Data Dive: Cannabis Price Trends

By Eric Peterson | Nov 21, 2019

Cannabis & Hemp Supply Chain Colorado

In cannabis, price trends vary from state to state and category to category, but the data indicates a market-by-market maturation catalyzes lower prices.

As the industry matures, there are two clear trendlines: The price of raw cannabis flower has steadily declined as the prices of processed cannabis products have steadily risen.

Tom Adams, managing director of Boulder-based BDS Analytics, highlights some of the trends with cannabis price data from the firm's GreenEdge platform. Low flower prices are "a negative for growers and generally a negative for retailers, but a positive, frankly, for edibles and concentrates makers, who are buying raw materials cheaper," says Adams of low flower prices.

An unexpected data point: California's tracked cannabis market actually shrunk when recreational adult-use marijuana became legal in January 2018. "The actual shrinkage surprised us," says Adams. According to data from BDS Analytics, flower prices dropped from $9.63 a gram in March 2017 to $7.96 in January 2018 in the Golden State before rebounding to $9.08 in September 2019.

Oregon rebounds

"I'm just picking up some buzz about wholesale prices firming up in Oregon," says Adams. "This is sort of earthshaking. The glut of product in Oregon was driving the most dramatic declines in retail flower prices in the country.

Wholesale prices have stabilized as retail prices for flower have bounced off of a bottom of $3.54 a gram in May 2019 to $4.49 a gram in September 2019, according to BDS Analytics data. They were more in line with the national average, at $9.27 a gram, in January 2016.

Will the trend will continue in 2020? Adams isn't sure. "It's unclear if enough of a shakeout has occurred, that there's enough of a reduction in what was the amazing glut of two years ago now, when there was five years' worth of product in the pipeline."

The black market continues to depress prices for the regulated market in the Beaver State. "Oregon is still not a 100 percent legal market," notes Adams. "A big chunk of Oregon's market is still the illicit pipeline, and that keeps price pressure on everybody else. It's not like legal dealers have this sector to themselves yet."

Vape crisis dampens price gains

According to BDS data, the average retail price for vape products increased from $35.60 in March 2017 to $44.01 in July 2018 before falling to $39.70 in September 2019.

"This recent big scare has been a heartstopping moment for the industry in many ways, because it was unprepared for it," says Adams. "Nobody cared about the health risks of the cannabis supply to the country before. Quite the contrary, the federal government abdicated its responsibility to the country to make sure cannabis supplies were safe."

As vapes were one of the categories with consistently higher prices, the recent vape health scare has interrupted that trend. The vape market saw its first sales decline on record in September 2019. In California, Colorado, Arizona, Nevada, and Oregon combined, vape sales dropped by 21 percent, while prices dropped by less than 1 percent.

The CDC's finding that the problematic cutting agent was "generally not in use in the legal market," says Adams, will drive future price gains for the regulated vape market. "It can only be positive," he says. "Consumers have long shown a willingness to pay more for the healthier alternative with everything from strawberries to low-tar cigarettes. People aren't willing to change their habits entirely, but they are willing to pay more for something that's healthier."

Processed products, stronger prices

Adams says the prices for edibles, concentrates, and other processed products have been "much more stable" than flower prices.

Contrasting with the downward trajectory for flower prices, the broad categories of ingestibles, inhalables, and topicals have seen steady price gains from 2014 to mid-2019. The average topical product jumped from $18.80 to $28.80 at retail, the average inhalable rose from $13.95 to $18.99, and the average ingestible increased from $8.23 to $9.26. "That's why the industry is eagerly embracing the whole brand-building strategies of big brands," says Adams.

The trends vary from state to state: BDS found prices in all broad categories -- flower, concentrates, ingestibles, and topicals -- have declined in Colorado, although flower's price drop had been the steepest. As flower prices decreased by 44 percent between January 2016 and June 2019, the price of concentrate dropped by 26 percent.

The scenario was notably different in California: Between March 2017 and June 2019, the average price of flower dipped by only 3 percent. while the average price of ingestibles and concentrates increased by 33 percent and 23 percent, respectively.

Edibles prices in California averaged $14.43 in March 2017, a number that rose to $20.93 in November 2018. The reason? Demand growth outpaced that of supply once more stringent testing laws went into effect in July 2018.

BDS looks east

"We just added Maryland," says Adams of BDS's entry into its first East Coast market.

He cites a "radical difference" in price with legal cannabis markets in the West. Flower in Maryland increased from $11.34 per gram in May 2019 to an August 2019 peak of $12.20 before softening to $10.44 in September 2019. "Still, that's more than twice the price of a developed state like Oregon," says Adams.

He says he expects the flower price to trend downward in Maryland in the longer term as the industry matures.

"That'll be interesting to watch in the year ahead, now that we do have some tracking in the East, and see how it shapes up differently," says Adams. "We've got Illinois, Massachusetts, and Florida next on our rollout calendars."

This is the third in a series of data-driven features for CompanyWeek's Cannabis Manufacturing Report produced with the help of BDS Analytics. Headquartered in Boulder, Colorado, BDS Analytics provides businesses with comprehensive, actionable, and accurate cannabinoid market intelligence and consumer research. To learn more about how you can utilize the company's industry-leading market research, visit www.bdsanalytics.com.