January 11, 2022

Neighboring States Continue to Fuel Illinois Marijuana Sales in 2021

Marijuana Dispensary
Photo: Add Weed/Unsplash

The Illinois Department of Financial and Professional Regulation (IDFPR) published adult use sales figures for December 2021 this week. Adult use sales soared in December 2021, jumping 14.2% to $137.9 million in combined in-state and out-of-state revenues. December 2021 sales represent a new all-time monthly high in Illinois’ adult use market as it turned two years old.

In-state sales were up over 17% month-on-month, jumping from $81.7 million in November to $95.6 million. Out-of-state sales jumped 8.5% to $42.4 million in December 2021. Out-of-state sales were 30.7% of total sales in December 2021.

December 2021 combined in-state and out of state sales skyrocketed by 58.8% over December 2020. Cumulative 2021 adult use sales reached almost $1.38 billion, up 106% over 2020’s total.

Combined medical and adult use sales for December 2021 were $173.3 million, a 13.8% increase from combined medical and adult use sales of $152.2 million in November 2021, and up 99% over combined medical and adult use sales of $86.9 million in December 2020.

The number of items sold in December 2021 was 3.18 million, a 14.9% increase over items sold in November 2021. The average cost per item fell $0.25 to $43.35 in December 2021.

Per item average retail prices continue to fall as more competition and more and varied inventory comes to market at lower price points.

The Illinois Department of Public Health (IDPH), which oversees the state’s medical cannabis program, also issued patient numbers and sales figures for December 2021 this week. IDPH reported sales of over $35.4 million in December 2021, a 12.3% month-on-month increase over November medical sales of $31.5 million, but up just 2.7% from December 2021 sales of nearly $34.5 million. December 2021 medical sales hit their highest level since March 2021.

Retail sales of medical cannabis included $16.5 million in flower sales, representing 47.6% of total medical sales in December 2021. Medical consumers bought over $18 million of concentrates and infused products in December, a 12% increase over November’s $16.9 million figure.

Since inception, IDPH reports 188,017 patients approved for the program as of December 2021, versus 181,517 in November 2021, an increase of 6,500 qualified patients in the month. Year-on-year, the number of patient approvals for the program is up by 38,305.

IDPH reports 55 medical dispensaries served 70,178 unique patients who purchased nearly 1.3 million grams of dry cannabis in December 2021, versus 67,803 unique patients served in November 2021, who purchased over 1.1 million grams of dry cannabis.

Patients purchased an average of 18.4 grams of dry cannabis in December 2021, an increase of 1.7 grams over the 16.7 grams of dry cannabis purchased in November 2021. Patients paid an average of $12.79 per gram of dry flower in December, versus $12.94 per gram of flower in November 2021.

December 28, 2021

Michigan Adult-Use Marijuana Sales Decreasing as Supply Overflows

Michigan Theater, Ann Arbor, MI
Photo: Brad West/Unsplash

The Michigan Marijuana Regulatory Agency (MRA) recently issued its November 2021 report detailing sales, licensing, and production data in the state’s medical and adult use cannabis markets. Overall, Michigan’s combined medical and adult use sales were $152.7 million in November, down 6.5% from October 2021’s combined sales of $163.5 million, but up 66% from the November 2020 combined sales figure.

Michigan spot prices have undergone a bit of a rout amid what is the first significant outdoor harvest season, the recall and subsequent reversal that put what MRA claims is “moldy, contaminated marijuana” product back on the market, and the steady entrance of new growers into the market. Growers tell Cannabis Benchmarks the price correction is exactly that: a correction of prices that were too high. Additionally, we are told there is now significantly more lower priced product in the Michigan market because new cultivator licensees are offering inexpensive wholesale rates in an attempt to penetrate the market and build their brands.

November 2021 Michigan Adult Use Cannabis Market Summary

Adult use sales have fallen in three of the past four months, which coincides with employment circumstances in Michigan. The Bureau of Labor Statistics shows unemployment has actually worsened from summer to fall with the unemployment rate in August at 4.7%, rising to 6.3% in September, and ticking down to 5.9% (preliminarily) in November, making for significantly less money in some consumer’s pockets. Seasonality of demand may also be playing a role, as the late autumn and winter typically see lower sales in more mature markets.

