Business
CBD prices are stabilizing after years of decline – but is it progress?
A yearslong tailspin for CBD prices is showing signs of leveling off.
But it’s too soon to say whether the CBD market is rebounding or if companies making CBD products have simply cut so deeply that they’re now holding or increasing prices just to survive.
The pricing trend was noted recently by the Brightfield Group, a Chicago-based cannabis analytics firm that crunches prices on thousands of websites and brick-and-mortar stores selling CBD.
“There were some massive price cuts that took place during the (COVID-19) pandemic, and those look to be ending,” said Brightfield’s managing director, Bethany Gomez.
Gomez compared the CBD market landscape to that of apparel, where discounting is so prevalent that consumers resist paying what they perceive to be full price.
A similar story has played out in the marijuana market: U.S. and Canadian cannabis retailers have been discounting their products, likely reflecting the rapidly growing number of adult-use brands and products available to retailers.
In the CBD market, Gomez said, widespread discounting through 2020 “really trained consumers to hunt for discounts.”
Brightfield noted 40%-50% price declines for CBD products in 2019 and 2020.
Through the second quarter of 2022, though, Brightfield noted that prices are holding somewhat steady, according to a pricing review of 100 brands and 100 brick-and-mortar retailers, plus digital menu audits.
CBD price stabilization comes as wholesale CBD inputs remain cheap, but inflation pressures are driving up other costs for CBD makers.
Not a good sign?
Not all manufacturers are ready to say that CBD pricing won’t keep falling, however.
“I think price is going to continue to get compressed,” said Bharat Ayyar, general manager of Vermont-based Sunsoil, which grows hemp and makes CBD.
Ayyar tracks CBD pricing on his own and believes the stabilizing prices might be a sign that surviving CBD makers have already cut prices as far as they can.
He noted that many publicly traded CBD companies have yet to show profits.
“These are companies that are not profitable, that are burning millions of dollars every quarter,” Ayyar said.
“And if they reduce their prices, they’re just going to get deeper into the red.”
Ayyar agreed with another conclusion Brightfield made from its pricing surveys: The CBD market won’t expand as many hoped without action by the U.S. Food and Drug Administration to regulate over-the-counter consumable CBD products.
Tinctures, ecommerce declining
Other CBD market trends Brightfield noted:
- More CBD makers are adding other cannabinoids and functional ingredients to their products in order to position themselves for distinct needs, such as weight loss or menstrual support.
- Tinctures remain the largest product segment in the CBD market by sales, at 19.2%. But gummies, drinks and other edibles are likely to gain market share. As Gomez put it, consumers are attracted to any CBD format that is “less of an objectively weird product” than a sublingual tincture. “Even those who are heavier users are shifting to that gummy format.”
- Market share for the top 20 CBD companies shrank slightly during the first quarter of 2022, from 18.9% to 18.5%. Brightfield attributes the slight change to supply-chain issues and slowing consolidation.
- E-commerce will remain the top sales channel for CBD in 2022, at 39.2%. Pharmacies comes next at 19.5% of sales, followed by CBD specialty retailers with 10.7% of sales. Gomez doesn’t see specialty CBD retail going away. “People are starting to go back into the world again, and some really do prefer to talk to someone about the products.”
Source: https://mjbizdaily.com/cbd-prices-are-stabilizing-after-years-of-decline-but-is-it-progress/
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/
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