Business
Bottoming out: Adult-use cannabis prices nosedive in Massachusetts as market hits oversaturation point
Add Massachusetts to the growing list of oversupplied recreational cannabis programs.
Similar to Colorado, Michigan, Oregon and Washington state, Massachusetts has too much cannabis on the market and demand can’t keep up with supply, causing prices across several sectors to fall by up to 50% since this time last year.
According to the Massachusetts Cannabis Control Commission, which regulates marijuana in the state, the average retail price for flower per gram averaged $7.76 in October, the most recent month with available sales data.
That’s down from $14.38 for a gram of flower the same month a year ago.
Sources in the state say that wholesale flower and cannabis oil for infused products and extracts are showing a similar sales pattern, which has happened in several other recreational marijuana markets.
The trend: Prices start high for cannabis companies in the early years, then, as production capacity ramps up, the market becomes glutted and prices plummet.
The difference between Massachusetts – which started recreational sales at the end of 2018 – and Michigan, compared to the older markets, is that the drop-off in pricing seems to be occurring more rapidly.
Companies can stand up cultivation operations quicker and operators are simply getting better at growing cannabis and making extracted products.
“In the last six months we’ve seen a dramatic reduction in both wholesale and retail pricing,” said Brandon Pollock, CEO of Theory Wellness, based in Stoneham.
“For a couple years in Massachusetts, we were undersupplied in the market. It has certainly slipped to where it appears to be there’s an oversupply.
“And that really happened during the second half of this year most dramatically.”
Big drops
For wholesale flower prices, Pollock said anecdotally, a pound is selling for $800-$1,500, which is about a 50% drop from a year ago.
Dennis Curran, chief operating officer of marijuana multistate operator Acreage Holdings, which does business in Massachusetts, said companies are getting better at cultivating, so there are more products in the market.
“There’s a lot of capacity on the market in Massachusetts,” he added.
Unfortunately, Pollock said, many cannabis companies built their business model off the prices they were getting in the early days of the market, when wholesale flower was selling for $3,000 a pound or more.
“The difficulty these folks have is it takes several years between when you have the idea to actually getting online, let alone the whole process to do your first harvest,” he added.
“In that interim period, when folks are doing their planning and construction, the market’s bottom started to fall out.”
Aside from the indoor and greenhouse cultivation facilities that have all come online recently, Massachusetts has a dozen or so outdoor marijuana farms that had a good growing season, according to Pollock, and those crops also began hitting the market in the past month.
That can affect the flower price on the shelf but, even more so, the price of cannabis oil, which is typically made from cheaper, outdoor-grown flower. A liter of cannabis oil distillate has gone from around $20,000 last year to $5,000-$7,000, Pollack said.
“That’s been the greatest drop,” he added.
Staying competitive
The saturation is causing a lot of pain for cannabis companies.
The market experienced its first store closure since recreational sales began when The Source+, located in Northampton, shuttered last week.
However, one upside is the lower prices have been a boon to consumers, and the pricing is making the licensed industry more competitive with the illicit market.
An eighth is selling for $20-$25 in some stores, down from closer to $50 last year.
“Customers have been loving it,” Pollock said.
For Ulysses Youngblood, president and co-founder of Major Bloom, a cannabis retailer in Worcester, business has been good despite the price drops in the market.
His company doesn’t grow cannabis but does manufacture products, so the lower wholesale prices help him save on input costs.
“I have to be focused on what we’re doing, how we can serve people, which has been our business model from Day One,” Youngblood said.
“Making sure that prices are economical, because we’re in a low-income neighborhood.
“We have to think about how we can get weed in people’s hands that are economically depressed.”
Jason Vegotsky, CEO of Petalfast, a sales and marketing agency for the cannabis industry, said that while the state gave out more cultivation licenses than the retail demand can support, the low prices help get consumers’ attention in the fight against the illicit market.
“Nobody knew exactly how much cannabis we should be growing,” he said.
“But it’s very clear that there is far too much cannabis in Massachusetts for the demand, which is driving down prices, putting pressure on margins and having folks race to the bottom.”
