Marijuana Business Factbook 2019

182 Marijuana Business Factbook 2019 Chapter 3 | Financial & Operational Data: Wholesale Cultivators © Copyright 2020, Marijuana Business Daily , a division of Anne Holland Ventures Inc. You may NOT copy this Factbook, or make public the data and facts contained herein, in part or in whole. For more copies or editorial permissions, contact CustomerService@MJBizDaily.com or call (720) 213-5992, ext. 1. BUSINESS CONDITIONS OVERVIEW CHART 3.01: How Profitable Are Wholesale Cultivators? Year-Over-Year Comparison Source: 2019 Marijuana Business Factbook Note: "Losing A Lot Of Money" (expenses and taxes exceed revenue by more than 25%); "Losing Some Money" (expenses and taxes exceed revenue by up to 25%); "Moderately Profitable" (up to 25% of revenue left after expenses and taxes are paid); "Very Profitable" (more than 25% of all revenue left after expenses and taxes are paid). © 2019 Marijuana Business Daily, a division of Anne Holland Ventures Inc. All rights reserved. How Profitable Are Wholesale Cultivators? Year-Over-Year Comparison 2016 2017 2018 0% 20% 3% 8% 33% 13% 7% 30% 26% 27% 17% 24% 30% 34% 28% Level of Profitability Very Profitable Moderately Profitable Break-Even Losing Some Money Losing A Lot of Money More than half the cultivators surveyed indicated that their business lost money in 2018, a significant change from the roughly 15% of wholesale cultivators that were unprofitable in the prior two years. This may be a factor of cultivators choosing to grow for an adult-use market that faced razor-thin margins and declining profitability in 2018, as wholesale cannabis prices dropped dramatically between the 2017 and 2018 fall harvests. No cultivators described their operations as “very profitable” in 2018, whereas a third of cultivators reported they were very profitable a year ago. Several economic factors combined to contribute to cultivators’ declining profitability in 2018, including: • Intense competition: Low barriers to entry and abundant license availability have encouraged more recreational wholesale cultivation than expected. • Rampant oversupply: Favorable outdoor growing conditions coupled with an abundance of grow licenses flooded the market with flower after the fall 2018 harvest. • Depressed wholesale prices: Wholesale cannabis prices fell between 19% and 65% in California, Colorado, Oregon, Nevada and Washington state from 2017 to 2018. • Changing consumer preferences: Consumer demand for adult-use marijuana is increasingly shifting from flower to concentrate-based products.