October 18, 2021

Why are Arizona Retail Cannabis Sales Declining?

Arizona cactus
PHOTO: Andrew Seaman/Unsplash

The Arizona Department of Revenue (ADOR) recently published August cannabis sales and tax collection data. Adult use sales commenced in January 2021 and ADOR provides adult use and medical sales estimates from that point. The table below shows adult use and medical sales from January 2021 through August 2021, as well as total monthly sales.

Arizona Cannabis Sales Figures
SOURCE: Arizona Department of Revenue

[Editor’s Note: ADOR provides two separate estimates of adult use sales, one based on collections from the Transaction Privilege Tax (TPT) and another based on collections from an Excise Tax, both of which are applied to retail purchases of adult use cannabis. Previously, Cannabis Benchmarks reported adult use sales estimates based on the TPT. However, we have switched to reporting the adult-use sales estimates derived from the Excise Tax under advisement from ADOR. According to a September 8 email from a spokesperson for ADOR, “the Adult Use TPT tax base allows for some deductions that the Marijuana Excise tax does not. I would suggest you use the Excise tax as the closer number for taxable sales.”]

 

August adult use sales, at $53.8 million, fell 8.4% from July. Medical sales, at $61.5 million, fell 11.1% from July. Adult use sales made up 46.7% of all sales in August, up from 45.9% in July. Medical sales were 53.3% of total August sales.

Adult use sales comprised 22% of total sales in January, even though they only began on January 22, and it was expected adult use sales would soon overtake medical sales. In the period since January 2021, however, adult use sales have made up between 42% to 47% of total sales. Both medical and adult use sales are subject to Transaction Privilege Taxes and adult use retail sales are subject to a further 16% excise tax, which likely accounts in part for the lack of migration from medical to adult use seen in other states new to adult use legalization.

The Arizona Department of Health Services (ADHS) has issued its September Report on the state’s medical cannabis program. The number of qualifying patients fell by 4% from 313,001 in August down to 299,997 in September. Year-on-year, the number of qualifying patients has risen 7.2%.

ADHS also provides information on sales volume of cannabis flower, edibles, and “marijuana other” – extracts and non-edible infused products – to registered patients.

September flower sales volume was 9,317 pounds, down 151 pounds or 1.6% from 9,468 pounds in August. Year-on-year, flower volume has fallen 42.3%.

September edibles sales were 152 pounds, down 9% from August edibles sales of 167 pounds. Edibles sales are down over 57% year-on-year.

September sales volume of “other” products fell 4.3% month-on-month to 1,166 pounds, with August sales volume at 1,219 pounds. “Other” product sales volume is down over 30% year-on-year.

Total weight sold in September was 10,635 pounds, down 2% from 10,853 pounds in August. Total volume sold has fallen 41.5% year-on-year.

ADOR adult use and medical data do not reflect a strong migration from medical use to adult use, which might be put down to higher taxes on adult use sales. The year-on-year drop in volume of products sold, as reported by ADHS, suggests that the medical market may have been satisfying significant demand from general consumers who obtained patient registrations prior to adult-use legalization.

October 12, 2021

Cannabis Sales in Nevada Stabilize as Tourism Numbers Increase

Las Vegas
Photo: Julian Paefgen/Unsplash

The Nevada Department of Taxation (NDOT) recently released sales and tax data from the state’s legal cannabis market for July 2021. Total retail sales moved higher after falling in May and June. Retail sales spiked sharply at the end of Q1 2021, jumping 32.6%, as Clark County started dropping COVID restrictions and tourism picked up quickly. Q2 saw smaller percent sales changes month-to-month, with July representing the first uptick in sales in three months, gaining 1.4% over the previous month to reach just over $93 million.

According to NDOT data, Nevada cannabis retailers generated the following monthly revenue figures in the most recent three months for which data is available. The sales numbers below include both retail sales of adult-use and medical cannabis.

Nevada Cannabis Sales

Total July adult-use sales were $85.9 million, comprising over 92% of total sales. Medical sales were 8% of total July sales at $7.2 million. Year-on-year, July 2021 sales are up 19% over July 2020, a period during which the coronavirus caused a drop in Las Vegas tourism. Wholesale cannabis tax collection was $5,457,948 in July, down slightly from the $5,535,097 June figure.

The Las Vegas Convention and Visitors Authority shows an 11.2% increase in visitor volume from June to July 2021 and, at 3.3 million, the highest monthly visitor count this year. July visitor count is up 130% year-on-year. Virus-related restrictions have proven a moving target. As of October 1, 2021 a statewide mask mandate is back in place. Although Nevada does not break out local versus tourist sales, local demand increased during the pandemic, helping to push February sales over $90 million ahead of tourists returning.

