Analysis, Commentary

Oregon Cannabis Prices Down, But Revenue Remains Substantial


Cannabis buds
Cannabis buds (Photo Provided)
OREGON—(ENEWSPF)—July 5, 2018
By: Anthony Johnson

Cannabis officially became legal to possess and cultivate in Oregon on July 1st, 2015. Three years later, the Beaver State has become a cannabis consumers paradise. Advertisements for $3 grams are common, with “bulk” deal of $5 for 3.5 grams available as well. At times, you may even see $1 grams for sale, especially when you purchase a full ounce (28 grams). If you are an Oregon Medical Marijuana Program patient, Portland dispensary Panacea actually donates free medicine. While cannabis prices have come down dramatically, overall sales and the tax revenue generated remain steady and substantial.

Wholesale prices of cannabis have dropped in all legal states, but nowhere as dramatically as Oregon as the Willamette Week reported:

The national average price for a pound of cannabis was about $1,789 in 2016, but had fallen by 13 percent to $1,562 by the end of 2017, according to the Cannabis Benchmarks U.S. Spot Index, which tracks marijuana prices.

The price has tumbled much lower here than the national average: Oregon’s wholesale sun-grown weed fell from $1,500 a pound last summer to as low as $700 by mid-October.

Other states’ legal marijuana markets have been similarly suffering from a downturn in prices. Some attribute the falling prices to an unpredictable market, oversaturation and even corporate consolidation in the industry.

The drop in wholesale cannabis prices has been problematic for many craft growers and mom-and-pop retail stores. Those managing to thrive have had to make up for the drop in prices by increasing volume and becoming vertically integrated.

As the Bend Bulletin covered, profits can remain steady even with prices falling:

Local cannabis retailers reported similar sales trends at their stores. The price of dried marijuana flower fell about 30 percent in the past six months, said Mark Capps, of Oregon Euphorics on SW Century Drive in Bend. That translates to a drop from $12-$18 per gram to $8-$15 per gram, depending on the strain. “There’s a race to the bottom right now as far as price,” he said.

Still, the shop is holding its own in terms of sales, which are “somewhat” increasing, he said.

“Even though prices are falling, our margins are about the same,” Capps said.

As the Mail Tribune noted, Southern Oregon cannabis pioneer, Brie Malarkey vertically integrated and expanded even in the face of more competition:

Malarkey started with a farm and Breeze Botanicals in Gold Hill. Now she has another store in Ashland, along with a processing facility in Medford. She employs about 40 people with a monthly payroll of about $45,000, or more than $500,000 annually.

When Malarkey started her business in 2014, her Gold Hill store was the only OLCC licensed facility in the county. Now, the Oregon Liquor Control Commission lists 34 active licenses for retailers in the county, with another 18 pending applications.

Revenue forecasts for the state continue to exceed initial expectations with sales buoyed more than expected by increased demand from residents and tourists alike. Also, these projections probably downplay sales initially because they are partly based on surveys that people may not be truthful on as they are reluctant to state their actual intake of a still-federally-illegal substance.

It is going to be extremely interesting to see the Oregon market evolve over the coming years. It is hard to see prices coming down too much further for now, so businesses need to adapt to the current market through marketing and branding, and, if feasible, consolidation and vertical integration.

While we continue to work to end federal prohibition, which will open up new markets for growers, the cannabis industry needs to unite behind changes to state law that will promote more tourism.  Legalizing cannabis cafes, an idea that Portland officials are behind, is a huge key to increasing sales, profit margins, and tax revenue, a true win-win-win for the entire state.

Get informed about the latest cannabis industry developments and network with top entrepreneurs, investors, and advocates from around the world at the next International Cannabis Business Conference in beautiful Portland, Oregon, this September 27th-28th.

Source: https://internationalcbc.com

Related Article:

Cannabis Industry Eclipses Wine in Southern Oregon

 


ARCHIVES