| As cannabis producers raced to the bottom to help move unsellable pot, the other end of the market remains in high demand. Canopy Growth Corp.'s acquisition of Supreme Cannabis Co. for $435 million on Thursday highlighted how valuable premium cannabis can still be in the Canadian recreational space. Sales in the segment are now booming following a rough-and-tumble period that saw more producers flock to the low-end of the market. "Most [consumer-packaged-goods] companies don't just rely on one brand, we wanted to make sure that we have appropriate scale in each in each price category," said Canopy's Chief Executive Officer David Klein in a phone interview. "Value brands" - another name for cannabis with a price point below roughly $6 a gram - have become a significant part of the market over the past year, a key reason why many consumers have transitioned away from the illicit market and bought legally. Meanwhile, charging a premium for a cannabis product is an attractive proposition for licensed producers as they command higher margins, help retain customer loyalty, and can better compete with the illicit market. John Fowler, who co-founded Supreme Cannabis and now is president of Muskoka Grown, a premium producer based in Bracebridge, Ont., told BNN Bloomberg the company looked to mimic how wine was sold under a "prestige" label, or in other words, "it feels premium but it feels attainable." "It's all about fit," he said in a phone interview. "In Canada, there is a very traditional downward sloping demand curve that shows the customer is price sensitive on volume. And when you're talking about that sliding scale of premium, when you get up to super-high priced products, consumers are going to demand their cannabis will be nearly perfect." Pricier premium offerings have commanded the lion's share of the Canadian cannabis market, according to a recent report from ATB Capital Markets. Premium cannabis, described by ATB Capital Markets as dried flower with a THC content equal to or greater than 20 per cent, saw sales climb to $88.6 million in February, a 142 per cent jump from a year earlier. The premium category now accounts for 61 per cent of all dried flower sales, up from 40 per cent last year. "Premium is a nice high margin segment to go after," said ATB Capital Markets Analyst David Kideckel in a phone interview. "Folks are actually looking for very specific brands, and they're willing to pay that difference in price, even if it's a another good 20 per cent to 30 per cent higher than a competing high-THC brand."
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