Recreational marijuana prices plummet as product floods market
The cost of stoned decreases.
The average cost of a flower or bud in the Maine adult cannabis market has dropped by more than 41% in the past two years.
This is good news for customers whose wallets have been hit, but it may be bad news for growers, who industry officials say have overpriced the market and are sitting on a glut of unsold produce. .
When the adult use market launched in October 2020, the average price per gram of flower was $15.83.
It fell to an average of $12.75 per gram in 2021, and by June 2022 it had fallen further to $9.26 per gram. The year-to-date average is $10.29 per gram. An average joint contains between 0.32 and 0.5 grams of cannabis.
Industry officials expected prices to fall as the market matured, but flower prices aren’t expected to fall much further, said Matt Hawes, head of the Maine Cannabis Industry Association. The association represents members in retail, manufacturing and culture.
Consumers are not demanding lower retail prices and growers are operating at the bottom of their margins, he said.
Hawes owns the Novel Beverage Company, which makes THC-infused beverages, and co-owns Brothers Cannabis, which has locations in Bangor and Brewer.
At first, the industry struggled with limited supply, few options, and high costs, especially compared to the state’s prolific medical cannabis market.
There are approximately 3,500 medical marijuana operators — known in the industry as caregivers — in the state.
When the adult-use marketplace first launched, only nine stores were open.
That’s grown more than tenfold in less than two years, with 100 stores now operating in Maine, according to the Office of Cannabis Policy.
Growers grew at the same rate, with 70 licensed recreational growers, up from seven when the market launched.
But now, with 70 growers supplying 100 stores, there’s plenty of cannabis on the market. While this is good for consumers, who are seeing more options and prices falling just about everywhere, it is a concern for producers who may have been counting on different market dynamics.
DEMAND MAY HAVE BEEN OVERESTIMATED
Many say the demand for the adult market may have been overstated.
There’s been a buzz for several months that there’s plenty of extra supply on the market, said Eben Sumner, president and legislative chairman of the Maine Growers Alliance.
“I think despite all the hype that happened, it was a bit outdated,” he said.
Sumner owns Casco Bay Hemp and 1780 Maine, a medical marijuana caregiver store and grow site.
“I think it’s just a lot of growers injecting flowers into the market,” he said, despite the fact that there are still plenty of products just lying around on the shelves. He said it would take some time to equalise.
“There are these growers that want to take over the whole state and they have these huge shoots (but) it’s not endless,” said David Vickers, owner of Origins Cannabis. “If you’re just a grower and you don’t have a storefront, I think you’re in a tough spot.”
Origins has an adults-only site in Manchester, two medical dispensaries in Augusta, and a cultivation site and manufacturing facility in Hallowell.
Hawes attributes this disparity between market expectations and reality to a few things.
The medical market has remained strong, thanks in part to its longevity and lower prices. And only about 10% of Maine towns have “opted in” to adult-use sales, meaning the 100 stores are too concentrated, he said. They need to compete with each other instead of spreading across the state creating cannabis deserts.
MORE CULTURES AND STORES TO COME
This underperformance led to saturation, and Hawes said it will get worse. There are 111 additional grow sites at various stages of the approval process and 160 stores.
People are still building new crops — that’s the first segment of the supply chain people are investing in, he said.
“There’s this misconception among people who are inexperienced with cannabis that it’s an endless source of easy money,” he said.
Additionally, many stores, such as Origins, are vertically integrated, meaning owners choose to grow their own produce, reducing some of the demand from larger growers.
Vickers said that helped him keep prices low.
“We felt the market was overinflated when it started and we never participated in it,” he said.
Launch prices were artificially high because there were only a few growers, which “held the industry hostage”, he added.
John Kreis, owner of Portland Greenhouse, said there had been an uptick in sales since prices had fallen, but he said that was difficult in a market like Portland where there was so much competition.
Even with lower prices, Kreis said, it’s hard to compete with the medical market, which has fewer regulations, taxes and testing requirements than the adult segment. Prices will always be lower.
“The adult use market is going to suffer until the state starts regulating this,” he said.
LOWER PRICES ACROSS THE NATIONAL
Prices are falling across the country. A wholesale price index tracked by Cannabis Benchmarks, an independent news agency, revealed that the price per pound of cannabis flower has been falling since last summer.
Accounting and consulting firm GreenGrowth CPAs reported that the overall national price for the 18 legal markets covered by Cannabis Benchmarks fell to $1,114 per pound in June, the lowest price seen in more than three years.
Colorado prices fell to an all-time low of $709 per pound on July 1, down 46% from a year ago and 60% from January 2021, according to the Colorado Department of Revenue.
In Massachusetts, the price per gram is similar to Maine, at $10.58. Prices fell to $9.74 per gram in April 2020, but rebounded to the standard rate of around $14 before starting to fall in June 2021 and continuing to fall every month since.
While Maine prices have consistently fallen, sales continue to set records.
In June, the recreational market brought in $13.4 million.
So far this year, the state’s 100 Adult Stores have grossed just under $65 million and are on track to far exceed last year’s $81.9 million.
“A saturated market doesn’t mean the market isn’t strong,” Vickers said, adding that he expects it to stabilize soon.