Inflation Hits Cannabis Industry as Prices Rise

Although inflation has already disrupted many people's plans for summer off-road trips, the impact of rising prices could soon cause real harm to certain individuals.

So far, marijuana and many related products have largely shed the double-digit growth seen in many foods, from chicken to avocados. An analysis firm even reported that prices for marijuana flowers, edibles, and vape products fell by 16.7%, 11.8%, and 12.4%, respectively, between January 2021 and 2022.

Due to a variety of interconnected reasons, such as lack of available materials and supply chain disruptions, the prices of most things have been steadily and rapidly increasing at a rate unseen in 40 years. Even if the prices of main products have not risen, the increase in packaging material costs has had little effect on any industry.

From June 2021 to June 2022, the Consumer Price Index has increased 9.1%. Additionally, according to a recent report from the cannabis industry and accounting firm GreenGrowth CPAs, the cannabis industry may finally be experiencing inflation. With labor and material costs for producing ready-to-eat cannabis products on the rise, one in four cannabis retailers report that they have already increased or plan to increase prices by 10% or more next year.

According to the report, the impact of the COVID-19 pandemic on cannabis businesses has been relatively limited. Based on last year's data, supply chain and recruitment difficulties were reported as issues affecting almost all industries in 2021, in addition to supply challenges being the most common issue currently impacting operators. The survey examined over 700 companies in states where recreational or medical cannabis use is legal, including startups and large multinational operators. While 70% of operators reported they would attempt to absorb rising costs rather than raise prices, 30% plan to proactively increase prices to prevent losses.

The survey found that there were differing opinions among respondents regarding responsibility for rising inflation, with 40% citing policies of the Biden administration and 30% attributing it to lingering impacts of the Trump administration. Other reasons quoted by operators included supply-chain issues, conflicts with countries like Russia and China, and effects of the oil industry's operations. Nationwide numbers are not entirely reflective as marijuana use and production currently remain illegal at a federal level. However, despite price increases, demand for marijuana has remained strong during and after the COVID-19 outbreak. Since the start of quarantine, some online delivery services in California have seen sales increase by 500%.

After two years of crisis and uncertainty following the global pandemic, cannabis financial operators find themselves navigating a range of new, complex situations and business obstacles," the report states. "But it's not all bad news. Many operators have benefited from the surge in demand and are using this new windfall to develop ambitious growth plans.

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