Nearly four years after legalization, Bay State cannabis consumers still pay top dollar
Ask Massachusetts marijuana consumers what they think of the state’s legal cannabis market, and one complaint comes up over and over: It’s just too expensive.
But is pot here really more pricey than in other states?
In short, yes.
Massachusetts marijuana products consistently fetch around double the price of their equivalents in the most mature recreational markets, according to a review of dispensary menus around the country and new data provided to the Globe by several analytics firms. And in most cases, cannabis here is even pricier than in other states that legalized the drug more recently; only the nascent and heavily taxed Illinois market approaches the Bay State’s exorbitant prices.
An eighth of an ounce of decent-quality marijuana flower — the familiar, smokable buds of the cannabis plant — retails for $50 to $60 on the Massachusetts recreational market before adding an effective 20 percent combined state and local tax. Compare that with $20 to $30 for an eighth of an ounce of exceptional cannabis in Oregon, the state with the cheapest legal weed.
For many consumers, the persistence of dispensary sticker shock nearly two years after recreational sales began in November 2018 has kept them loyal to the illicit market, where products are cheaper, untaxed, and untested.
“Most of the people in my network stick with their illicit market partners just because it’s so much more affordable,” 33-year-old Dorchester consumer and advocate Dishon Laing said. “It’s the difference between paying $50 for an eighth plus tax, or getting double that [quantity] for the same price with no tax.”
An average of all available sizes of marijuana flower in Massachusetts stores in August was $41.78, the most of any state with recreational sales tracked by Seattle-based cannabis industry data firm Headset. That’s more than twice the same figure in Oregon, and pegs Massachusetts flower prices above even those in Michigan ($39.92), where recreational sales began a full year later.
Massachusetts especially stands out for the price of its marijuana vapes. According to BDS Analytics, vapes containing 500 mg of concentrate sold for an average of $54.18 in Massachusetts during the second quarter of 2020, but they cost under $30 on average in California, Colorado, Illinois, and Oregon.
Experts attribute the high cost in Massachusetts to the state’s steep cannabis taxes, seasonal climate (which forces most marijuana cultivation to take place inside expensive climate-controlled facilities with artificial lights), and, most of all, a slow and onerous business licensing process that has limited the number of new producers and retailers opening for business. Four years after voters signed off on legal cannabis, there are just 36 cultivators and 70 retailers operating in the Massachusetts recreational market.
License applicants face particularly acute delays at the municipal level, with many cities and towns moving slowly on zoning and licensing for marijuana facilities, or else extracting large payments under the auspices of “host community agreements.” For many local, more homegrown entrepreneurs, the costs of complying with stringent state regulations and the difficulty of finding affordable property in a cannabis-friendly community make entering the legal market next to impossible.
In erecting such barriers to entry, analysts said, Massachusetts policymakers have effectively ensured a smaller, more expensive, and less diverse marijuana market dominated by investor-backed concerns that grow middling weed.
“Our market may be a few years old, but we’re still relatively immature and the supply is pretty constrained,” said David O’Brien, president of the Massachusetts Cannabis Business Association. “By the time you do all the go-arounds with the board of selectmen, the licensing process here always takes much longer than people think. And time is money.”
Another factor driving high prices: Most recreational producers operating today emerged from the state’s earlier medical marijuana market, which requires companies to grow their own cannabis and sell it at dispensaries they also own.
With those vertically-integrated operators now converting their retail dispensaries into “hybrid” stores that also sell large quantities of recreational pot, most have little flower left over for wholesaling after satisfying in-house demand — and besides, margins are better on the retail side. That leaves the state’s smattering of newer, independent recreational retailers with few options and minimal leverage as they seek suppliers to fill their shelves. The high wholesale prices such independent retailers pay are passed on to consumers, who can sometimes purchase the same strain offered by an independent shop from a dispensary owned by the strain’s producer for less.
While marijuana firms are reluctant to disclose exact figures, Massachusetts industry insiders said a pound of flower at wholesale typically ranges from $3,600 to $4,200. But independent retailers might be quoted $5,000 or more for top-shelf strains, a price that on the West Coast would be considered either an insult or a joke.
“A lot of the medical companies are only geared up to meet their own [dispensaries’] demand,” said Kobie Evans, co-owner of the Pure Oasis marijuana store in Boston’s Grove Hall neighborhood. “If you’re lucky, they might have 10 percent [of their crop] left over for wholesale.”
Meanwhile, Evans added, investors have been reluctant to back standalone growers, whose businesses cannot depend on retail markups and are highly subject to wholesale price fluctuations.
There’s also the question of experience. David Abernathy, the lead researcher at the national cannabis consultancy Arcview, said some producers in states with longstanding marijuana markets such as California and Colorado have fine-tuned their procedures such that they can reliably grow marijuana for as little as $300 to $400 per pound, even indoors. In Massachusetts, production costs of $700 to $800 per pound would be considered a triumph, he said.
“Any time you have licenses that are harder to get, especially in states that don’t have much of a history of large-scale cannabis cultivation, then there’s a much slower production ramp and the demand tends to outstrip the supply for longer,” Abernathy said.
Some relief may be in sight, however. The Massachusetts Cannabis Control Commission this year has dramatically increased its pace of licensing, approving dozens of new marijuana companies every month. While those businesses may yet take some time to build out and open — especially in the case of complex cultivation and processing facilities — the pot pipeline is nonetheless growing, a trend that should eventually increase supply and bring down prices.
In the meantime, studies suggest that of the 20 percent of Massachusetts residents who consume marijuana at least occasionally, a majority are sticking with the illicit market. Evans said that seems obvious from his store’s sales figures, even as coronavirus-related border and travel restrictions have somewhat increased illicit marijuana prices.
“When we know Boston has 700,000 people and a certain percentage of them consume cannabis — we’re only seeing a fraction of those people” in legal stores, he said. “There’s a large population that isn’t ready to pay.”
Some analysts warned, however, that Massachusetts marijuana consumers should be careful what they wish for. In Oregon, overproduction and attendant ultra-low flower prices have bankrupted many locally owned growers, or pushed them back into the West Coast’s vast illicit market.
Massachusetts regulations don’t cap overall cultivation in the state, but do limit the size of any one company’s cultivation area to 100,000 square feet, and require operators to apply for a new license in a higher cultivation “tier” before significantly increasing production.
“Obviously, Massachusetts consumers would love prices to go low,” O’Brien said. “But precipitous crashes aren’t good for anybody.”