The adult-use cannabis market in Massachusetts has been a wild ride.
Cannabis prices have nose-dived, and the market is correcting itself at an alarming rate.
It’s not just happening in Massachusetts, either; it’s happening in every new state that comes online with adult-use sales. There’s no consideration being taken for what the demand will actually be for sales, with city/state governments more concerned with rushing to collect application and licensing fees from anyone they can than letting the market corrections wipe out underperforming companies.
The Cannabis Oversupply
The marijuana industry is facing an oversupply problem.
According to the Massachusetts Cannabis Control Commission, which regulates marijuana in the state, the average retail price for flower per gram averaged $7.76 in October, the most recent month with available sales data. That’s down from $14.38 for a gram of flower the same month a year ago, according to the commission.
Prices start high for cannabis companies in the early years; then, as production capacity ramps up, the market becomes glutted, and prices plummet. This cycle has happened before—just look at beer or wine—but with marijuana, it’s happening faster than ever before because there are no barriers to entry into this market: anyone can grow weed at home or open up a dispensary (and many people are doing both).
The result? A lot of products don’t sell well and aren’t worth much money at all.
Wholesale Prices Dropping Like It’s Hot
The cannabis industry is facing one of the biggest challenges in its history: wholesale prices are dropping.
The price of a pound of flower has fallen 50% from $3,000 to $1,500 over the last year, and there are no signs that it will stop dropping any time soon.
In fact, some experts say that prices could drop as low as $100 a pound in 2020 due to the surplus of supply in the market.
Companies are getting better at cultivating cannabis, which means there are more products than ever in the market. And since many companies built their business models off of high prices, they’re struggling to stay afloat as they see their profits plummeting.
How Cannabusiness Is Going To Stay Afloat
Despite being a billion-dollar industry, cannabis is in danger of going under.
Analysts predict a wave of mergers and acquisitions in 2023, owing in part to a large number of struggling businesses, ranging from mom-and-pop retailers to major publicly traded corporations. Cultivators are also dealing with oversupply and increased competition, which are reducing cultivators’ already razor-thin margins.
Cannabis growers are in a bind: they must balance quality demands with price compression. These dynamics also put a strain on the supply chain, exposing inefficiencies such as high labor costs, energy-intensive cultivation infrastructure, and inefficient plant input use.
How The Government Is Making Things Worse
The government is less focused on setting up the market to succeed and more focused on rushing to collect application and licensing fees from anyone they can. This isn’t just happening at the local level. It’s happening at the federal level as well.
The government is supposed to be working hard to create a SAFE Banking Act, which was first proposed by the Marijuana Businesses Access to Banking Act of 2015 (HR 2652). This act was supposed to give cannabis businesses access to banks to conduct business without having to deal with cash-only transactions. But these protections are completely failing, and there are no signs that things will get better anytime soon.
Cannabis companies in the US are struggling to make ends meet, and it’s not just because of the falling prices. The government is doing nothing to help them out, and nobody has any idea when this market correction will end.
The problem is not just that cannabis prices are falling—it’s that the government is unwilling to do anything about it. We need our representatives to step up and start making real changes for us so we can keep up with other industries and make sure cannabis stays competitive in this country.
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