Washington's cannabis market spent the better part of its first decade as a capitalist's dream industry. It just kept growing, year after year. Then in 2022, something changed. Sales dropped by 8 percent compared with 2021, from more than $1.5 billion to less than $1.4 billion.
"This last year or two has seen a significant decline compared to the start of COVID," says Joe Lima, manager of Liberty Lake's Novo Dia Farms. "Prices have gone down. Talking to anyone from the [Liquor and Cannabis Board] to growers to stores, last year was really tough. Maybe not for the biggest ones, but for the smaller growers."
While the drop in prices has strained some in the industry, it could be welcome news for consumers, especially considering Washington has some of the highest taxes on cannabis in the country.
Various factors have contributed to the drop in prices.
In 2020, the cannabis industry was deemed essential by Gov. Jay Inslee and allowed to continue operating throughout the pandemic shutdowns. With little to do but stay home, and few places to spend money, cannabis sales went through the roof. As life has returned to normal, a regression toward the mean was to be expected.
Another factor that Lima sees impacting consumer spending on cannabis is that prices have risen for other goods, like gas and food.
Then, there's the product itself impacting its price in a counterintuitive way: Cannabis today is better than ever before.
"People are getting more bang for their buck," says Megan Roberts, store manager at the Green Nugget. "The budget people are all about the numbers. They want the products with high THC content."
The joints your hippie uncle used to smoke in the '60s contained around 2 percent THC. Good luck finding anything close to that at a dispensary today. In 2021, the average potency of cannabis seized by the DEA was just over 15 percent, but that's only illicit cannabis. By legal cannabis standards, 15 percent is low-potency. Consumers in the legal market have more options for cannabis above 30 percent today than they do around 15.
"People just want high potency. For low to mid potency, there is some market for that, but for the most part it's in high THC," says Lima.
Budget concerns may be top of mind for many consumers and may help to fuel the shift toward stronger products, but they're not the only thing driving a change in consumer behavior. People in the industry are noticing other trends as well, such as the return of vapes.
That's a notable shift from just a few years ago, when vapes appeared to be on their way out.
In 2019, the Centers for Disease Control and Prevention declared an epidemic after hundreds of people were hospitalized and multiple people died around the country due to lung injury associated with the use of vape products. In response, Inslee announced an emergency ban on all flavored vapes in the state.
Medical investigators ultimately determined that a chemical additive — Vitamin E Acetate — had caused the lung injuries and that the vast majority of cases were associated with unregulated products from states without legal markets. The chemical was banned from vape products in Washington, and the emergency ban on flavored vapes was allowed to expire.
Perhaps the health scare surrounding vapes has something to do with it, because retailers are seeing an increase in health-conscious consumer behavior and producers are taking note. Be on the lookout for vegan or sugar-free edibles.
"A lot of these edible companies are looking to get vegan or sugar-free options onto the shelves," says Roberts. "People have become more cautious about what they smoke and what they consume."
Looking ahead, the low-price, high-potency and health-conscious trends of today are on something of a collision course that could dramatically alter consumer demand and market supply down the road.
Researchers around the country have been turning their focus to high-potency cannabis, and there are now myriad studies linking it to negative health outcomes not associated with lower-potency cannabis. Could that push consumers away from the strong stuff? If it doesn't, the state just might.
Earlier this year, state legislators introduced a bill that would increase the tax on cannabis products with concentrations above 35 percent. Taxes on the strongest products would be nearly double what they are today.
Should either the bill or those concerns become reality, the trends of tomorrow could be opposite of the trends today. ♦