The average cost of flowers or buds in the Maine adult cannabis market has fallen by more than 41% over the past two years.
It’s good news for customers whose wallets have taken a hit, but it could be bad news for growers, who according to industry officials have overvalued the market and are sitting on a glut of unsold produce.
When the adult market launched in October 2020, the average price per gram for flowers was $ 15.83.
It dropped to an average of $ 12.75 per gram in 2021, and by June 2022 it was further down to $ 9.26 per gram. The year-to-date average is $ 10.29 per gram. The medium joint contains between 0.32 and 0.5 grams of cannabis.
Industry officials had expected prices to drop as the market matured, but the price of the flowers shouldn’t drop any further, said Matt Hawes, head of the Maine Cannabis Industry Association. The association represents members in retail, manufacturing and cultivation.
Consumers aren’t asking for lower retail prices, and growers are operating at the low end of their margins, he said.
Hawes owns the Novel Beverage Company, which makes THC-based beverages, and is co-owner of Brothers Cannabis, which has offices in Bangor and Brewer.
At first, the industry struggled with limited supply, few options, and high costs, especially when compared to the prolific state-owned medical cannabis market.
There are approximately 3,500 medical marijuana practitioners – known in the industry as caregivers – in the state.
When the adult market first launched, only nine stores were open.
According to the Office of Cannabis Policy, this number has more than tenfolded in less than two years, with 100 stores operating across Maine.
Growers have multiplied at the same rate, with 70 licensed recreational growers, compared to seven when the market was launched.
But now, with 70 growers supplying 100 stores, there is a lot of cannabis on the market. While it’s good for consumers, who see more options and falling prices pretty much across the board, it’s a concern for growers who may have been relying on different market dynamics.
THE REQUEST MAY HAVE BEEN OVERRESTED
Many say the demand for the adult market may have been overstated.
There has been a buzz for several months about there being a lot of extra supply on the market, said Eben Sumner, president and legislative president of the Maine Growers Alliance.
“I think, despite all that hype that has happened, it’s been a little bit over,” he said.
Sumner owns Casco Bay Hemp and 1780 Maine, a health care shop and medical marijuana growing site.
“I think there are just a lot of growers pumping flowers in the market,” he said, although there are still a lot of products that are only on the shelves. You said it will take some time to break even.
“There are these growers who want to span the whole state and have these huge crops (but) they aren’t infinite,” said David Vickers, owner of Origins Cannabis. “If you’re just a grower and don’t have any shop windows, I think you’re in a rocky spot.”
Origins has an adult office in Manchester, two medical dispensaries in Augusta and both a grow site and a manufacturing facility in Hallowell.
Hawes attributes this disparity between market expectations and reality to a few things.
The medical market continued to remain strong, partly due to its longevity and lower prices. And only about 10 percent of Maine cities have “accepted” adult sales, which means the 100 stores are too concentrated, he said. They have to compete with each other instead of spreading across the state, creating cannabis deserts in the process.
MORE GROWS AND STORES COMING
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 outlets.
People are still building new growth – it’s the first segment of the supply chain that people invest in, he said.
“There is this misconception with people who are not experienced in cannabis that it is an endless supply of easy money,” he said.
Additionally, many stores, such as Origins, are vertically integrated, meaning owners choose to grow their own produce, quelling some of the demand for larger growers.
Vickers said this helped him keep prices down.
“We felt the market was over-inflated when it started and we never participated in that,” he said.
Prices at launch were artificially high because there were only a few growers “holding the industry hostage,” he added.
John Kreis, owner of Portland Greenhouse, said there has been a slight increase in sales since prices have dropped, but said it’s tough in a market like Portland where there is so much competition.
Even with lower prices, Kreis said, it’s hard to compete with the medical market, which is subject to fewer regulations, fees, and testing requirements than the adult segment. Prices will always be lower.
“The adult use market will suffer until the state starts regulating it,” he said.
PRICES IN NATIONAL FALL
Prices are falling across the country. A wholesale price index monitored by Cannabis Benchmarks, an independent reporting agency, found that the price per pound of cannabis flowers has been falling since last summer.
Accounting and consulting firm GreenGrowth CPAs reported that the aggregate national price for the 18 legal markets covered by Cannabis Benchmarks fell to $ 1,114 per pound in June, the lowest price observed in over three years.
Colorado prices plunged to an all-time low of $ 709 a 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 that in Maine, at $ 10.58. Prices dropped to $ 9.74 per gram in April 2020, but rebounded at the standard rate of around $ 14 before starting to decline in June 2021 and have continued to fall each month since.
While Maine prices have steadily declined, sales continue to set records.
In June, the recreational market grossed $ 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.
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