Looking ahead
Despite the economic challenges, companies are still bringing more cultivation facilities online.
That’s coupled with several other states in the region kicking off recreational marijuana sales recently or in the near future, including Connecticut, New York, Rhode Island and Vermont.
“People have been traveling to visit us whether it’s just to buy cannabis or they’re on a vacation,” Pollock said.
“And most of the dispensaries in especially western Massachusetts are going to see a noticeable impact there when New York gets into a functioning marketplace.”
In the meantime, Pollock said it might be worth the state looking at pausing new applications for cultivation, a move other states such as Colorado have also considered.
Other than that, in order to survive the economic downturn, Curran said Acreage is focused on premium products.
“With more capacity coming on, for us to win is to make sure The Botanist and the Superflux brand is high-quality and that all the shoppers and patients understand it,” he said.
Pollock also recommends cannabis businesses in the state focus on branding and quality.
“If you’re going to go for the high-quality model, really double down on everything that you need to do to create that premium product that can hold a higher price point,” he said.
Source: https://mjbizdaily.com/massachusetts-recreational-marijuana-prices-nosedive-in-oversaturated-market/
New Mexico regulators fined a cannabis operator nearly $300,000 and revoked its license after the company allegedly created fake reports in the state’s traceability software.
The New Mexico Cannabis Control Division (CCD) accused marijuana manufacturer and retailer Golden Roots of 11 violations, according to Albuquerque Business First.
Golden Roots operates the The Cannabis Revolution Dispensary.
The majority of the violations are related to the Albuquerque company’s improper use of BioTrack, which has been New Mexico’s track-and-trace vendor since 2015.
The CCD alleges Golden Roots reported marijuana production only two months after it had received its vertically integrated license, according to Albuquerque Business First.
Because cannabis takes longer than two months to be cultivated, the CCD was suspicious of the report.
After inspecting the company’s premises, the CCD alleged Golden Roots reported cultivation, transportation and sales in BioTrack but wasn’t able to provide officers who inspected the site evidence that the operator was cultivating cannabis.
In April, the CCD revoked Golden Roots’ license and issued a $10,000 fine, according to the news outlet.
The company requested a hearing, which the regulator scheduled for Sept. 1.
At the hearing, the CCD testified that the company’s dried-cannabis weights in BioTrack were suspicious because they didn’t seem to accurately reflect how much weight marijuana loses as it dries.
Company employees also poorly accounted for why they were making adjustments in the system of up to 24 pounds of cannabis, making comments such as “bad” or “mistake” in the software, Albuquerque Business First reported.
Golden Roots was fined $298,972.05 – the amount regulators allege the company made selling products that weren’t properly accounted for in BioTrack.
The CCD has been cracking down on cannabis operators accused of selling products procured from out-of-state or not grown legally:
- Regulators alleged in August that Albuquerque dispensary Sawmill Sweet Leaf sold out-of-state products and didn’t have a license for extraction.
- Paradise Exotics Distro lost its license in July after regulators alleged the company sold products made in California.
Golden Roots was the first alleged rulebreaker in New Mexico to be asked to pay a large fine.
Source: https://mjbizdaily.com/new-mexico-cannabis-operator-fined-loses-license-for-alleged-biotrack-fraud/
Four marijuana companies, including a multistate operator, have filed a lawsuit against U.S. Attorney General Merrick Garland in which they allege the federal MJ prohibition under the Controlled Substances Act is no longer constitutional.
According to the complaint, filed Thursday in U.S. District Court in Massachusetts, retailer Canna Provisions, Treevit delivery service CEO Gyasi Sellers, cultivator Wiseacre Farm and MSO Verano Holdings Corp. are all harmed by “the federal government’s unconstitutional ban on cultivating, manufacturing, distributing, or possessing intrastate marijuana.”
Verano is headquartered in Chicago but has operations in Massachusetts; the other three operators are based in Massachusetts.
The lawsuit seeks a ruling that the “Controlled Substances Act is unconstitutional as applied to the intrastate cultivation, manufacture, possession, and distribution of marijuana pursuant to state law.”
The companies want the case to go before the U.S. Supreme Court.
