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The Art of Pricing Pot

Cannabis Prices Not Quite a Science


You’d think a plant that people call “weed” would be cheaper than it is. It’s relatively fast and easy to grow, so why is it so expensive? Unlike products in many other markets, the pricing rules around cannabis aren’t as codified or even as rational. How do retailers decide on prices and how do consumers know when they’re paying too much? Those answers may be harder to come by than you’d imagine.

“Price. It’s Complicated”

Experts say cannabis prices behave like those of other consumer packaged goods in many ways, but they differ in key areas. According to a recent report compiled through the collaborative efforts of cannabis analytics firm BDSA, professional services network Deloitte Canada and Canadian retail cannabis platform Hifyre, “consumers are willing to pay a premium price for quality, and the laws of economics do apply to cannabis. But in other instances, price-related factors suggest there are several key differences. The price/quality relationship−in other words, the value−can be confusing. There is no national pricing. And branding does not (yet) play a big role.”

The report, titled “Price. It’s Complicated,” analyzes data to find the differences between cannabis prices and those of other goods sold in North America in 2021. It polled thousands of U.S. and Canadian consumers and found that unlike the purchasing experience found with other goods, cannabis buyers were often confused about how to judge the quality of a given product. They were also confused by the reasoning behind different price points.

By and large, consumers mostly judged cannabis quality by its THC or CBD content. Close behind that was the quality of high it produced with factors like smell and taste trailing near the bottom.

Cannabis prices also differed from other goods by being highly variable across markets. Prices for the same product were vastly different from state to state without a digestible reason. According to the report, a 10-pack of 10mg Wana Sour Gummies sold for $27.59 in Illinois, $18.01 in Colorado and $8.03 in Oregon.

Quality standards between regions are also variable, and growing conditions in a particular place will affect the quality of product that can be produced there.

A key finding was that cannabis consumers look at prices to decide what products they will purchase. In the U.S., price was the third top factor in making purchase choices behind flavor and THC content. The study also found that 70 percent of Canadians who had turned to the black market to make their cannabis purchases said they’d done so over pricing concerns.

In California’s market, an analysis of 10 price changes found that sold unit volume consistently increased with price drops, meaning people bought significantly more cannabis if it was cheaper.

Are You Paying Too Much?

The truth is you’ll know you’re paying too much for your marijuana when it becomes an unsustainable monthly bill that doesn’t keep pace with the value you extract from it—the same as with any other consumer good.

The good news for consumers is that Cannabis prices have been falling over the last year. Cannabis analytics firm Headset tracked sales in California, Colorado, Michigan, Nevada, Oregon and Washington and found that the price per milligram or gram of THC declined between January 2021 and January 2022 by 16.7 percent for flower, 11.8 percent for edibles and 12.4 percent for concentrates.

This downward trend has occurred as other consumer goods have become more expensive. The U.S. is reportedly suffering through the highest inflation rate in 40 years, since 1982. The price of gas has been climbing and will likely get worse as the war in Ukraine heats up and the U.S. threatens oil and gas sanctions for Russia—one of the world’s top gas exporters.

The cannabis market isn’t immune to inflation, but companies are shielding prices from the impact while cutting away at other overhead sources like dispensary décor and product options. In an increasingly competitive market filled with an increasingly sophisticated clientele and compounded by global inflation, the bells and whistles will just have to come off.

What Retailers Can Do To Drive Sales

It’s a bitter pill to swallow, but New Mexico waited too long to legalize cannabis. We can all but forget about a serious tourist market anywhere outside of our southern border since we’re now flanked by states with established adult-use markets. If a business is opening anywhere north of the I-25 interior Border Patrol checkpoint, it will probably need to cater to a core customer base of local users. These businesses will probably be better off dropping any plans for flashy public edutainment programs and hip showrooms in favor of focusing on ways to lower prices and keep customers coming back.

New Mexico’s current selling practices create false scarcity and will likely not be sustainable in a market where there will be much more competition and consumers can easily grow their own cannabis at home.

One successful practice adopted in markets like Colorado and Washington is scaling price with quantity. The more you buy, the less you pay. It encourages return customers and moves products much faster than the most popular model found in New Mexico today: pricing dried flower by the gram—no matter what quantity is being bought.

The novelty of legal cannabis will fade quickly and, as the research has shown, the bottom line for customers is the bottom line. Cannabis will become a commodity in the next five to 10 years, and retailers will need to start thinking about it as such if they want to stay in the game.


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