The price consumers pay for legal cannabis in Massachusetts is at a five-year low, according to state data. While that’s a short-term win for users, it’s bad news in the long term for businesses.
The trouble is on two fronts: The wholesale price of the crops has dropped dramatically, and at the retail level, businesses have to sell about twice as many units to match the revenue they bring in. not long ago.
“You’re going to see some natural attrition happen within the market,” said Trent Wololoveck, chief strategy officer at Jushi – the parent company of Nature’s Remedy in Massachusetts.
Several business executives in the industry told NBC10 Boston that the oversupply of the product was the main reason for the price drop. In Massachusetts, a slew of new grow operations, dispensaries and products have exploded onto the scene in a relatively short period of time. While demand has grown, too — nearly $200 million in adult-use sales in the first two months of 2023 — supply has outstripped demand.
Industry insiders say the surest way to prevent oversupply is for operators to merge.
“The revenue just wasn’t there,” said Blandine Jean-Paul, Ethos’ vice president of marketing. “Being positive about money is a big hurdle in the cannabis industry.”
Exacerbating the problem for the cannabis industry is an upcoming April deadline for taxes. Because cannabis operators are dealing with a product that is still listed as a Schedule 1 narcotic under federal guidelines, the industry is more limited in the deductions that the Internal Revenue Service can take. That means a large tax bill compared to other types of business, which puts an additional burden on cash flow.
Representatives of Jushi and Ethos, which both have cannabis businesses in other states, predicted that some marijuana sellers in Massachusetts would collapse under these market conditions. And that consolidation will increase the likelihood of profit for the businesses that remain.
“I’m not advocating for businesses to lose their licenses, but I think there’s some thinning that needs to happen in the industry as a whole,” said Jean-Paul. “States like Massachusetts, I think, are probably a prime case for that.”
If the gathering headwinds of oversupply and falling prices drive some of the cannabis businesses around the state, as predicted, it will mean fewer options for consumers — and fewer jobs. . A consolidated industry will eventually drive drug prices up again.
