Inflation is hitting major sectors of the economy, and the cannabis market isn’t left out.
In the following weeks or months, there could be a major shift in the purchase habits of cannabis users all over the country. Inflation is ruining not only summer plans but also regular budgets. Many people are feeling the impacts of high-rising costs, and the majority are beginning to voice their pains because it’s hitting them where it hurts.
So far, cannabis and its derived products are yet to reach a double-digit increase, as seen in food items like chicken and avocados. It wasn’t until recently that the prices began inching upward; in the past, they fell. Between January 2021 and January 2022, it was reported that the costs of cannabis edibles, flowers, and vaping items fell by 11.8%, 16.75%, and 12.40%, respectively.
The predicted rise in cannabis products due to inflation can be linked to various reasons, from insufficient production materials to the apparent disruption in the supply chain distribution. Prices of most things, even necessities, are at their all-time high for four decades. Word on the street is that if your favorite item is yet to increase in price, it’s only a matter of time. The rising cost of packaging materials is at its highest, so no industry would be left out of this.
Cannabis Price Survey
In June, GreenGrowth CPAs conducted a month-long survey in which they questioned operators about the impact of price volatility on their pot business. The poll looked at more than 700 businesses in jurisdictions where cannabis usage is permitted for either medical or recreational purposes. Both small multi-state operations and big ones fall under this category.
In response to growing inflation expenses, 1 in 4 operators said they intended to hike prices in the near or immediate future. More than 50% of the survey participants say that during the past year, the global cannabis economy has deteriorated.
Derek Davis, founder, and CEO of GreenGrowth, noted that the cannabis industry is constantly evolving. He said that his firm took into account many variables affecting the financial performance of cannabis enterprises to give accurate financial statistics, as well as the economic effects of growing inflation expenses. “By polling our clients and cannabis business owners in general, we can gather enough information to have a thorough analysis of how the current economic climate is affecting weed business owners,” Davis continued.
Volunteers of the GreenGrowth survey suggested that the current inflation plaguing the U.S. cannabis business space can be blamed on the petroleum industry and the Biden Administration.
40% of survey participants blamed the Biden Administration for general inflation problems, 30% blamed residual effects from the Trump Admin, 20% faulted outside influences like the war in Ukraine, and several other participants decried supply chain problems and petroleum companies.
The result of the survey, released on Monday, revealed at least 25% of legal cannabis dispensary operators are on the verge of raising the prices of their stock to battle the rising costs of operations in the immediate future. Compared to 2021 and 2021, 70 percent of a similar study were optimistic about steady improvements in the industry. Today, not so much. Financial operators in the industry now find themselves tackling a number of fresh difficulties and commercial barriers every other day.
During the pandemic, an increase in demand was advantageous for many operators, who leveraged this newfound wealth to implement ambitious growth strategies. Now, minorities perceive a decelerating business climate and are increasing prices to offset growing inflation costs, which has an adverse effect on their profits and operational performance.
GreenGrowth noted that it’s not all bad news. About 70% of operators revealed that they’d try their best to bear the increased costs connected with inflation before raising client prices. According to reports from GreenGrowth, operators that anticipate increased costs may raise prices by as much as 10% for consumers.
Why did it take this long?
The weed industry escaped inflation for a long time. Mainly because there was too much weed in circulation. Weed shops were forced to keep their prices at the same rates to stay above the competition. Raising cannabis prices at such a time would have been more or less a death sentence.
Seattle-based Ganja Goddess general manager, Jason McKee, pointed out that it is very risky to raise prices when customers know they have multiple options. As of the time McKee gave this interview, cannabis stores had begun to see a slight decline in sales. She had mentioned that their store’s sales strategy involved keeping the customer interested in their products and willing to come back.
It is not only retailers that are stuck at the same pricing levels. Growers also compete with fellow growers to supply dispensaries. Like consumers, dispensaries also go for growers with lower prices, despite knowing that production expenses are on the rise.
About GreenGrowth Firm
GreenGrowth is an accounting and advisory firm with Certified Public Accountants (CPAs). Founded in 2016, the company’s objective is to assist budding cannabis firms with business and tax strategies that would keep them in the green. To learn more about the company, you can visit its YouTube Channel, which currently has about 14,000 active subscribers. This channel provides useful business knowledge that would profit operators in the cannabis market.
The pandemic has left the entire supply chain in a disarray, and transportation is being curtailed everywhere. Long lines and a backlog at the dock make it difficult to import items, which drives up the cost of even the most basic materials—even those used for cannabis cultivation and retail sales.
The cannabis industry is currently feeling the squeeze of inflation on the supply chain. Like Matt Gaboury of House of Cultivar said some months back, everyone will continue a rambling to switch vendors for things like packaging materials, especially the 70 percent that has chosen to bear the incurred costs themselves.
A general price increase is unavoidable in the long run, as the abundance of weed in the market will even out at a point. There’s only so much anyone can do to match inflation.