Wholesale cannabis flower prices in Massachusetts climb on mounting demand, sluggish supply

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(This is the ninth in a series of stories from Marijuana Business Daily examining wholesale prices in U.S. recreational marijuana markets. Part 1 covered Nevada, Part 2 Washington state, Part 3 Oregon, Part 4 California, Part 5 Colorado, Part 6 Alaska, Part 7 Michigan and Part 8 Illinois.)

Prices for wholesale cannabis flower grown for Massachusetts’ recreational market are some of the highest in the nation, as the state’s producers slowly ramp up production to meet roaring demand.

As regulators gradually add more marijuana retail stores, supply could become even further strained before production facilities are built out to full capacity and catch up to the appetite for adult-use products. That means prices likely haven’t hit an upper limit.

Marijuana business owners in the state report pounds of wholesale cannabis flower are selling for:

  • Premium-quality indoor-grown: $4,200 ($3,500 in 2019)
  • Average-quality indoor-grown :$3,800 ($2,800 in 2019)

“It’s incredibly competitive on the wholesale market,” said Thomas Winstanley, director of marketing for Theory Wellness, a vertically integrated cannabis company in Great Barrington. 

Similar to several other states’ recreational marijuana programs, wholesale flower prices vary based on how the material is trimmed and its testing results. Hand-trimmed flower with high THC levels (20% or more) attracts higher prices. 

Retail marijuana stores are passing the stiff wholesale prices on to consumers. An eighth of an ounce of recreational flower is selling for $60-$70 in Massachusetts stores.

When prices are this strong, vertically integrated companies have an advantage if they exclusively sell their own flower at retail or produce enough to sell into the wholesale market.

Demand eclipses supply

The steep wholesale rates are expected to peak this summer and then start to ease in the fall, when a limited outdoor harvest hits the market and more indoor growers have their facilities built out.

For now, demand is far outpacing supply, and prices could still go up, said Nial DeMena, CEO and co-founder of Manna Molecular, an infused products company based in Mansfield.

“We don’t really know what the ceiling is,” he added.

When supply is this tight, vertically integrated companies with flower have significant leverage over buyers, according to DeMena. 

For instance, a vertically integrated company selling flower could say it’ll sell the purchaser 20 pounds of flower but the purchaser must also buy $150,000 worth of infused products.

“It’s definitely a challenge to keep up with demand,” said Patrik Jonsson, president of Wakefield-based vertically integrated cannabis company Curaleaf Massachusetts.

Not only is quantity lacking, but the limited supply means less variety of indica, sativa and hybrid strains. Curaleaf Massachusetts buys from other growers to increase its selection for consumers.

“You have to go look for the flower,” Jonsson said.

It could be many months until supply catches up. Cannabis executives in the state are predicting more retail stores will open their doors with or without enough flower to sell, increasing access and fueling demand.

But that process could take months. According to MassLive, the average wait time for initial license review by the state’s Cannabis Control Commission is 121 days, which has prompted the industry to ask the regulators to speed up the process.

As of late February, the commission had licensed 246 marijuana establishments, including 72 cultivators, and had opened 92 marijuana establishments, including 37 retail stores, according to MassLive.

“We still haven’t reached that critical threshold where supply has met demand,” Winstanley said.

For example, some of the more urban areas have yet to see a substantial retail presence, which could drive sales.

“We have yet to see the true level of demand from the greater Boston area,” said Jennifer Drake, chief operating officer for Ayr Strategies, a vertically integrated cannabis company with headquarters in Toronto and operations in Massachusetts.

Drake said her company sells everything it produces each month and could sell twice as much.

Massachusetts regulators approved a business license for the first recreational cannabis store in Boston last month.

Andrew Livingston, director of economics and research at Denver-based cannabis law firm Vicente Sederberg, said the pace of licensing for both cultivation and retail facilities has been similar for both sectors – that is, slow.

Future expansion

Getting cultivation facilities to maximum capacity won’t happen overnight either, Livingston added.

“Capital is hard to get now,” he said. “It takes a while to build out these facilities.”

Ayr Strategies recently finished a cultivation expansion that more than doubles the company’s canopy from about 13,000 square feet to 32,000 square feet, with plans to build out to the 100,000 square feet maximum allowed by law.

“People see a robust opportunity in the Boston area, and the people who have an ability to address a robust market will try to do so,” Drake said.

Curaleaf Massachusetts’ second grow will be dedicated solely to wholesale flower. Jonsson pointed out that flower is a difficult product to perfect, and that it takes time.

Theory Wellness also is building a second cultivation facility, according to Winstanley.

“These are good challenges to have,” he added.

Outdoor growing

Massachusetts may not be the ideal climate for growing cannabis outdoors, but some cultivation facilities are adding more greenhouse space to their operations.

That could help supply the market for extraction-grade flower and lower wholesale prices overall, DeMena pointed out.

Winstanley said his company has sold a little outdoor-grown flower to retail stores, but most of it is allocated for extraction.

And that cheaper product is desperately needed for processors.

“We definitely want more greenhouses,” Livingston said.

Bart Schaneman can be reached at barts@mjbizdaily.com