October 5, 2021

How Can Oregon Curb the Impact of Cannabis Oversupply and Illegal Grows?

stop
Photo: Possessed Photography

The Oregon Liquor and Cannabis Commission (OLCC) met on September 23, 2021. Commissioners and staff held an in-depth discussion of current market conditions, specifically the illicit market and its deleterious effects on the state’s legal system. One speaker asserted that if the illicit market is not met with more police resources, it will destroy the legal cannabis market. The OLCC does not fund or direct policing activities and one member pointed out that such initiatives would have to be funded by the legislature. Some staff members noted that illicit growers, especially in southern Oregon, are undercutting legal cannabis prices.

Also of particular interest to Cannabis Benchmarks readers: OLCC staff recommended the moratorium on new cannabis producer licenses be extended for two years. The moratorium is likely to be extended, with procedural and timing details outlined in the interview below. While the intent of the initial moratorium to curb supply and support market price was largely defeated by the clearing of backlogged producer licenses, a second bite at the moratorium apple, in conjunction with increased policing of the illicit market, may help in supporting Oregon cannabis prices in future years.

Casey Houlihan, Executive Director of the Oregon Retailers Association (ORCA), said that the recommendation to extend the moratorium was expected given that the initial moratorium “slowed the bleeding” in the industry, but did not stop it. The OLCC appears to have the authority to extend the moratorium on its own, but will take a more nuanced approach, according to Houlihan. The commission will likely look for statutory approval of an extension of the moratorium and, given Oregon’s truncated legislative calendar next year, the moratorium should receive such approval in February or March 2022.

Houlihan supports the moratorium extension. He told Cannabis Benchmarks, “even the existing canopy is far more than is needed to supply the state’s existing consumers” and issuing more licenses at this time “would create instability” in the cannabis market. As far as supply goes, the OLCC may be over-stating the supply situation because they rely on “wet weight,” which includes wasted product that is not ultimately marketable. Still, he reiterated the fact that outdoor growers kept finished inventory off the market last year, thus adding to supply generated this year and compounding price pressures.

That the market is oversupplied is not in doubt and while outdoor product is changing hands at $300, $400, and $500 per pound, depending on quality, that is for single pounds for retail sale as smokable flower. Larger volume outdoor product sales have seen prices as low as $80 per pound and it seems likely that flower is going to processors to make shelf-stable products such as extracts, concentrates, and infused products. Trim still trades at $50 per pound but lower prices for quantity are not unknown.

Indoor-grown product can trade for as little as $800 per pound, up to $1200 for higher quality, but for “5% of indoor growers” prices can range much higher. This small number of indoor growers are getting $2,700 per pound before the product is even planted, according to Houlihan, and “demand for this product exceeds supply.” Greenhouse product is “almost a bifurcated market” with some greenhouse quality as high as indoor and some on par with outdoor, with prices to match. Houlihan noted product grown in hoop houses is mostly getting outdoor-grown prices.

In a wide-ranging conversation, one sensed the outdoor market may again undergo a type of creative destruction, where growers throw in the towel and new growers come to the market. Indeed, one advantage of the moratorium, as Houlihan sees it, was that it offered growers crushed by oversupply and tanking prices the opportunity to sell their businesses to new growers, rather than some less desirable alternatives. At the end of the day, it seems as if the high-end producers will continue to thrive even as supply swamps price on some greenhouse and most outdoor production.

Houlihan sees federal legalization as the road to a robust and stable Oregon cannabis market but is not optimistic about President Joe Biden supporting such a bill. He did concede that there are other signs Biden may come around if a legalization “democratic bill” were to land on his desk. For now, Oregon prices remain under pressure and the market is likely to see a new two-year moratorium on cannabis producer licensing receive statutory approval in late winter or early spring next year. In the interim, Houlihan does not see the OLCC processing new license applications even after the moratorium expires on January 1, 2022.

September 28, 2021

Massachusetts Retail Cannabis Sales on Track for Record Performance

increasing line chart
Photo: Frank Busch

The Massachusetts Cannabis Control Commission recently released adult-use market data for August 2021. August sales, at $125,843,894, were down 1% from July’s $127,113,019. As we have noted in regard to other states, July contained five weekends, when sales typically spike, so the small downturn from July to August suggests that the steady growth Massachusetts’ adult-use sector has been experiencing is not slowing in a meaningful way.

Meanwhile, the data shows significant jumps in quarterly sales year-to-date. Q1 sales were $268.7 million, Q2 sales were $327.7 million, and, thus far in Q3, sales are $253 million suggesting the current period will be another record breaking quarter, a not uncommon occurrence in recently legal, high population states. Year-on-year, August adult use sales are up 58.1%. While the Massachusetts market was slow to get off the ground initially, it seems to be hitting its stride.

