self-inflicted pricing pressure.
We have been harping on the topic of price destruction in the cannabis space, and we will continue to harp on the topic moving forward because this might be the most significant headwind in the space and doesn't look to dissipate anytime soon. The pricing pressures have crushed retail margins, and in many insistences, retailers are doing whatever they can to try and recoup some of their investments, including even steeper price discounting and loyalty reward programs. "There's a lot of independent retailers who have mortgaged their house, they put all their savings into their store, and it's such an oversaturated competitive market," said Lisa Campbell, cannabis marketing company Mercari Agency's CEO. "Price is the key to success in these areas, and we're seeing quite a few stores close as a result of lowering margins for the retailers." The average price for cannabis was $11.78 per gram at the start of 2019, shortly after legalization, but fell to $7.50 per gram in 2021, a November report from Deloitte Canada and cannabis research firms Hifyre and BDSA said. Some management teams have commented that they think the cannabis market will double by 2026, which we would love to see but are far from optimistic that it will become a reality.
Between price & taxes, cannabis is being destroyed.
It is estimated that Canadian cannabis producers destroyed 425M grams of cannabis in 2021 compared to 280M in 2020. In 2018 it was estimated that only 11% of products were destroyed in Canada, and in 2021 that number grew to 26% of production destroyed. The latest data signals that some Canadian mass-producers might need to further rein in output to bring it more in line with forecasted sales after years of trying to rightsize capacity, so they're not growing more than they can sell. "The odds are, even if you are a good actor and have substantial financial assets, the numbers are not good for anyone. Because of these issues – oversupply. Cannabis can't find its real price point," says a crop consultant in Canada. This shows that the overproduction of cannabis and the amount of new products on the market are driving prices down to the point that it's not even worth using crops due to how they are taxed. This goes to the point above that a doubling in market size over the next four years is hard to see as we should expect many retailers and cultivators to close their doors when even more consumer pressure is realized in the back half of the year. mjbizdaily.com
lounges in the u.s.
Cannabis lounges (or called cafés in some states) have opened up in California. These consumption lounges haven't taken off yet in the U.S. since the timing of them lined up with the COVID-19 outbreak. Currently, most of the lounges are in San Francisco and Oakland but more lounges are getting the greenlight in southern California. Estimates for the state are that these lounges could double or even triple in the coming years. "Consumption lounges are a very crucial part of pushing the industry forward and normalizing cannabis use," said Lauren Fontein, co-founder of The Artist Tree, a West Hollywood cannabis retailer that recently opened The Studio Lounge. This isn't the only state going in this direction, it is expected that Governor Baker signs a Bill that already passed a state vote to bring cannabis cafes to M.A.
