The cost of getting high is going down.
The average cost of a flower or bud in the Maine adult cannabis market has dropped by more than 41 percent in the last two years.
That’s good news for customers whose wallets have been affected, but it may be bad news for growers, who industry officials say have overestimated the market and have a glut of unsold produce.
When the market for adult use was launched in October 2020, the average price per gram of flower was $15.83.
It dropped 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. The average joint contains between 0.32 and 0.5 grams of cannabis.
Industry officials had expected prices to fall as the market matured, but the flower price isn’t expected to drop much further, said Matt Hawes, director of the Maine Cannabis Industry Association. The association represents members in retail, manufacturing and farming.
Consumers are not demanding lower retail prices and growers are at the lower end of their margins, he said.
Hawes owns the Novel Beverage Company, which makes THC-infused beverages, and is part owner of Brothers Cannabis, which has branches 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 an estimated 3,500 medical marijuana operators, known in the industry as caretakers, in the state.
When the adult wear market first launched, only nine stores were open.
That has increased more than tenfold in less than two years, with 100 stores now operating in Maine, according to the Office of Cannabis Policy.
Growers have multiplied 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 is plenty of cannabis on the market. While it’s a good thing for consumers, who see more choice and declining prices pretty much across the board, it’s a concern for producers who may have reckoned with different market dynamics.
DEMAND MAY HAVE BEEN OVERESTIMATED
Many say that the market demand for adult use may have been overestimated.
There have been rumors for several months that there is a lot of additional supply on the market, said Eben Sumner, president and legislative chair of the Maine Growers Alliance.
“I think for all the hype that happened, it was a little bit of a hype,” he said.
Sumner owns Casco Bay Hemp and 1780 Maine, a medical marijuana grow site and store.
“I think it’s a lot of growers bringing flowers to the market,” he said, even though there are still plenty of products on the shelves. She said it will take some time to balance.
“There are these growers who want to cover the entire state and they have these huge crops (but) it’s not endless,” said David Vickers, owner of Origins Cannabis. “If you’re just a grower and you don’t have storefronts, I think you’re in a tough spot.”
Origins has an adult location in Manchester, two medical dispensaries in Augusta, and a cultivation site and manufacturing plant in Hallowell.
Hawes attributes this disparity between market expectations and reality to a few things.
The medical market has remained strong, in part due to its longevity and lower prices. And only about 10 percent of Maine cities have “opted in” to adult-use sales, meaning the 100 stores are too concentrated, he said. They have to compete with each other rather than spread across the state, creating cannabis deserts in the process.
COMING SOON MORE GROWTH AND STORES
This underperformance has led to saturation, and Hawes said it’s going to get worse. There are an additional 111 grow sites in various stages of the approval process and 160 stores.
People are still building new crops — it’s the first segment of the supply chain that people invest in, he said.
“There is a misconception among people who are inexperienced with cannabis that it is an endless supply of easy money,” he said.
Additionally, many stores, like Origins, are vertically integrated, meaning owners choose to grow their own produce, reducing some of the demand for larger growers.
Vickers said this has helped him keep prices low.
“We felt like the market was too inflated when it started and we never got into it,” he said.
Prices at launch were artificially high because there were only a few growers, which “held the industry hostage,” he added.
John Kreis, owner of the Portland Greenhouse, said there has been a slight uptick in sales since prices have dropped, but said it’s difficult 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, taxes and testing requirements than the adult-use segment. Prices will always be lower.
“The adult use market is going to suffer until the state starts to regulate that,” he said.
PRICES DROP THROUGHOUT THE COUNTRY
prices are falling across the country. A wholesale price index tracked by Cannabis Benchmarks, an independent reporting agency, found that the price per pound of cannabis flower has been declining since last summer.
Accounting and advisory 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 seen in more than three years.
Colorado prices plunged to a record low of $709 a pound on July 1, down 46 percent from a year ago and down 60 percent 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 recovered to the standard rate of around $14 before beginning to decline in June 2021 and continuing to fall every month since then.
While Maine prices have steadily dropped, 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 taken in just $65 million and are on pace to far exceed last year’s $81.9 million.
“A market that is saturated doesn’t mean the market isn’t strong,” Vickers said, adding that he expects it to stabilize soon.
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