Michigan Adult Use Cannabis Sales

Retail flower sales revenue fell 4% in August, eked out minor gains in September and October, but fell sharply in November.  Flower sales volume and revenue figures for the trailing three months are shown in the table below.

Michigan Retail Marijuana Flower Sales

Inventory of flower held by growers in the adult use sector that had passed the state’s required testing stood at 32,495 pounds at the end of November. Combined with the amount of flower held in inventory by retailers – 36,484 pounds – the amount of immediately marketable flower in Michigan’s adult-use market as of the end of November stood at 68,979 pounds, or the equivalent of 3.7 months of supply based on the November flower sales volume.

The number of plants reared and harvested in the most recent three months are shown in the table below. Vegetative and flowering plant figures are as of month-end, while harvested plant figures encompass all those successfully brought in during the entire month.

Michigan Cannabis Cultivation Statistics

Vegetative plant counts fell 8.6% in October, but increased 0.8% in November. Flowering plants fell by 17.8% month-on-month and harvested plants fell 36% in the post-harvest period.

As more Michigan growers come to market, retail price competition appears to be picking up with ounce prices falling over $13 and extrapolated pound prices falling by $210.

  • September 2021: $203.84 per ounce ($3,261 per pound)
  • October 2021: $203.81 per ounce ($3,261 per pound)
  • November 2021: $190.71 per ounce ($3,051 per pound)

December 21, 2021

Colorado Retail Cannabis Sales Stall as Wholesale Prices Continue to Decline

Colorado
Photo: Mana5280/Unsplash

The Colorado Department of Revenue (CDOR) released its monthly Marijuana Sales Report for October 2021 this week. Combined retail (the state’s term for adult use) and medical sales were $176.4 million, down 2.6% from $181.1 million in September 2021 and down 11.7% from October 2020’s $199.8 million.

Year-to-date CDOR reports $1.9 billion in combined adult use and medical sales through October, 13.2% below 2020 total sales. Year-to-date sales are on pace to exceed 2020’s combined adult use and medical sales by $91.9 million.

October 2021 retail sales (adult use), at $147 million, were down 2.4% from September’s retail sales of $150.8 million and down 8.6% from October 2020’s $161 million.

CDOR also reported on November 2021 Marijuana Tax Revenue, which corresponds generally to October sales activity. The 15% wholesale tax is levied on adult use cultivators when unprocessed cannabis plant material is sold or transferred to a processor or retailer. November 2021 brought $8.6 million to state coffers from that tax, 3.2% less than the $8.9 million collected in October 2021 figure and down 15.2% year-on-year. Year-to-date as of November 2021, the 15% excise tax collected stands at $110.1 million and is 18.8% higher than the amount collected from January through November 2020.

Average Market Rates (AMRs) are used by the state to assess the wholesale excise tax on internal transfers of flower, trim, and other plant material between commonly-owned adult use licenses. After a surge in AMRs in July 2021, such that AMRs for bud for extraction jumped 70% and trim for extraction jumped 26%, AMRs have generally fallen since Q3. AMRs are calculated on prices gathered in previous quarters, such that Q1 2022 rates are based on data from the METRC reporting system for September, October, and November 2021. AMRs have been adjusted for Q1 2022, as depicted in the table below.

Colorado wholesale flower prices are down about $219 per pound since June 2021, but the pace of weekly losses has slowed. The 20-week average loss per pound is -$7.33, but the 10-week average loss per pound each week has narrowed by 84% to just -$1.16, suggesting downside price momentum is slowing. Indeed, there has been a small uptick in prices for outdoor and indoor product as the immediate effects of the harvest wane. Spot losses have narrowed, though the trend is still down.

