Marijuana Prices Are Falling in Colorado, and Here's Why

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Have you noticed that your cannabis dollar is going further than it did this time last year?

According to a new analysis by Convergex, which describes itself as "an agency-focused global brokerage and trading-related-services provider," you should.

Since last June, the report notes, "the average price of an 1/8th ounce of recreational cannabis has dropped from $50-$70 to $30-$45 currently; an ounce now sells for between $250 and $300 on average compared to $300-$400 last year."

Why the decline? The main reason cited by Convergex is increased competition, as more and more dispensaries come online, as well as existing shops "vertically integrating by buying additional warehouses and expanding their grow facilities, increasing supply."

Another reason is the tendency of folks to make smaller purchases than they did last year around this time, when the novelty of being able to legally make such a buy was presumably higher.

Sources who spoke with Convergex reported "between 100 to 300 customers entering their stores each day" — a figure similar to customer flow last year — "but they only spend about $50 per visit compared to $100 last June."

Moreover, these customers include tourists — perhaps some who've returned to the state and are getting a better sense of what they can consume before their departure, rather than buying too much and then leaving the extra in their rental car.

These factors don't necessarily mean problems for the industry as a whole.

The report stresses that the price drop is "a natural result for any maturing industry, as dispensaries try to find the market’s equilibrium price."

Besides, the money is still rolling in.

If the $4.39 million in retail sales tax collected by the State of Colorado in April translates to sales of $43.9 million in revenue (and it should, since the tax is 10 percent), the total would represent a 98 percent increase from the same month last year.

And if this pace is expected to flag somewhat as the year goes on, Convergez predicts that retail stores will cumulatively gross $480 million in 2015, an increase of more than 50 percent over 2014.

In the meantime, customers should be able to reap the benefits.

To read the complete Convergex report, click here.

Send your story tips to the author, Michael Roberts.

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