As if the legalization of marijuana in Colorado, Washington State, Oregon, and Alaska weren’t good news enough. Now comes word that should make even the hardest-hearted stoner weep with joy: The price of legal weed is dropping.
Roughly 18 months after retail pot first went on sale in Colorado, the cost of cannabis is on the decline. A new survey shows prices are falling even as the number of customers continues to grow.
On opening day, Jan. 1 2014, the first retail pot shops sold weed for upwards of $70 a high-quality eighth. Anyone who has ever purchased an eighth of an ounce of marijuana outside grammar school knows that’s a ripoff.
By last June, the same eighth sold for between $50 and $70. But now, according to the study, the cost has dropped to between $30 and $45. An ounce, which once sold for $300 to $400, now catches just $250 to $300.
Those numbers are in line with black market prices elsewhere in the American West. And they’re cheaper than the going price almost anywhere else. Another study, published earlier this year, found that states with legal cannabis have the cheapest prices, a conclusion borne out by the new data.
Increased competition between dispensaries
Business expansion may be the biggest reason for the decrease in prices. There are more operating pot shops now, and that means greater competition for customers. There are also more cultivation sites, which in turn means more product to sell. Both factors lead to lower price tags on the shelves.
Observers say the reductions are driven by the natural give-and-take of supply and demand. Nicholas Coilas, an executive in the cannabis industry, called the cheaper prices “a natural result for any maturing industry as dispensaries try to find the market’s equilibrium price.”
Not even economists know exactly what that number is until the market reaches it, but the hope is that it will be no higher than the natural price on the black market. If so, the decrease is likely already bottoming out.
Among other facts, the study also noted that individual customers are spending less on marijuana than they did in the months after it first went on sale. The novelty of legal weed has worn off, and customers are no longer buying in bulk.
Increased market supply
Still, the number of customers has held steady at most stores, and the growing number of stores means the market has much more potential. State officials reported they collected $4.4 million in taxes off the industry in April, based on $44 million in sales for that month, suggesting a 98 percent increase in profits compared to April 2014. Total revenues for 2015 should be up 50 percent from last year.
And weed taxes will drop later this year, when Colorado institutes a one-day holiday from the 10 percent sales tax on recreational marijuana. After that, the tax will drop to 8 percent as part of a legal effort to undercut the black market.
So even if legal weed prices have stopped shrinking, they should remain low for the foreseeable future. And that, maybe even more than legalization, is a very good thing.