December 14, 2021

Oregon Cannabis Prices and Demand Decline as Oversupply Continues

marijuana supply
Photo: Add Weed/Unsplash

The Oregon Liquor & Cannabis Commission (OLCC) recently released sales data for November. According to OLCC, licensed retailers generated over $86.4 million in revenue last month, down by 7.9% from over $93.8 million in October 2021. November sales are down 4% year-over-year, from nearly $90 million in November 2020.

November is the fourth month in a row of lower monthly cannabis sales figures in Oregon and lower monthly average spot and outdoor prices are a factor. The average Oregon spot price in November 2020 was $1,391 per pound versus $1,105 in November 2021, a difference of $285 per pound year-on-year. November’s price for outdoor flower has dropped over 43% year-on-year.

Average monthly sales per retailer are down for the fourth month in a row as well, falling 8.3% in November 2021 and falling 11.3% year-on-year, which is likely a consequence of lower prices and lessening demand as employment rises. The Oregon unemployment rate has fallen from 7% in October 2020 to 4.4% as of October 2021.

November adult use purchases were $79.9 million, down 7.8% month-on-month and down 2.6% year-on-year. Adult use retail sales were 92% of total sales. Medical sales, at $6.4 million, were down 10% month-on-month and down 19% year-on-year. Medical sales were 8% of November 2021 total sales.

Month-on-month changes in retail sales revenue for the OLCC’s product categories are as follows: Usable marijuana (flower, trim and pre-rolls) was down 10.7% month-on-month and down 10.9% year-on-year, with November sales at $44.6 million. Usable marijuana made up 51.6% of total sales in November 2021.

Concentrates and extracts sales fell 6.6% month-on-month to $21.5 million, and were down 10% year-on-year. Concentrates and extracts were 24.9% of total sales in November 2021 versus 24.5% of total sales in October 2021.

Sales revenue from edibles and tinctures, at $10.6 million, was down 3.1% month-on-month, but were up 12.9% year-on-year. Edibles and tinctures accounted for 12.3% of November’s total sales revenue, versus 11.7% of total sales in October 2021 and 10.5% of total sales in November 2020.

The OLCC reports monthly harvest figures fell from October’s 5.54 million pounds of wet weight to 820,175 pounds as the harvest wrapped up in November, an 85% decrease month-on-month. Year-on-year, November 2021 wet weight is up nearly 9% from 752,609 pounds in November 2020.

The Oregon oversupply situation has been exacerbated by a 54.6% increase in outdoor-grown product in 2021. To date in 2021, outdoor growers have produced 6.4 million pounds of wet weight product versus all of 2020, when 4.1 million pounds of outdoor wet weight was harvested. At this rate of production there is no successful exit door for the Oregon market except for the one marked federal legalization.

Indoor production figures show a 20.6% increase year-on-year. Mixed-light production – greenhouse and light deprivation – show a rather restrained increase of 4.5% from 2020 to 2021.

Oregon’s Spot Index average in November was down 3.9% month-on-month and down 20.6% year-on-year, reflecting increased harvest (supply) year-on-year and plateauing demand in one of the more established state markets.

December 7, 2021

California’s Taxable Cannabis Sales Take Big Hit in Q3 2021

California Taxes Take Big Hit
Photo: Pascal Meier/Unsplash

The California Department of Tax and Fee Administration (CDTFA) recently issued data on taxable sales and cannabis tax collections for Q3 2021. Taxable sales for Q3 were $1.24 billion, a steep 12.5% quarter-on-quarter decline from over $1.41 billion in Q2 2021. The quarterly downturn in sales is notable, as Q3 is frequently the strongest sales period of any given year for legal cannabis markets. Year-on-year, Q3’s taxable sales are down 1.8% from over $1.26 billion in Q3 2020.

Total cannabis tax revenue collected in Q3 was $322.3 million, of which excise taxes were $169 million, cultivation taxes were $42.4 million, and sales taxes from cannabis businesses were $111 million. The $322 million in total taxes collected represents a 6.6% decrease from the upwardly adjusted Q2 total taxes of $345 million. Total tax collections were down by 0.8% year-on-year in Q3. Quarter-on-quarter and year-on-year total sales revenue are lower due to lower demand beginning in the summer, as well as a significant drop in Q3 California cannabis prices.

