Thursday July 6, 2017
From everyone on the PotGuide team, we hope you had an excellent 4th of July holiday! It’s back to business as usual over here and were bringing you yet another enlightening recreational marijuana pricing report. This week, we’ll take a look at Oregon’s recreational marijuana market and the trends and patterns it has undergone over time.
We couldn’t bring you this information without the help of our good friends at BDS Analytics, who work tirelessly to aggregate the most accurate and up-to-date point of sale information out there. We’re grateful to be teaming up with them again and excited to bring you Oregon pricing content! So, let’s get right to it.
History of Oregon Recreational Marijuana
Price point analysis is founded on core economic principles. As prices decrease in a healthy market, demand should increase, and vice versa. Price point analysis can be applied to optimize pricing and maximize sales.
A study of historic flower pricing in Oregon reveals a market that has yet to find the equilibrium that indicates a healthy interaction between supply and demand.
A short history of Cannabis sales in Oregon - BDS Analytics began reporting sales at Oregon’s medical dispensaries in January 2015. In October of 2015 the state enacted “early start,” a provisional measure that allowed dispensaries to begin selling flower-only to “recreational” customers 21 and over. Recreational sales were tax free in the remaining months of 2015 but in 2016, the state began mandating the collection of taxes on purchases by recreational customers.
In June of 2016, “early start” expanded to include concentrates, edibles and topicals. In October of 2016, the state began issuing licenses to recreational retailers and phasing out the “early start” program. With the transition to a fully-regulated recreational market, the state also enacted more stringent testing requirements. Newly licensed retailers could only purchase products from similarly licensed vendors who were now required to adhere to stricter product testing protocols. Unfortunately, with an understaffed licensing apparatus, delays in licensing and testing resulted in product shortages and the market suffered its first recession. Because of the many issues with laws and regulations, the history of regulatory challenges in Oregon is essential to understanding pricing trends in the Beaver state.
Oregon Marijuana Pricing Report
Since January of 2015, Oregon’s medical and recreational dispensaries have generated $498 million in sales from flower/bud. With the first phase of “early start” in October of 2015, flower sales surged from September to October;
Revenues jumped 476 percent, volume climbed 316 percent, and prices increased 39 percent.
In 2016, as taxes were imposed on recreational customers, sales dropped and prices declined due to less demand. In June of 2016, the expansion of “Early Start” to include new product categories brought increased traffic to retailers and flower sales volume increased faster than prices. In October 2016, the new licensing and testing requirements created product shortages. As a result, prices increased and sales declined. Since December, prices and sales volume have mostly flattened and without a significant boost in production, the flower market appears stagnant.
In the 7 months ending April 2017, average monthly sales volume for flower/bud has ranged between 2 and 2.2 million grams per month with an average retail price of $8.99 per gram (pre-tax) across both medical and recreational channels combined. Compared to October of 2015 when “early start” began and flower sales peaked, monthly sales volume has decreased more than 50 percent and prices have declined 14 percent from a high of $10.24 per gram. Unlike Colorado, where the disparity in pricing between medical and recreational channels is significant, in Oregon, recreational customers have historically spent just 16 percent more per gram than medical patients, a disparity that is more indicative of the discount medical patients receive for buying in bulk. Year-to-date through April, the difference between medical and recreational pricing is just 7 percent with adult-use customers paying $8.94 per gram (pre-tax) on average vs. medical patients paying $8.33.
Variety is the spice of life and in cannabis there is plenty of variety to go around. Oregon dispensaries sell flower with over 2000 unique names. Similar to the variety of strains, there are retailers that seek to capture market share by offering everyday low prices, others who focus on exclusive flower for connoisseurs and everything in between. With prices ranging from $2-$20 a gram what is the winning recipe?
In the last 6 months, the top 10 strains had an average retail price of $9.18 per gram (pre-tax), $0.02 less than the average for all strains combined, indicating that consumers are seeking lower price flower.
|Top 10 Selling Strains by Volume|
|Strain||Avg Price Per Gram|
|Gorilla Glue #4||$9.40|
|Purple Hindu Kush||$8.25|
While the outside world looks to the meteoric rise in cannabis sales, Oregon’s experience has been marked by volatility that more recently has resulted in declining sales, momentarily robbing the young market of momentum. The rebound from 2016’s regulatory changes has been slower than anticipated, likely a result of supply constraints and a general inability to lower prices enough to lure consumers away from the black market. What Oregon lacks for in pricing it makes up for in quality and as competition heats up and prices come down, consumers will return to drive the next growth spurt in this burgeoning market.