Inflation is finally coming to cannabis

1 in 4 cannabis retailers are raising prices to combat the rising cost of inflation

Inflation is hitting large sectors of the economy, and the cannabis market is not left out.

In the weeks or months that follow, the purchasing behavior of cannabis consumers across the country could change dramatically. Inflation ruins not only summer plans, but regular budgets as well. Many people are feeling the effects of soaring costs, and the majority are beginning to express their pain because it hits them where it hurts.

So far, cannabis and its derivatives have yet to see double-digit increases, as seen in edibles like chicken and avocados. Only recently have prices started to rise slowly; in the past they fell. Between January 2021 and January 2022, the cost of cannabis edibles, flowers, and vaping items were reported to have decreased by 11.8%, 16.75%, and 12.40%, respectively.

The projected increase in cannabis products due to inflation can be linked to a variety of reasons, from inadequate production materials to apparent disruptions in supply chain distribution. The prices of most things, even necessities, have been at their all-time highs for four decades. Word on the street is that it’s only a matter of time before the price of your favorite item goes up. The rising cost of packaging materials is the highest, so no industry would be left out.

Cannabis Price Survey

In June, GreenGrowth CPAs conducted a month-long survey asking operators about the impact of price volatility on their pot business. The survey examined more than 700 companies in jurisdictions that allow the use of cannabis for medicinal or recreational purposes. Both small and large multi-state operations fall under this category.

In response to the rising cost of inflation, one in four operators said they plan to raise prices in the near or immediate future. More than 50% of survey respondents say the global cannabis economy has deteriorated over the past year.

Derek Davis, founder and CEO of GreenGrowth, noted that the cannabis industry is constantly evolving. He said his firm took into account many variables that affect the financial performance of cannabis companies to produce accurate financial statistics as well as the economic impact of rising inflation costs. “By surveying our customers and cannabis business owners in general, we are able to gather enough information to provide an in-depth analysis of how the current economic climate is affecting cannabis business owners,” Davis continued.

finger pointing

GreenGrowth survey volunteers suggested that the oil industry and the Biden administration can be blamed for the current inflation plaguing the US cannabis business space.

40% of survey participants blamed the Biden administration for general inflation problems, 30% blamed aftermath of the Trump administration, 20% blamed external influences such as the war in Ukraine, and several other participants criticized supply chain problems and oil companies.

The results of the survey, released Monday, found that at least 25% of legal cannabis dispensary operators are poised to raise their stock prices to combat rising operating costs in the immediate future. Compared to 2021 and 2021, 70 percent of a similar study were optimistic about steady improvements in the industry. Not so much today. Financial players in the industry are now confronted with a new set of difficulties and commercial obstacles every other day.

During the pandemic, rising demand has been beneficial for many operators, who have used this newfound wealth to implement ambitious growth strategies. Now, minorities, perceiving a slowing business climate, are raising prices to offset the rising cost of inflation, negatively impacting their profits and operating performance.

GreenGrowth noted that it’s not all bad news. About 70% of operators said they would do their best to absorb the increased costs associated with inflation before raising customer prices. According to reports from GreenGrowth, operators anticipating higher costs can increase prices for consumers by up to 10%.

Why did it take so long?

The cannabis industry has long avoided inflation. Mainly because there was too much weed floating around. Weed shops have been forced to keep their prices the same to stay ahead of the competition. Raising cannabis prices at such a point would have been more or less a death sentence.

Jason McKee, general manager of Seattle-based Ganja Goddess, pointed out that raising prices when customers know they have multiple options is very risky. At the time McKee gave this interview, cannabis stores had begun to see a slight drop in sales. She had mentioned that her store’s sales strategy was to keep customers interested in her products and ready to come back.

Not only retailers are stuck at the same price level. Growers also compete with other growers to supply pharmacies. Like consumers, pharmacies are choosing producers with lower prices, knowing that production costs are increasing.

About GreenGrowth Firm

GreenGrowth is an accounting and consulting firm with Certified Public Accountants (CPAs). Founded in 2016, the company aims to support emerging cannabis companies with business and tax strategies that keep them in the green. To learn more about the company, you can visit its YouTube channel, which currently has around 14,000 active subscribers. This channel provides useful business knowledge that operators in the cannabis market would benefit from.

bottom line

The pandemic has disrupted the entire supply chain and transportation is being restricted everywhere. Long lines and a backlog at the dock make it difficult to import items, driving up the cost of even the simplest of materials — even those used in cannabis cultivation and retail sales.

The cannabis industry is currently feeling the pressure of inflation on the supply chain. As House of Cultivar’s Matt Gaboury said a few months ago, everyone will continue to migrate to switch suppliers for things like packaging materials, especially the 70 percent who have chosen to foot the bill themselves.

A general price increase is inevitable in the long run as the weed abundance in the market will eventually even out. There is only so much anyone can do to counteract inflation.

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