Photo: Andrew Seaman/Unsplash
Proximity matters. New England states have the most volatile wholesale cannabis prices in the country. Legal adult use markets in the region are at various stages of development led by Massachusetts, the most mature market, in addition to featuring several newcomers.
The Bay State started adult use cannabis sales in November 2018, the first on the entire East Coast to do so. Wholesale cannabis prices climbed from the outset, jumping 5.9% in the first month of sales, then jumping 17% in 2019 and adding another 7.3% in 2020. The two-year honeymoon period of steadily rising prices and no nearby legal competition saw Massachusetts wholesale cannabis prices climb to become the most expensive in the nation. However, no one knew the party was already over.
Massachusetts saw the pandemic boost demand from in-state and out-of-state consumers for a while, but when sales fell off in the fall of 2022, prices started dropping as businesses that borrowed to expand in response to burgeoning demand saw their debts coming due. At the same time, proximate states legalized adult use sales. Plateauing growth, debt servicing obligations, and regulations on the allowed shelf-life of flower made shedding inventory, debt, and assets seem prudent to many operators in the state. And shed they did: wholesale cannabis prices dropped 61% between October 2021 and January 20, 2023.
Enter Rhode Island and Connecticut. While Massachusetts was once an oasis in a cannabis desert, it is now surrounded by states with businesses that are determined to keep their cannabis consumers home. Operators know that the best way to achieve that is by offering convenience and competitive prices.
Rhode Island wholesale cannabis prices started falling before the adult use market even opened, shedding 19.6% from July 2022 through November 2022. Since the adult use market opened in December 2022, prices have fallen an additional 34.7% and are now aligned with Massachusetts.
The Connecticut adult use market had a soft open last week. The state licensed just nine stores for adult use sales, but only seven opened for business initially, with most located as far away from Massachusetts as local options will allow. Complaints about retail prices are bubbling up on social media, with one man complaining he paid $35 for a pre-roll “that didn’t even get him high” and another stating the illicit market has better quality and lower prices, a refrain familiar to retailers from California to Illinois to Massachusetts. Connecticut’s spot wholesale cannabis price fell $218 per pound just last week alone.
While Massachusetts cannabis businesses enjoyed a two-year honeymoon period of rising prices, the same luxury was not afforded to those in Rhode Island. Last week’s price drop in Connecticut is a portent that the state will eventually follow suit, though market fundamentals – namely, a dearth of licensed businesses at the outset – may lengthen the time it takes for prices to converge with those of Massachusetts and Rhode Island. Ultimately, though, it’s only a matter of time and operators in new adult use markets up and down the East Coast should expect little to no honeymoon period for wholesale cannabis prices after sales open.
Subscribers to our CORE and PREMIUM services have access to an extensive library of Interactive Charts that enable them to use wholesale pricing, supply, and sales data to identify trends and prepare for market volatility. Below is a chart our subscribers can make to compare different state market wholesale price history for a selected period of time.
Proximity is supercharging wholesale prices toward the cost of production, a phenomenon that should be familiar to Cannabis Benchmarks readers. Over the past year, Cannabis Benchmarks data and analysis has tracked the volatility and eventual convergence in wholesale cannabis prices as markets open, develop, and mature at increasingly rapid rates. While the recent sell-off in wholesale prices across New England markets caught many off guard, the independent wholesale price assessments and fundamental market data provided by Cannabis Benchmarks helped our subscribers – cannabis business operators, investors, and other stakeholders – make informed decisions with confidence.
Unbiased wholesale price data remains a crucial metric to assist operators and others in the industry to help weather the current storm. Now, cultivators in New England will need to push down their cost of production, manufacturers will need to create more inexpensive products, and retailers will have to lure customers on price first and product second if they want to succeed. In short, it’s on in New England!