REUTERS/Lucy Nicholson
Weed is getting much cheaper in Colorado.
Colorado's weed is getting much cheaper.
In October last year, the cost of a wholesale pound of cannabis in Colorado was around $2,400 to $2,600. That price has almost been cut in half to between $1,400 and $1,600 last month, according to data from Tradiv, an online marijuana distribution platform.
"In less than a year, we've seen wholesale prices drop to nearly half of their previous totals," John Manlove, the director of sales at Tradiv told Business Insider in an email. "We've never seen prices like this."
The reason prices are dropping so rapidly is because the market is getting flooded. Growers are building scale and ramping up production of the plant.
Manlove explains that this has to do with the way cities in Colorado, like Denver, regulate the recreational marijuana market.
In May, Denver's municipal government extended a moratorium on granting licenses to new retail dispensaries as well as marijuana cultivation facilities.
This has allowed a "minority of large cannabis business owners" to buy up and consolidate the remaining licenses, says Manlove.
Dispensaries will make the majority of their money from pot products, like beverages and edibles, in the future.
And, without strict "canopy limits" (the amount of plants one facility can grow) the influx of marijuana into the Colorado market will continue to cause prices to drop, says Manlove.
Thus, Colorado growers, with few limits and access to a huge market, are able to build an economy of scale, reducing prices across the board.
Though low prices are good news for consumers, dispensaries will have to cope with lower profit margins on raw marijuana flowers.
According to Headset, a cannabis intelligence platform, the highest margin products for dispensaries are those that make marijuana easier to consume, like edibles, beverages, and pre-rolled joints.
If these trends continue, raw marijuana will only continue to get cheaper. And it's likely that the retail market will adapt by pushing further into such higher-margin products.