East Valley medical marijuana dispensaries are enjoying a phenomenal growth rate in sales, despite the failure of Proposition 205, but they are also prepping for an inevitable period of price declines, market consolidation and increased competition.
“We have already seen price declines and increased competition,” said Steve White, CEO of Harvest of Tempe. “Market consolidation is likely next.”
Lilach Power, owner of The Giving Tree Wellness Center, agreed.
“We have seen a number of licenses consolidating,” she said. “We have seen more dispensaries opening in Maricopa County—some are new licenses, some have moved from other areas of Arizona. But overall it’s a market of small local operators.”
The Giving Tree and Harvest comments come in reaction to a recent eye-opening report saying that medical cannabis sales in Arizona—on course to hit $367 million in 2016—will top $681 million by 2020. The study was conducted by Washington, D.C.-based New Frontier Data, a big data cannabis analytics outfit, in partnership with publisher Arcview Market Research.
“Almost any business would be thrilled to be in a market with a 17 percent compound annual growth rate, until you consider that they were a few thousand votes away from having a growth rate double that,” said Troy Dayton, CEO of the Arcview Group.
Had Prop. 205 passed, which would have legalized adult recreational use of marijuana in Arizona, medical and retail marijuana sales likely would have approached $1.2 billion by 2020, noted New Frontier Data founder and CEO Giadha DeCarcer.
“Now, they must begin planning for a period of steep price declines, license holder consolidation, and intense competition in the market,” she said.
Harvest’s White said he wasn’t all that alarmed by the study.
“The report is encouraging and reflects the efficacy of cannabis as medicine,” he said. “But it is simply a prediction—fun to talk about and usually wrong.”
“As far as price declines,” said Power of The Giving Tree, “I see it more as stabilizing. The fair market price of low-quality medicine versus high-quality medicine is becoming more standardized.”
Power said her dispensary is working on a new greenhouse facility in not-so-hot Northern Arizona that will increase production. Prices will drop further if Arizona growers start producing on a larger scale, but that hasn’t happened yet.
For the near future, Power said, The Giving Tree will focus on providing high-quality—and consistent—prescribed medicine for its patients.