Recreational cannabis sales brought in roughly 36% more revenue last year than in 2022, but industry members say it’s not necessarily a cause for celebration.
Store owners across the state say the market is oversaturated and the boost in sales comes from more stores opening, rather than shops raking in money.
The state’s licensed adult-use retailers reported more than 3.7 million sale transactions totaling $217 million, according to data released Monday by the Maine Office of Cannabis Policy. The 2022 total was $159 million.
Last year’s sales earned the state $21 million in tax revenue.
John Hudak, director of the office, said the 2023 numbers paint a two-sided picture.
“The sales numbers are up almost 40%. That’s a strong testament to how the industry continues to grow,” he said. “But hidden in these numbers, too, is a pretty significant decrease in price.”
Prices decreased by 16% in 2023, Hudak said, reflecting an overproduction of cannabis. Even near-record-high utility prices could not stem the downward pressure on prices. The drop in cost is great for consumers but can leave some businesses in dire straits.
“Even with the increases in overall sales, the decreased prices do make it harder to operate,” Hudak said. “Eventually we’re going to see business closures.”
When recreational sales started in late 2020, the industry struggled with the opposite problem – limited supply and high costs. Now, with 138 stores, 68 manufacturing facilities, 88 cultivation sites and five testing labs, buyers are seeing more variety and lower prices. Seven towns welcomed their first stores last year.
The average price of smokable marijuana flower has been slashed by more than half from $16.68 per gram at market launch to $7.53 per gram as of December. The average joint contains between 0.32 and 0.5 grams of cannabis.
Mark Benjamin, owner of Botany in Rockland, said foot traffic has steadily increased since he opened his doors in the last months of 2021, but as prices have declined, he and his team have offered incentives for customers to spend money.
“There may be tens of millions of dollars flowing into (the market), but it is certainly spread out across more stores,” he said.
His business is doing well. Botany will open a second store in Belfast in a matter of days. But Benjamin knows it’s been a challenging year for many, especially businesses without as much capital.
“Everyone was dropping and dropping their prices in order to get enough cash in the door to cover their costs,” he said. “The weaker players are starting to drop out of the market,” he said.
Despite the closures, concerns about saturation don’t seem to be deterring prospective cannabis entrepreneurs. The state has another 76 stores, 53 cultivation sites and 68 manufacturing facilities in various stages of the approval process.
Hayden Stokes and Zach Dolgos opened their store, Blue Lobster, in Casco in December. Business has been good and Stokes is glad to be up and running after working on the ordinance with town officials for nearly two years. It’s the first adult-use store in Casco, although their company, The Happy Canary, has been growing for the medical market for the last six years.
“I’ve always had an interest and a passion for it,” Stokes said.
He’s hoping to move his cultivation over to the adult-use market soon, but an ordinance issue has delayed the process. He believes that vertical integration will ultimately be key to their success.
Stokes has been concerned about the saturation in both of the state’s cannabis markets, and as a wholesaler, he relies on the success of other businesses.
“Having our own retail is a big part of the solution,” he said. “When you have your own retail, you can set your own fate.”
Sales have come a long way from the roughly $1.4 million reported during the Maine market’s first full month of operation in October 2020. Stores started out the year with about $14 million in sales, steadily increasing until they peaked in the summer. Sales surpassed $20 million in each of July, August and September.
Not far behind that peak, a busy December saw sales of about $19.3 million.
Hudak believes there are still a few years of substantial growth left before things level off.
David Vickers, owner of Origins Cannabis Company in Augusta and Manchester, thinks most of that growth will come from southern coastal towns.
“You’re going to continue to see people flocking to Maine,” he said. “I don’t think we’ve hit the summit yet, but I think we’re certainly getting there. There are only so many people in Maine.”
Maine’s rollout of legalized adult-use cannabis was the slowest in U.S. history. The launch of the regulated market took almost four years after voters approved legalization in 2016. The process was slowed by legislative rewrites of marijuana laws, gubernatorial vetoes, a change in gubernatorial leadership and the coronavirus pandemic.
Vickers, Stokes and Benjamin all operate or will soon operate in both the medical and recreational markets and all three said oversaturation is a problem for both. They expect more medical operators will either switch to the adult-use market or abandon the industry altogether and in fact, it’s happening already.
In April, the Office of Cannabis Policy released a report concerning a “mass exodus” of about one-quarter of the industry’s medical caregivers. The number of caregivers had decreased from the 2016 peak of about 3,250 to about 2,070. Just nine months later, that number has fallen further to 1,763.
“I’m seeing the medical side suffering as the recreational side increases,” Vickers said. “That to me, long term, may not be a good thing for Maine. We have so many small farmers that may very likely lose their livelihood.”
The difference in monthly sales between the two markets has been narrowing, but the medical market still far outpaces the recreational market.
Jackson McLeod, CEO of Atlantic Farms, which operates a medical dispensary in Portland and a new recreational store in Thomaston, said that since the medical market was born out of the small caregiver market, there are deeper personal relationships between patients and providers.
“That continues to be very powerful for us,” he said. “It’s something where Mainers have benefited from Mainers working with Mainers and the real medicinal benefit of the plant. I wouldn’t want to see that lost through the recreational use market.”
H/T: www.pressherald.com
