Jenel Stelton-Holtmeier
Inflation might be getting all the headlines, but cannabis flower appears to be immune from its influence.
According to data from cannabis analytics firm Headset, the most popular consumption format for cannabis has been suffering wide-scale price compression. The rapid demand increases experienced early in the COVID-19 pandemic began receding in late 2021, and that trend has continued to drive market correction since, according to a new report from the firm.
Average flower price
There are several ways this trend can be analyzed, but all of them point to the same broad trend in the markets monitored by Headset, four of which are analyzed in the report: California, Colorado, Michigan and Ontario. Two basic ways to look at price changes are by looking at the average item price and the average equivalized price.
Average item price
Average price per item is the simplest approach to analyzing the price trajectory for cannabis flower. It’s calculated by dividing total sales by total units sold. This results in a figure that shows roughly how much each customer spends per item, regardless of the size of the item.
According to Headset, “Average item prices have been declining in both U.S. and Canadian markets since late 2020. That decline accelerated towards the middle of 2021. By October 2022, the average item price of a cannabis product in Colorado was 14% lower than it had been in October 2020.”
Average equivalized price
The weakness of average flower price is it doesn’t account for the variety of packages that flower can be purchased in. Equivalized price determines the average price paid per unit of measure, which in Headset’s analysis of flower is one gram.
The same declining trend seen with average item price plays out when the prices are equivalized, according to Headset, with the steepest declines in the newest market monitored by Headset, Michigan.
What it means for flower prices
Not only have prices declined in most legal adult-use cannabis markets, but for many the declines have accelerated since the second half of 2021, according to Headset. Of the four markets included in the report, only Ontario saw a deceleration in price compression.
Notably, however, Ontario also did not experience the same pandemic boost that the other markets did. Michigan reported the steepest year-over-year decrease in per gram price of flower, falling 46% between October 2021 and October 2022.
The comparable declines in both price per item and equivalized price highlights the fact that all package sizes are being impacted by price compression.
While history can’t completely predict future outcomes, the recent trend of price compression does not appear to be slowing, at least in the U.S. Headset’s analysis focuses on the price paid at retail, but it also can be used as a signal for what wholesalers will be able to charge for the product after harvest, as well – at least the product that will be sold as flower.
