Adult-use marijuana companies struggle to stay afloat amid overproduction, falling prices

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Image depicting company financial losses

As mainstream businesses cope with surging inflation and the threat of a recession, many adult-use marijuana companies – growers, retailers and ancillary businesses alike – are struggling with their own host of problems.

Falling prices and a product glut in more established state marijuana markets are forcing companies out of business, triggering layoffs and setting off an industrywide scramble to stay afloat.

Colorado, Oregon and Washington state are among the more mature markets where wholesale cannabis prices have tumbled, because growers produced far more flower than retailers could absorb.

The falling prices have put added strain on cannabis growers and retailers.

Ancillary businesses also are struggling, with tech companies Akerna of Colorado and Dutchie of Oregon as well as California-based delivery operator Eaze recently shedding employees.

Compounding the problems of cannabis companies: Marijuana products are often taxed at a far higher rate than mainstream goods such as corn, milk and automobiles.

In Washington state, for example, taxes can account for nearly 50% of the price of marijuana products on store shelves, making it harder for owners to remain competitive – much less survive.

“My revenue has dropped month after month, year after year, and we are to the point now where we’re just barely able to keep our doors open,” said James Lathrop, owner of Cannabis City, a marijuana retailer in Seattle.

In response, retailers are using a variety of tactics to stay afloat, including:

  • Offering consumers steep price discounts.
  • Exiting the retail business altogether to focus on cultivation.
  • Opening entirely new businesses – such as a marijuana-themed beer lounge – in order to drive traffic back to their stores. 

“It’s going well for almost nobody,” said Matt Walstatter, who sold his Oregon store, Pure Green, in 2019 to focus on cultivation.

“When I go to industry events, I don’t really talk about my business, because everybody is talking about how terrible it is and what a bloodbath.”

Below is a snapshot of market conditions in three states:


Marijuana companies in the state are struggling to cope amid a flood of businesses opening their doors after voters in the state legalized recreational marijuana in 2014.

Oregon adds a state tax of 17% to cannabis products, while municipalities are permitted to impose an additional tax of up to 3%.

Initially, there was no limit on the number of retail licenses the state doled out.

According to Walstatter, this led to a surplus of retailers and eventually forced the state to impose a moratorium on new cannabis licenses in April 2018.

“The retail market here is really, really, really crowded,” Walstatter said.

“It used to be when we got started that people would drive past stores to come to our store.

“And after a while it wasn’t that they were driving past two or three, it was that they were driving past 10 or 15.”

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At last count, Oregon had 787 cannabis retail stores, according to the Oregon Liquor and Cannabis Commission. The state’s population totals about 4.2 million.

Walstatter said two high-volume retailers opened on either side of his store soon after he opened, which made it tough to remain competitive.

He said he has seen many businesses like his either sell their stores to multistate operators or close up shop because of the stiff competition.

A tight labor market isn’t helping.

“I was talking to one grower who we work with, and he has no employees left,” Walstatter said. “He waters 600 outdoor plants himself every other day; he literally cannot afford help.”


After Colorado became the first state in the nation to begin adult-use sales, in January 2014, businesses there rode a steadily rising sales tide for years.

Now sales – and prices – are falling. Business owners are shuttering their doors or putting their companies on the sales block.

The state imposes a 15% excise tax on retail cannabis products. Localities add a sales tax of up to 2.9%.

While cannabis companies in newer state markets typically enjoy rising sales, Colorado operators have suffered a steep decline over the past year.

According to the Colorado Department of Revenue, marijuana sales in April totaled $153 million, a 25% decline from April 2021.

The price of wholesale cannabis flower is also down – 43% in the first quarter of the year compared to a year earlier.

Colorado cannabis retailers have also reported heavy oversaturation in the retail space, which recently led to the closure of all seven Buddy Boy stores in Denver.

The situation has been just as bad for growers.

Chris Becker, head of revenue and partnerships for Denver-based cannabis brand The Honeybee Collective, said the market price for a pound of wholesale marijuana flower has dropped from $1,600 this time last year to about $800.

“It’s been a tough year for cultivators,” he added. “Most people built their businesses around getting at least $1,500 a pound.”

With cost of production around $800-$900 a pound, Becker said, many of the smaller cultivators with 3,500- to 5,000-square-foot grows are likely to go out of business.

“I can’t see people growing in Denver for much longer,” he added.

John Andrle, owner of Denver cannabis grower and retailer L’Eagle Services, said the market indicates “some serious trouble for everyone in the industry, notably growers, but extending to stores, product manufacturers and more.”

Marijuana grows are selling for pennies on the dollar, if they’re selling at all, Andrle said.

“Stores aren’t faring much better, mostly because so many are for sale,” he added.

He estimated half the stores in Boulder are currently for sale.

Washington state

Marijuana businesses in the state are coping with steep taxes.

Washington state legalized cannabis for medical use in 1998, and adult-use sales began in July 2014.

The state has a strict licensing limit, with the number of retail licenses capped at 556 – well below the nearly 800 stores currently operating in neighboring Oregon.

The state’s population, by comparison, is nearly double that of Oregon’s, at 7.5 million.

And, at a whopping 37%, the retail excise tax on marijuana purchases is much higher than in Oregon or Colorado.

“This is in addition to the regular state of Washington sales tax, which, in Seattle, is 10.2%,” Cannabis City’s Lathrop said.

“So now it’s a 47.2% tax on a product that people can effectively grow in their closet if they want.”

Lathrop told MJBizDaily that while he might have less storefront competition than do retailers in other states, Cannabis City struggles to bring in customers who would rather shop on the illicit market rather than pay such a high tax.

“The only people that are winning are the high-volume stores that happen to be in an area where they’ve had a monopoly for a while,” Lathrop said.

Cannabis City has been open since 2014. But Lathrop said he will be forced to close his store if market conditions don’t improve.

He has even opened a cannabis-themed lounge – it serves beer, since marijuana clubs are banned in Washington state – in an attempt to drive traffic back to his dispensary.

But it’s been to no avail.

“I’m on the edge of, do I go bankrupt?” Lathrop said.

“Do I sell my store and walk away with nothing after eight years of being in an industry? Or can I still make it happen?”

Patrick Maravelias can be reached at

Bart Schaneman contributed to this report.