High Supply Lowers Prices, Profits in Mass. Cannabis Market

While a cannabis oversupply in Massachusetts has allowed customers to enjoy lower prices for marijuana products, it is leaving many businesses with questions of viability

NBC Universal, Inc.

The price consumers pay for legal cannabis in Massachusetts is at a five-year low, according to state data. While that is a short-term win for users, it's bad news over the long term for businesses.

The trouble is on two fronts: The wholesale value of the crop is greatly diminished, and at the retail level, businesses must sell about twice as many units to equal the revenue they were bringing in just a short time ago.

"You're going to see some natural attrition happen within the marketplace," said Trent Woloveck, chief strategy director at Jushi — parent company of Nature's Remedy in Massachusetts.

Multiple business executives in the industry tell NBC10 Boston an oversupply of product is the main culprit of a falling price. In Massachusetts, a slew of new grow operations, dispensaries and products have exploded onto the scene in a relatively short amount of time. While demand has grown, too — almost $200 million in adult-use sales in the first two months of 2023 — supply is outpacing demand.

Industry insiders say the surest way to choke the oversupply is a consolidation of operators.

"The profits are not there," said Blandine Jean-Paul, vice president of marketing at Ethos. "Becoming cash positive is a huge hurdle in the cannabis industry."

Exacerbating the problem for the cannabis industry is a looming April deadline for taxes. Because cannabis operators deal in a product still listed as a Schedule 1 narcotic under federal guidelines, the industry is severely limited on the deductions it can claim with the Internal Revenue Service. That means an oversized tax bill compared to other business types, which puts a further burden on cash flow.

Representatives at Jushi and Ethos, which both have cannabis businesses in other states, predict some Massachusetts marijuana sellers will collapse under these market conditions. And that consolidation will increase the likelihood of profitability for the businesses that remain.

"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."

If the gathering headwinds of oversupply and falling prices bring down some of the cannabis businesses around the state, as predicted, it will mean fewer choices for consumers — fewer jobs, too. A consolidated industry eventually will lead to the price of the drug going up again.

Contact Us