Cannabis markets worldwide are feeling price compression, oversupply pressures

If you thought dropping cannabis prices were just a headache for the U.S. and Canada, think again.

The same challenges of oversupply, shrinking margins and falling prices are starting to ripple through Europe and Latin America as cannabis markets in those countries open up and mature, according to a report on price compression from the Global Cannabis Network Collective and Whitney Economics.

More than 110 countries now allow some form of cannabis access.

But instead of steady growth, many of the new markets are finding themselves stuck in a familiar cycle: ramping up supply faster than they’re adding legal consumers and watching prices fall as a result.

And the chief culprit is government, according to the report.

“Regulators control the supply and as a result, operators, investors, and consumers are at their mercy,” the report reads in part.

How fast are prices falling in new cannabis markets?

Emerging cannabis markets often see annual price drops of 10% to 20% during their early and mid-market phases, according to the report. In Germany, medical cannabis prices have plunged by almost 25% in just over two years.

German imports support between 900,000 and 1 million consumers, but the actual projected demand is at only 700,000 to 900,000.

Oregon-based economist Beau Whitney, who closely tracks the cannabis industry and authored the report, told MJBiz Daily that the price compression phenomenon is predictable.

And U.S. regulators are influencing international markets.

“In seemingly every market from Canada to the U.S. and from the U.K to Germany, regulators focus more on demand than they do on supply,” the report reads in part.

Are cannabis cultivation limits the answer to global oversupply?

Oversupply occurs when regulators award cultivation licenses without considering the number of cannabis consumers in the market, Whitney said.

It’s also fueling the illicit market because “cultivators sell what they can’t sell in the legal market to the unregulated market,” he added.

The price compression happening in international markets mirrors what’s been occurring in the U.S., where there’s enough legal production capacity to meet about 600% of legal demand.

As a result, only about 27% of U.S. cannabis operators turned a profit in 2024, according to the report.

Whitney said price compression squeezes margins throughout the value chain, making it hard to keep up with debts, pay vendors or staff and meet tax obligations.

Making matters worse is that many cannabis operators personally guarantee their loans.

“When you have a personal guarantee and you can’t pay your loan, not only are you going to lose your business, you’re also going to lose your house or your farm or your 401(k),” Whitney told MJBiz Daily.

Is the dispensary-only model holding back cannabis sales?

There’s another snag: how cannabis is sold.

U.S. states still restrict cannabis sales to regulated retailers, who are in turn restricted from selling products other than cannabis.

This eliminates large groups of would-be customers who don’t want to shop in a dispensary, which means market participation stalls after the early adopters convert, Whitney said.

“The dispensary model is a failure because not everybody wants to go in,” he said. “The female power shopper/soccer mom isn’t going to leave her kids in the car.

“The cannacurious will never participate in the legal system because they don’t want to go into a dispensary. As a result, the dispensary model is capping legal participation.”

And that’s showing up in sales.

Last year, 24 U.S. states saw cannabis revenue drop for the first time. Whitney said it’s partly because of price compression but also because of changes in consumer behavior.

With tighter budgets, more consumers are buying value-oriented products like vapes and gummies, hoping to get more bang for their buck.

“Consumers are tapped out,” Whitney said. “They’re starting to act like normal consumers in the general population. If gas prices go up, they try to cut in other areas.”

Industry leaders like Beau Whitney will explore these issues and what comes next at MJBizCon. Stay connected for agenda announcements and conference details.

Margaret Jackson can be reached at margaret.jackson@mjbizdaily.com.