If you’re a Massachusetts toker, you may have noticed prices dropping across all marijuana products. While many are celebrating this affordability (especially in a time of great inflation), many businesses are worried.
According to state data, cannabis prices have recently reached a five-year low. More specifically, the wholesale value of crops has greatly diminished. And the simple reason for this is there’s more cannabis available than in demand.
In turn, if a business wants to garner revenue equal to what they were making a year ago, it must sell twice the number of products. As Trent Woloveck, chief strategy director at Jushi, puts it: “You’re going to see some natural attrition happen within the marketplace.”
This oversupply only happened recently—when an exorbitant number of new grow operations, dispensaries, and products hit the industry in a short period of time. Such actions were likely a response to the growing demand for marijuana within Massachusetts. However, this oversupply far outpaces that demand.
Most industry insiders agree that the best action to take now is by consolidating operators. Still, this can be met with debate considering it’s not the operator’s fault the state overestimated how much cannabis was necessary.
Either way, some action needs to take place. As Blandine Jean-Paul, vice president of marketing at Ethos, noted: “The profits are not there. Becoming cash positive is a huge hurdle in the cannabis industry.”
These repercussions are only furthered by the fact that it’s currently tax season. Since cannabis remains a Schedule I substance in the eyes of the federal government, cannabis businesses in Massachusetts are limited in their tax deductions. So, on top of a lack of profits, most operators are further burdened with an outlandish tax bill.
What’s Going to Happen to the Oversupply of Products in Massachusetts?
Most industry experts agree that within this economic climate, a number of operators will financially collapse. In turn, the industry will balance itself out, allowing for the supply to meet the demand.
“I’m not advocating for businesses to lose their licenses, but I do think that there’s some thinning out that needs to happen in the industry overall,” Jean-Paul said. “States like Massachusetts, I think, are probably a prime case for that.”
Still, such prospects aren’t an ideal solution. Especially when we consider how much time, effort, and money operators put into opening such businesses.
Not to mention, this will come at a cost to consumers and the general public. Fewer operators mean fewer choices for cannabis customers. On top of this, it also means fewer jobs within the state.
To further this, many Massachusetts operators have already taken note of California and turned to the black market. Due to the lack of taxes, this market has remained strong within the state.
Similarly to California, there’s a good chance many operators will simply participate in illicit interstate commerce. Since Massachusetts is so closely bordered by many states, transporting the oversupply isn’t much of an issue.
While most states have legalized around Massachusetts, there are a few exceptions. On top of this, certain legalized states, such as New York and Rhode Island, are still working out the finer details of their industry. Leaving consumers to the black market to get their supply until legislators sort out licensing.