They hired prominent law firm Boies Schiller Flexner to represent them.
The New York-based firm’s principal is David Boies, whose former clients include Microsoft, former presidential candidate Al Gore and Elizabeth Holmes’ disgraced startup Theranos.
Similar challenges to the federal Controlled Substances Act (CSA) have failed.
One such challenge led to a landmark Supreme Court decision in 2005.
In Gonzalez vs. Raich, the highest court in the United States ruled in a 6-3 decision that the commerce clause of the U.S. Constitution gave Congress the power to outlaw marijuana federally, even though state laws allow the cultivation and sale of cannabis.
In the 18 years since that ruling, 23 states and the District of Columbia have legalized adult-use marijuana and the federal government has allowed a multibillion-dollar cannabis industry to thrive.
Since both Congress and the U.S. Department of Justice, currently headed by Garland, have declined to intervene in state-licensed marijuana markets, the key facts that led to the Supreme Court’s 2005 ruling “no longer apply,” Boies said in a statement Thursday.
“The Supreme Court has since made clear that the federal government lacks the authority to regulate purely intrastate commerce,” Boies said.
“Moreover, the facts on which those precedents are based are no longer true.”
Verano President Darren Weiss said in a statement the company is “prepared to bring this case all the way to the Supreme Court in order to align federal law with how Congress has acted for years.”
While the Biden administration’s push to reschedule marijuana would help solve marijuana operators’ federal tax woes, neither rescheduling nor modest Congressional reforms such as the SAFER Banking Act “solve the fundamental issue,” Weiss added.
“The application of the CSA to lawful state-run cannabis business is an unconstitutional overreach on state sovereignty that has led to decades of harm, failed businesses, lost jobs, and unsafe working conditions.”
Alabama regulators are targeting Dec. 1 to award the first batch of medical cannabis business licenses after the agency’s first two attempts were scrapped because of scoring errors and litigation.
The first licenses will be awarded to individual cultivators, delivery providers, processors, dispensaries and state testing labs, according to the Alabama Medical Cannabis Commission (AMCC).
Then, on Dec. 12, the AMCC will award licenses for vertically integrated operations, a designation set primarily for multistate operators.
Licenses are expected to be handed out 28 days after they have been awarded, so MMJ production could begin in early January, according to the Alabama Daily News.
That means MMJ products could be available for patients around early March, an AMCC spokesperson told the media outlet.
Regulators initially awarded 21 business licenses in June, only to void them after applicants alleged inconsistencies with how the applications were scored.
Then, in August, the state awarded 24 different licenses – 19 went to June recipients – only to reverse themselves again and scratch those licenses after spurned applicants filed lawsuits.
A state judge dismissed a lawsuit filed by Chicago-based MSO Verano Holdings Corp., but another lawsuit is pending.
Source: https://mjbizdaily.com/alabama-plans-to-award-medical-cannabis-licenses-dec-1/
New Mexico cannabis operator fined, loses license for alleged BioTrack fraud
Marijuana companies suing US attorney general in federal prohibition challenge
Alabama to make another attempt Dec. 1 to award medical cannabis licenses
Pot Odor Does Not Justify Probable Cause for Vehicle Searches, Minnesota Court Affirms
New Mexico cannabis operator fined, loses license for alleged BioTrack fraud
Alabama to make another attempt Dec. 1 to award medical cannabis licenses
-
Business1 year agoPot Odor Does Not Justify Probable Cause for Vehicle Searches, Minnesota Court Affirms
-
Business11 months agoNew Mexico cannabis operator fined, loses license for alleged BioTrack fraud
-
Business11 months agoAlabama to make another attempt Dec. 1 to award medical cannabis licenses
-
Business1 year agoWashington State Pays Out $9.4 Million in Refunds Relating to Drug Convictions
-
Business11 months agoMarijuana companies suing US attorney general in federal prohibition challenge
-
Business1 year agoLegal Marijuana Handed A Nothing Burger From NY State
-
Business1 year agoCan Cannabis Help Seasonal Depression
-
Blogs1 year agoCannabis Art Is Flourishing On Etsy