Why Marijuana Prices at Colorado Dispensaries Have Been Falling

I remember the first time I set foot inside a recreational marijuana dispensary. It was May 2014, and the pot shop was a highly awarded location, the Clinic Colorado. Smoking pot was nothing new to me, but buying weed legally certainly was. And the options! The options gave me a stoner hard-on that only Colorado could inspire at the time. After sniffing a few of the best examples of Bubba Kush, Girl Scout Cookies and Strawberry Cough that I’d ever seen, I pulled out my wallet like an adolescent virgin at a strip club, eager to drop cash.

“So $50 should be enough for an eighth, right?” I asked the budtender.

“You’re about $23 short for the mid-tier stuff,” he said with an impressively straight face. After tax, the price was a total boner-kill: upwards of $70 or $80 for an eighth (3.5 grams) of flower. I called a friend and drove to his house, where he gave me four grams of basement weed for $30, and I didn’t buy anything from a dispensary for the rest of the summer.

Two years later, that same dispensary charges $40 for the same amount of potent herb after tax, and that friend doesn’t even bother selling me eighths anymore.

After realizing that people in Denver would just go back to buying marijuana illegally, the same way they did for generations, and facing increased competition as other retail stores opened, dispensaries have lowered their prices — big time. A recent report from pot data firm BDS Analytics listed the average price for a gram of flower (including single grams, eighths, quarters and so on) at $5.77 the week of 4/20 this year and $6.67 during the rest of April, down from an average of $8.86 in the first quarter of 2014, when recreational dispensaries were first allowed to open.

Andy Williams — president and CEO of Medicine Man and Medicine Man Technologies, a Denver recreational dispensary chain and marijuana-business consulting firm with over forty clients in fourteen states — says that like any other industry, the retail marijuana market responds to factors such as competition and supply and demand.

“My dispensaries were charging $55 an eighth before tax when we first opened in 2014, and now we charge $25,” he says. “But in states like Massachusetts, the prices are still high because consumers don’t have as many options, or the buyer pool is limited because of medical marijuana restrictions. Here, we have availability.”
Williams says that he can fetch around $2,800 to $3,000 per pound of flower on the retail market today; in 2014, he was getting around $6,000.

“I had people waiting in line at 2 a.m. during the first day of recreational sales. They were pretty insensitive to price; it was all about the freedom,” he remembers. “But there was hardly anybody in line from Colorado.”

High dispensary prices for flower kept many Colorado residents at a distance in the beginning, when a friend or friend’s friend was charging significantly less for a small bag of chronic. The variety might not have been as good, but business for many black-market dealers remained largely the same in 2014 — and even better than before, in some cases.

“I was getting around $2,300 per pound, bulk pricing, before the dispensaries opened,” says my friend and ex-dealer, Patrick, who agreed to be quoted if I didn’t use his last name. “And I continued to get that much afterward, only I was selling a little more of it.”

Patrick says he didn’t notice prices dropping until mid-2015, when he saw an eighth for $30 at a dispensary in Aurora. “When it was that cheap without a coupon, I knew I had to rethink my approach,” he says. “I can still get somewhat close to $2,000 for a pound today, but I don’t waste time selling smaller amounts anymore. No point in wasting my time trying to compete with $20 eighths and free joints at the shops.”

Coloradans seem to like marijuana a little more than the average American — or at least we’re not as scared to admit it as residents of other states. Before recreational dispensaries even opened, a 2012 survey from the Denver Office of Drug Strategy that compared Denver with the rest of Colorado and the U.S. showed that 15.5 percent of Coloradans had admitted to marijuana use within the previous thirty days, a rate 5.2 percent higher than the national average. But 17.6 percent of Denverites admitted using marijuana during that same time period. Add in the 100,000-plus new residents Colorado gained between July 2014 and July 2015, and you have yourself a growing customer base.

Over 200 retail dispensaries in the Denver metro area and 500-plus in the state provide more than enough places for all of these marijuana users to spend money, but it took time for the market to figure itself out — and for residents to figure out the market.

Although flower prices have been falling drastically for the consumer, Williams says, the increasing demand has allowed his cultivation and production to reach full capacity, forcing recreational prices to the levels found at medical dispensaries in 2013. If prices of black-market basement weed that you know little about are similar to those at a retail dispensary, which is (supposed to be) regulated and have some sort of quality control, the choice is easy — especially when a dispensary has dozens of strains and most street dealers have only one or a few to choose from.

But just because flower prices are dropping doesn’t mean that other marijuana products have stopped denting budgets. Williams says he can almost double his profit by making concentrates that are much harder to find on the black market. “Live resin has extremely high profit margins, and so does shatter and wax,” he explains. “I could sell $3,000 worth of bud over the counter, or I can take that same amount, blast it, and get $6,000.”

Continued demand and a more regulated competition platform give concentrates and edibles a much more stable price point, Williams notes, and the numbers back him up. BDS says the average price per unit for recreational edibles was $16.20 in the first quarter of 2016, down just 62 cents from the average edible two years prior. Concentrates (bubble hash, shatter, live resin, wax, etc.) have actually risen in price, up to a current $35.64 per gram from a $33.02 average in the beginning of 2014.
“The state has yet to make up its mind on how edibles are going to be packaged, and every time a regulation changes, that affects packaging costs, which affects retail prices,” Williams says. “And you have to look at branding: LivWell and Snoop Dogg’s line of products have done a great job of creating interest.”
With wholesale bud prices currently topping off at around $1,000 per pound in Colorado (down at least $800 from 2014), Williams says the industry is starting to take note that legal marijuana isn’t just a flower show anymore. According to BDS, flower accounted for 59 percent of sales revenue during a four-day stretch over 4/20 weekend in 2015, and 63 percent during the rest of the year — still a majority of the market, but quickly trending downward.

As apps and social-networking tactics by such outfits as MassRoots and Weedmaps continue to infiltrate the marijuana industry, consumers are becoming more savvy at comparing the deals, prices and inventory at pot shops around Denver. They can figure out which store has the strain, extract or edibles brand they want, and which one sells it at the cheapest price. Because of that, Williams says, dispensaries need to either start catering to a more intelligent consumer or move to a state where there’s less competition.

“Prices [of flower] are going to keep going down,” he concludes. “If you’re not on track to live with that, then you’d better start planning.”