420 with CNW — Cannabis Prices Slump in Massachusetts Amid Supply Glut
A chronic oversupply problem has caused cannabis prices in Massachusetts to slump for several months. In October 2022, recreational cannabis in Massachusetts averaged $7.76 per gram of cannabis, the lowest cannabis prices had been since the launch of the adult-use market.
Prices had decreased steadily since June 2021, with the most significant falls in cannabis prices occurring in September and October 2022.
Interestingly, sales revenue from recreational cannabis went down as well, with adult-use cannabis retailers bringing in $112.2 million in November 2022, the lowest retail sales revenue since the start of the year. Joseph Lekach, CEO of cannabis company Apothca, said at the time that there was an “extreme oversupply” of edibles, flower, concentrates, vapes and other cannabis products.
State data now shows that prices for legal cannabis in Massachusetts have hit a five-year low, allowing users to purchase more cannabis without digging deeper into their pockets. However, while the low prices may be a boon for customers in the short-term, cannabis businesses will likely pay a price in the long-term. Recreational cannabis retailers in Massachusetts now have to sell twice as much product to bring in the same amount of revenue they were making just a few months ago.
The wholesale value of cannabis has also dropped significantly. This may impact producers who invested in large cultivation operations to cash in on the nascent but lucrative cannabis market. This will likely result in some “natural attrition” occurring in the cannabis market, said Jushi chief strategy director Trent Woloveck. Jushi is the parent company of a Massachusetts-based, vertically integrated medical and recreational company called Nature’s Remedy.
The consensus among many executives in the state’s cannabis market is that oversupply is the main reason for slumping cannabis prices. With plenty of sellers attracted by the seemingly endless profits in the cannabis industry, the Massachusetts market has seen a multitude of new operations open their doors in a relatively short time. This surge in supply was more than the market demand for cannabis, however, resulting in a supply surplus that has significantly dampened profitability.
Ethos vice president of Marketing Blandine Jean-Paul says that one of the largest hurdles cannabis businesses face is becoming cash positive because it is becoming increasingly harder to make decent profits. Additionally, the fact that cannabis businesses in every state cannot deduct their expenses increases their tax bill and burdens their cash flow even more.
Some businesses will likely bow out of the industry due to cash-flow constraints. Once states such as Massachusetts thin out the number of players in their cannabis markets, oversupply issues will reduce, and prices will likely increase again.
This oversupply won’t just impact companies that directly deal in marijuana or its products. Ancillary businesses such Advanced Container Technologies Inc. (OTC: ACTX) could also see an effect on their bottom lines if the companies they serve reduce their production capacity.
NOTE TO INVESTORS: The latest news and updates relating to Advanced Container Technologies Inc. (OTC: ACTX) are available in the company’s newsroom at https://cnw.fm/ACTX
Please see full terms of use and disclaimers on the CannabisNewsWire website applicable to all content provided by CNW420, wherever published or re-published: http://CNW.fm/Disclaimer
A chronic oversupply problem has caused cannabis prices in Massachusetts to slump for several months. In October 2022, recreational cannabis in Massachusetts averaged $7.76 per gram of cannabis, the lowest cannabis prices had been since the launch of the adult-use market.
Prices had decreased steadily since June 2021, with the most significant falls in cannabis prices occurring in September and October 2022.
Interestingly, sales revenue from recreational cannabis went down as well, with adult-use cannabis retailers bringing in $112.2 million in November 2022, the lowest retail sales revenue since the start of the year. Joseph Lekach, CEO of cannabis company Apothca, said at the time that there was an “extreme oversupply” of edibles, flower, concentrates, vapes and other cannabis products.
State data now shows that prices for legal cannabis in Massachusetts have hit a five-year low, allowing users to purchase more cannabis without digging deeper into their pockets. However, while the low prices may be a boon for customers in the short-term, cannabis businesses will likely pay a price in the long-term. Recreational cannabis retailers in Massachusetts now have to sell twice as much product to bring in the same amount of revenue they were making just a few months ago.
The wholesale value of cannabis has also dropped significantly. This may impact producers who invested in large cultivation operations to cash in on the nascent but lucrative cannabis market. This will likely result in some “natural attrition” occurring in the cannabis market, said Jushi chief strategy director Trent Woloveck. Jushi is the parent company of a Massachusetts-based, vertically integrated medical and recreational company called Nature’s Remedy.
The consensus among many executives in the state’s cannabis market is that oversupply is the main reason for slumping cannabis prices. With plenty of sellers attracted by the seemingly endless profits in the cannabis industry, the Massachusetts market has seen a multitude of new operations open their doors in a relatively short time. This surge in supply was more than the market demand for cannabis, however, resulting in a supply surplus that has significantly dampened profitability.
Ethos vice president of Marketing Blandine Jean-Paul says that one of the largest hurdles cannabis businesses face is becoming cash positive because it is becoming increasingly harder to make decent profits. Additionally, the fact that cannabis businesses in every state cannot deduct their expenses increases their tax bill and burdens their cash flow even more.
Some businesses will likely bow out of the industry due to cash-flow constraints. Once states such as Massachusetts thin out the number of players in their cannabis markets, oversupply issues will reduce, and prices will likely increase again.
This oversupply won’t just impact companies that directly deal in marijuana or its products. Ancillary businesses such Advanced Container Technologies Inc. (OTC: ACTX) could also see an effect on their bottom lines if the companies they serve reduce their production capacity.
NOTE TO INVESTORS: The latest news and updates relating to Advanced Container Technologies Inc. (OTC: ACTX) are available in the company’s newsroom at https://cnw.fm/ACTX
Please see full terms of use and disclaimers on the CannabisNewsWire website applicable to all content provided by CNW420, wherever published or re-published: http://CNW.fm/Disclaimer
