During the pandemic, the marijuana industry was thriving, but now cannabis sales decrease after pandemic surge. This may be due to regulatory challenges, inflation, or people simply choosing to spend their money on other things.
Statistics show marijuana markets on the decline in Oregon and Washington as compared to a year ago. Colorado, which has one of the most thriving industries in country, saw June sales plummeting by 11.4% as compared to last year’s numbers.
Why Did Cannabis Sales Increase at the Beginning of the Pandemic?
Marijuana sales were up at the beginning of the pandemic as people were looking for ways to relieve their boredom and depression.
“What we saw in 2020 was a massive spike in sales tied to the pandemic as people stayed home, had government money, and not a lot to do,” said Chris Walsh, CEO of Marijuana Business Daily.
Average monthly year over year sales were up by 25.8% in Colorado between March 2020 and March 2021. But the frequency of purchases and the amount of money people are spending started to decline last summer as pandemic restrictions began letting up leading to cannabis sales decrease after pandemic surge.
For example, in July of 2022, people spent an average of $55.21 per visit at Colorado dispensaries. This compares to the average $59.73 they were spending in July of 2021.
Inflation and Competition Accounts for Cannabis Sales Decrease After Pandemic Surge
The end of the pandemic may not be the only reason cannabis sales decrease after pandemic surge. Inflation is also doing its part.
“Retailers are discounting in a time of high inflation because they’re trying to move product from the shelves,” Walsh stated. He also noted that businesses are lowering their prices due to competition from illegal markets that can charge less because they are not paying taxes.
Troy Datcher, CEO of the California cannabis company The Parent Company, echoes Walsh’s sentiment stating, “We are operating in an incredibly challenging and competitive landscape, with our biggest competitor being the illicit market.”
Regulation Plays a Role in Why Cannabis Sales Decrease After Pandemic Surge
A lack of regulation is also playing a role in why cannabis sales decrease after pandemic surge. It means that sellers are unable to access traditional banking services or financial loans in states where recreational sales are legal. The Secure and Fair Enforcement Banking Act (SAFE) is a congressional bill that would lift these restrictions, but it hasn’t made it through Senate despite passing House several times.
“A lot of investors had jumped in under the assumption that there would be some movement at the federal level to either reschedule the drug or pass a sort of banking legislation,” noted Matt Hawkins, founder of the cannabis investment firm Entourage Effect Capital.
Investors Get Picky Worsening Cannabis Sales Decrease After Pandemic Surge
Hawkins also noted that he and other investors have become more selective in the businesses they are financing prioritizing those who have been shown to produce a steady income. This makes it difficult for new and smaller business to get their foot in the door.
Robert Beasley, CEO of Fluent, a firm that holds medical licenses in Florida, Texas, and Pennsylvania, backs this sentiment stating, “The industry remains in an internal consolidation state finding it difficult to find capital and scale with efficiency.”
Bright News for the Future
Cannabis sales decrease after pandemic surge, but the market has a positive outlook overall.
Retail sales in the industry are still rising and are projected to continue to do so. This is due to increased legalization, particularly in large markets like Maryland, Missouri, and New York.
An analysis by Marijuana Business Daily shows the combination of medical and recreational cannabis sales in America could reach $33 billion by the end of the year as compared to last year’s $27 billion evaluation. It further shows that sales may reach $52.6 billion by 2026.
“The long-term horizon is extremely bright,” Walsh said. “This is just what industries go through.”
But for now, many companies are struggling as the market is becoming more competitive and investment money is drying up.
New York based cannabis advisory firm Viridian Capital Advisors shows that total marijuana capital raised in the United States is down 6.2% from where it was a year ago. Equity financing is down 96.3% dropping from $2.1 billion a year ago to it’s current $78 million.
Cannabis sales decrease after pandemic surge was not the trend sellers were hoping for. But measures taken to reduce inflation and efforts made to provide regulatory relief should bring us closer to the bright future experts are foreseeing. It’s hopeful that companies have the funding to make it through the storm so they can reach the light at the end of the tunnel.