Regular gas at the Speedway in Albemarle County, Virginia is at $4.20 per gallon, up from $2.72 a year ago. The grocery store a mile away, a Kroger, has raised the price of pork and beef. Yet in the middle of the two, one local business has somehow managed to avoid the wave of inflated prices being passed onto customers : a cannabis dispensary.
Inflation has been burdening the nation, but the marijuana industry has been an outlier in this crisis. The industry has already withstood the negative impacts from the pandemic, with sales increasing 67% by the end of 2020. Now with the inflation crisis emerging as the next major challenge for industries, dispensaries like Greener Things have yet to raise prices on their products for customers. In fact, some dispensaries have even managed to lower prices.According to New Leaf Data Services, wholesale marijuana prices have fallen 21% since February 2021, to just over $1,200 per pound.
The cannabis market has been able to buck the inflation trend for a variety of reasons; an abundance of sellers keeps the prices low and stable to compete with one another. But while that is good news for customers, it has left many dispensaries carrying the burden of inflation.
Some economists attribute this trend to the novelty of the industry. The cannabis industry is relatively new and is rapidly growing as more states legalize recreational marijuana and it becomes more socially acceptable. With many blooming industries, many stakeholders try to capitalize on the business early and the industry grows larger.
More stakeholders means more varied products and complementary products. For cannabis, this means sleek vaporizer pens and CBD pillow sprays. As more people enter the business to offer these products, supply goes up and prices stay down.
“What happens is, you get a lot of players that enter and you actually have too much competition at the beginning. And as a result, the prices are compressed,” said Bradley Poulos, a consultant and professor of entrepreneurship and strategy at Ryerson.
For Greener Things, this has reigned true as they have a wider selection of wholesalers to work with with low prices to offer to customers.
“There is an oversaturation of other brands in the industry, fighting for shelf space. So everybody’s kind of going lower pricing or lower pricing because there’s no three tier system similar to alcohol,” said Eric Welch, Growth Strategy Marketing & Finance Manager at Greener Things.
But, although customers of dispensaries are walking away with cheap cannabis, dispensaries themselves have been experiencing the brunt of inflation as they pay for the ‘luxuries’ that accompany being legal.
Running a dispensary is costly. Certain states such as New York require extensive security measures including motion detectors, a transport team that ensures products arrive to and from their destination safely, perimeter alarms and more. This means recurring costs such as insurance and payroll payments on top of installation costs.
This, along with fees related to packaging – which has been experiencing extensive supply chain shortages- puts retailers at a disadvantage.
Welch has experienced this with his Texas cannabis company, Drop of Sunshine.
“That’s been impacting me personally pretty, pretty tough as a small business because I’m trying my best to continue to bootstrap things but like, maintain consistency with my products,” said Welch.
Still, a number of dispensaries have yet to raise prices to cover these costs because not only can consumers easily switch to a different dispensary, but there is a sea of competition in the black market.
“Again, this isn’t rocket science, anybody can grow it,” said Andrew Zatlin, Moneyball Economist. Marijuana has several strains that are relatively cheap to grow and due to it being a weed, the output often is abundant. Because of this, legacy dealers are not only vast in number, but are able to set their own prices for their network of customers without going through the regulations and costs of running an official dispensary.
As a result, a number of dispensaries try to maintain their price point or even find ways to lower it.
The longevity of this is unclear. The pandemic has introduced an influx of new customers to the business and sales are projected to reach $30 billion dollars by 2023; the cannabis industry is clearly not ending its growth stage any time soon. For customers, that means they can rely on one staple not having price hikes anytime soon. As for stakeholders like Welch, the priority continues to be maintaining customers as the market continues to grow.
“It’s the Wild West you know, so it’s like really just whoever can continue to survive,” says Welch.