November 2, 2021

Ohio Retail Cannabis Prices Driving Patients Across State Lines

highway
Photo: Markus Spiske/Unsplash

While Michigan has undergone a price rout in 2021, with wholesale flower prices falling nearly $500 per pound, the state is virtually guaranteed to attract business from neighboring Ohio where medical cannabis is legal, but prices are significantly higher. Under Michigan law, licensed dispensaries are permitted to sell to registered patients from other states with legal medical cannabis.

Historical data from the Ohio Medical Marijuana Control Program indicates that, as of the end of September, a tenth of an ounce of plant material (flower) cost $28.81 or $288.10 per ounce, equivalent to an average retail price for patients of $4,610 per pound. In September in Michigan, as we covered above, the average retail price for flower in the medical cannabis sector was $3,065 per pound, about a third lower than what patients are paying in Ohio. With price differentials at this level, prices falling in Michigan, and Ohio patients upset about local pricing, Ohio patients traveling to Michigan to purchase is bound to occur until Ohio medical cannabis prices come down.

Ohio’s medical market opened in January 2019 but prices have not fallen appreciatively. A report from the The Dayton Daily News quotes the CEO of an Ohio dispensary as stating, “Everybody’s selling pretty much at the same price, all of the locations. There’s no price-gouging by any individual owners.” However, the report notes she continued, saying there is also an understanding among owners to not undersell it “just so they can get all the sales.” The seller further opined, “that happens in other industries, but I think there’s a respect among all of the owners to sell for what the going rate is.” State officials have promised to address medical market issues, but their efforts have had virtually no effect on prices according to the historical data provided by the Ohio Department of Commerce.

The number one patient complaint in Ohio is the price of medical cannabis, as documented in a recent Ohio State report. With Michigan prices under pressure due to the proliferation of cannabis licenses and expanding production, some Ohioans will almost certainly continue to cross the border seeking a less expensive alternative.

October 26, 2021

Cannabis Demand in Massachusetts Remains Elevated While Legalization Lags in Neighboring States

New England Autumn Trees
Photo: Peter James Eisenhaure/Unsplash

The Massachusetts Cannabis Control Commission (CCC) released adult-use market data for September 2021 recently. September sales were $118,994,054, down 5.4% from the August sales figure of $125,843,930. September marked the second month in a row of lower sales, although the August drop in sales was likely due July having five weekends, when sales typically go up.

Quarterly sales, on the other hand, are on an absolute tear, with Q3 2021 sales up 11.2% over Q2, after Q2 sales jumped 21.6% over Q1 2021. Year-on-year things really heated up, with 2021 sales to date jumping through the $1 billion mark in September. Year-to-date sales are already outpacing full year 2020 sales by 42.6%. At the current pace, 2021 sales will be $1.27 billion.

Massachusetts also supplies average retail price data for flower. It is evident we are beginning to see a bit of price deterioration in per-ounce retail prices with September, at $362.49, down 1.3% from August 2021. The per-ounce retail price is down 4.5% year-on-year.

As recently as August there were only just over 50 active cultivator licenses in Massachusetts’ adult use market. However, recent CCC information shows the number of licensees with permission to commence operations is as follows: 61 Cultivators, four Microbusinesses, 50 Product Manufacturers, 175 Retailers, and five Courier licenses, thereby expanding growing, production, and distribution services. Given Massachusetts’ population, there appears to be much more room for growth for cultivators, product manufacturing, and distribution, as well as retail outlets and delivery services.

The average retail price per pound in September was $5,800, 1.3% lower than the average price per pound year to date, at $5,877. September’s average retail price per pound represents an over 60% premium compared to Cannabis Benchmarks’ mean wholesale Spot price for the state in September.

Massachusetts also issued sales data for their Medical Marijuana Treatment Centers – the term the state uses for dispensaries. September 2021 medical sales were $25,157,624, down 5.5% from August. Year-on-year, medical sales are up 1.9%. Year-to-date medical sales stand at $242 million.

Cannabis Benchmarks’ Massachusetts Spot price – which includes wholesale transactions from both the state’s adult use and medical market – rallied from Spring 2020 through December 2020, when it peaked. Prices are likely to remain buoyant with demand from New York, Connecticut, and New Jersey continuing into next year. New York, Connecticut, and New Jersey have all experienced delays in implementing an adult use program, which should support prices in the Bay State until at least mid-2022, and likely longer.

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.