Just over a year after Colorado started selling marijuana in licensed dispensaries, they are seeing more customers than ever, but according to Nicholas Colas and his team at Convergex, a global brokerage company based in New York, Colorado citizens aren’t paying as much for their marijuana nowadays.
After interviewing several stores in Colorado, Colas found that prices are declining faster than some anticipated. Is there too much supply and not enough demand, or are there other factors at play here?
“Since last June, the average price of an 1/8th ounce of recreational cannabis has dropped from $50-$70 to $30-$45 currently; an ounce now sells for between $250 and $300 on average compared to $300-$400 last year. More competition and expansion of grow facilities contributed to this price decline, but it is also a natural result for any maturing industry as dispensaries try to find the market’s equilibrium price.”
This isn’t that a-typical for many markets, though. The new I-phone always starts with an inflated price, for example, and as its novelty wears off, and the latest edition comes out, its price becomes competitive with the rest of the market. When you consider that more states are also allowing individuals to grow their own plants in small numbers, it’s no wonder we’re seeing falling cannabis prices.
Bloomberg also states that the number of sales for recreational marijuana still exceed those of last year, and the state is still standing tall on its own two legs. What’s more, half of the marijuana sales are made by tourists. So much for the nay-sayers who thought that as soon as marijuana was legalized, the whole world would be high. Like any recreational substance, there will be those who partake, and those who don’t. The choice to toke or not to toke affects the market, as much as the decriminalization of cannabis.
“Given our revenue estimates for January through April, we expect stores to gross up to $480 million this year collectively, a +50% comparison to 2014.
That’s still quite an incredible tax base to garner funds from when you consider just over a year ago there were ZERO pot sales, unless they occurred unregulated and illegally, and therefore, untaxed.