5 is large).

Figure 5

Putting It All Together

The industry is currently stuck in a situation in which many growers and dispensaries are catering to high THC’ers, because (i) the costs of investing in budtender and consumer education are high, and (ii) it’s currently profitable for growers and dispensaries to simply cater to demand for high THC cannabis.

Yet, based on the earlier discussion (surrounding Figures 3 and 4) it’s clear that the industry as a whole would generate much more value for all participants by shifting to a Quality = Variety paradigm than it currently is under the Quality = High THC paradigm. At the same time, as the industry continues to grow, the opportunity costs for the industry as a whole when growers and dispensaries continue catering to High THC’ers will increase – as larger volumes of consumer needs are less than fully optimized.

Many people are already onboard for the Quality = Variety paradigm. As the industry matures, we’re seeing increasing numbers of third-party providers of consumer education who are increasing awareness. We’re also seeing increasing amounts of testing for and reporting of minor cannabinoids and terpenes, thanks in large part to demands by advocates for variety. Surely, the abundance of information becoming available will help the cause.

In short, supply is simply following demand, and demand for high THC currently dominates. Yes, awareness of and demand for variety continue to penetrate. However, for growers and dispensaries to focus more on variety than THC concentration, the growth in demand for variety will have to increase faster than growth in demand for THC concentration. Certainly, there will always be demand for high concentration cannabis. Yet I believe at some point, as education and advocacy accumulate, the portion of Variety = Quality consumers will reach the critical mass needed to become the new, dominant paradigm in the industry.