Takeaways from Our Conversation on Cannabis Price Volatility in 2023
Volatile cannabis flower prices in states with developed cannabis programs will impact insurance buying, while capacity will still be a challenge in 2023.
Those were among the forecasts for the year from three subject matter experts.
For our latest podcast we interviewed Roy Bingham, CEO of cannabis data provider BDSA, Jay Virdi, chief sales officer for Hub International’s cannabis specialty practice, and Charles Pyfrom, chief marketing officer at CannGen Insurance Services.
Following are takeaways from that conversation.
“I think the continuation of the price compression that we’ve seen in the last 12 months is going to be felt by everybody,” Bingham said.
He said average retail prices in the big, mature markets in the Western U.S., such as Arizona, California, Colorado, Nevada, and Oregon declined 10% or more.
“It’s all been driven by price reductions, and those markets, of course, are still about two-thirds of the national scene,” he said. “Prices are just decreasing at a rate, uh, that is greater than the incremental gain in units being sold.”
As a consequence, consumers are getting a better deal. But the cannabis space promises to be reshaped in the coming year by what’s been going on.
“And the companies that are playing in the space are having to operate with tighter margins, especially the growers, but also the manufacturers in the middle as well, and the retailers themselves have to get used to potentially smaller ticket sales,” he said. “And as a result, we think that a number of the large multi-state operators will be purchasing smaller multi-state operators, purchasing some of the independent brands who are more vulnerable to this tough economic environment.”
This is impacting insurance because some strapped cannabis businesses are choosing to skimp on insurance. Some retail brokers have reported companies are looking to trim their insurance costs as payrolls and revenues decline.
Despite reports of increased capacity in 2022, Virdi expects 2023 to continue to be a challenge in terms of rates and availability in certain lines.
He saw more players entering cannabis last year, “but there still is not enough,” he said.
“And then if we talk about some of the other lines of business, where we look at crime and environmental and cybersecurity, those still very much are challenging segments,” Virdi added.
Pyfrom is upbeat about the growth of the cannabis market on newly legal states, many of which are in the East.
“We’re positive about what the growth looks like in the Northeast,” he said. “We’re excited from what New York, New Jersey are going to be offering from a licensing standpoint. And we’re seeing additional growth and adoption in the Midwest with this being a meaningful business enterprise for either entrepreneurs or expanding existing clientele from other states and jurisdictions.”
Pyfrom also believes the cannabis market will continue to innovate and bring new forms of consumption and new places to consume – such as the growing cannatourism business.
“I think the biggest operators will continue to thrive and find new ways to bring creative experiences to their customer base, but also they’ll find innovative new products that need great insurance solutions to meet the needs of what their buyers are soliciting to stay, not only ahead of the competition from an operator standpoint, but also to be solutions-oriented for their clientele that may be lured by other operators trying to be cutting-edge with not only new products, but also new ways of consuming and enjoying the plant itself.”
Related:
- Takeaways from Our Conversation with New York State Insurance Fund Director
- Takeaways from Our Conversation on Cannabis Risk Management
- Takeaways from Our Conversation on Cannatourism
- Takeaways from Our Conversation with a Cannabis Investing Pro
- Takeaways from Our Conversation on Economic Headwinds, Cannabis Glut