Massachusetts also provides average monthly per-ounce retail prices, as depicted in the graph below. Readers should note that the anomalous drop shown in the chart is due to the suspension of adult-use sales that occurred as part of the state’s COVID-19 response, which lasted from late March to late May 2020. After sales resumed, average retail flower prices trended upward for several months, culminating in a high of $379.06 in November 2020, after which price has remained remarkably stable, sliding just $13 since that point.

Retail ounce price slipped $3 from July to August 2021 and is trading at levels not seen since June 2020. From a technical perspective, there is no support for current ounce prices. (Again, the dip in the chart occurred when adult-use sales were suspended.) However, given market fundamentals – including an ever growing customer base and contiguous large population states delaying adult use retail – there is a good chance price remains stable within the $350 to $400 per ounce range. August 2021’s average retail price is $367.08 per ounce, equivalent to $5,873 per pound.

Massachusetts Retail Marijuana Prices Per Ounce

Massachusetts Retail Cannabis Price Per Pound
Source: Massachusetts Cannabis Control Commission

Massachusetts also issued data on Medical Marijuana Treatment Centers (the state’s term for dispensaries). August 2021 medical sales were $26,540,694, 2.6% lower than July sales of $27,259,175. Cumulative 2021 sales through August 31, 2021 are $211,187,070, or an average of $26.4 million per month.

September 21, 2021

Colorado Marijuana Sales on Track to Surpass 2020 Totals

Colorado Landscape
Photo: Shelby Smith

The Colorado Department of Revenue (CDOR) recently released its monthly Marijuana Sales Report for July 2021. According to that report, demand picked up month-on-month, to levels not seen since early spring 2021. While there’s been a good bit of variability in monthly sales in 2021, the last three months have seen medical sales move forward on their average monthly sales for the year at $36.4 million per month. The adult-use monthly sales were $167.8 million — well over 2021 average monthly sales at $156.8 million.

In July, combined retail sales of adult-use and medical cannabis totaled $202.8 million, up by 8.3% from June’s combined revenues of over $187.3 million. On a year-on-year basis, those July 2021 sales, at $202.8 million, are up just 2% from the July 2020, $198.9 million data. Year-to-date, combined adult-use and medical cannabis sales in Colorado, at $1.35 billion, put Colorado on pace to exceed the 2020 total sales, which came in at $2.2 billion.

Adult-use retailers in Colorado tallied over $167.8 million in July, a 9.9% increase over June adult-use retailer sales. Year-over-year, July 2021 adult use retail sales, at $167.8 million, were down 9.1% from July 2020’s monthly figure of $183.1 million. Retail revenues from the adult-use sector expanded by over 24% from 2019 to 2020 but look set to expand by just 6.7% in 2021 if retail revenues keep their current monthly pace.

Medical cannabis revenues in July 2021 came in at just over $35 million, up 1.5% from June 2021’s $34.5 million, but down by 23.6% from the July 2020 figure of $43.3 million.

In the wholesale realm, tax collection data for August 2021 – which corresponds generally to wholesale transfers and transactions executed in July – shows that the 15% excise tax on wholesale activity in Colorado’s adult-use system resulted in nearly $9.5 million accruing to state coffers. August wholesale excise tax receipts are down by 3.9%, compared to tax collections from the previous month, which amounted to just under $9.9 million.

Average Market Rates (AMRs), 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, increased from June to July. (Since August 2017, AMRs are adjusted quarterly by the Colorado Department of Revenue.) The Q3, 2021 effective tax on internal transfers of flower from licensed cultivation businesses to commonly-owned retailers went up $1 per pound to $1,309 for flower, effective through September 30, 2021. While some AMRs were little changed in July, the tax on bud allocated for extraction jumped by 71.6% to $901 per pound, the retail trim rate jumped by over 20% to $425 per pound and trim allocated for extraction went up nearly 7% to $425 per pound. These changes suggest that the downturn in July tax collections is likely due to less wholesale product being transferred between commonly owned adult use licenses. The table below shows AMRs for all of 2021 with the newly issued October AMR at the top of the table.

The AMR for bud allocated for extraction will fall over 50% to $405 per pound in Q3, but the AMR for trim will rise nearly 24% to $302 per pound, commencing on October 1, 2021.

CDOR calculates AMR for each quarter by averaging the first two months of the previous quarter with the last month of the quarter before, to come up with the AMR for the next quarter.  For instance, to find the AMR for Q4, 2021, CDOR averages prices from June 1 through August 31, 2021, thus the average captures part of the previous two quarters in calculating the next quarter AMR.