Excise tax receipts were down 4.7% from the prior quarter in Q3 2021, after gaining an upwardly revised 10.7% in Q2 2021. California’s 15% excise tax is levied on retailers – both medical and adult use – based on the wholesale price paid, plus a markup rate set by CDTFA in the case of bilateral trades between two unaffiliated parties.

California Quarterly Cannabis Excise Taxes

As shown in the table below, 2020 saw strong and steady increases in sales taxes collected from adult use retailers – including a 29% quarter-on-quarter increase in Q2 2020 – with the exception of the final quarter of 2020, in which tax revenue fell slightly. 2021 sales tax revenues have fallen two out of three quarters, yet total revenue in the first three quarters of 2021 is $61.3 million higher than that of the first three quarters of 2020.

The average quarterly sales tax revenue in 2020 was $98.6 million while the average quarterly sales tax revenue to date in 2021 is $115.2 million. At this pace, 2021 sales tax revenue will outpace 2020 by some $66.3 million.

California Quarterly Cannabis Sales Tax

CDTFA also provided Cannabis Benchmarks with a breakdown of cultivation tax receipts for Q3 2021. As California’s cultivation tax is a flat tax by weight for each product type, the data provides for quarterly and annual comparisons on the volume of product that entered California’s regulated market in recent periods. Tax receipts for flower and fresh plants are up quarter-on-quarter, but revenue from leaves was down nearly 10% in Q3.

Lower tax revenues for leaves – or trim – are perhaps an effect of waning pandemic demand. Seasonal factors may also be at play. With such material largely used by extractors and product manufacturers, those operators may have been waiting for the current quarter’s fall harvest to bring in more, cheaper raw material for their production lines.

California Cannabis Tax by Product

Quarterly wholesale sales volume figures, extrapolated from CDTFA cultivation tax data, are shown in the table below. The cultivation tax is levied on product when it “enters the commercial market,” which is defined by CDTFA as when the product clears required testing.

California Wholesale Cannabis Volume

Year-on-year wholesale volume of products put in a mixed performance with Q3 2021 flower sales volume up 6.5%, fresh plant volume up 11%, and leaves (trim) down just over 12%.

While the 2020 pandemic year saw steadily rising product volumes, in 2021 volumes dropped initially with Q1 2021 product volume falling across the board versus Q4 2020. The Q4-Q1 decline was likely also due to the seasonal characteristics of the production side of the market, with trading volume in the final quarter of any given year inflated due to the fall outdoor harvest. That said, volumes have generally increased from Q1 2021, with the exception of leaves (trim) in Q3, when the volume that entered the market fell 10.2% from Q2 2021.

Cultivation tax collections have remained surprisingly steady after the massive 40.9% jump in Q3 2020, which was likely spurred by expansive pandemic demand and increasing production capacity coming online. While cultivation taxes were marginally lower in Q4 2020 and Q1 2021, it appears the $40 million handle is here to stay until the next big figure at $50 million – an event that is likely to occur next year as explained below.

California Cannabis Cultivation Tax

Cultivation taxes are set to increase on January 1, 2022 in an inflation adjustment, a requirement of the Cannabis Tax Law effective January 2020. The new rates apply to cannabis product the cultivator sells or transfers to a manufacturer or distributor, according to the CDTFA.

California Cannabis Adjusted Tax Rates

The California spot market has undergone a steep sell-off in 2021, losing just over 34%, from its current annual high to the current low. The cultivation tax record indicates there has been very little change in the amount of cannabis being taxed in 2021.

Lower excise and sales tax collections are likely due in part to lower retail prices corresponding to the downturn in wholesale rates, especially in Q3 2021. Consumer demand and retail sales also softened in California in Q3, as in many other markets around the country. We might expect tax revenues from retail purchases to sink again in Q4, with spot pricing down 17.4% two-thirds of the way through the quarter. Additionally, October and November are typically slower retail sales months in legal cannabis markets.

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