Hashish doesn’t undergo from retail inflation

If you’ve been to the grocery store lately, you’ve probably noticed that prices have gone up. The increase is directly due to a recent surge in inflation this worries both consumers and economists. Fortunately for cannabis users, Headset’s data shows that inflation hasn’t crept into the cannabis industry – at least for now. Let’s take a closer look at what the data says.

What is inflation and why should you care?

According to Forbes, “inflation occurs when prices rise and the purchasing power of your dollar falls”. In essence, inflation is the reason you are buying less with your dollar than you used to be. Because of this, bacon was $ 1.46 a pound in 1980 but was $ 5.58 a pound in 2020 (an increase of nearly 282 percent – sorry bacon lovers).

Is inflation affecting the cannabis industry?

To see if inflation is affecting the cannabis industry, we first need to examine average prices over time. Let’s dive into the graph below, which shows the average item price of all cannabis products in the U.S. recreational markets over the past year.

Graphics: headset

Here we can see that prices in most of the US adult markets have been fairly stable over the past twelve months. Michigan is the clear outlier with a sharp drop in the average item price from $ 25.38 in July 2020 to $ 19.32 in June 2021. Given that prices typically tend to be lower in new markets, it’s not surprising that prices in the two year old Michigan market are declining. Often times after legalization, supply cannot keep up with demand, driving prices up for about two to three years until the supply imbalance is resolved, after which the market stabilizes.

Nevada experienced some price volatility during the pandemic due to weakened market demand due to a sharp decline in tourism. Prices in Oregon rose in early 2021 but have leveled off since then.

Now let’s look at the relative change in the average item price from July 2020 to June 2021 by market. Michigan saw the largest price decline, as reflected in the previous graph. Oregon stands out as the only market where average prices have increased 2 percent over the past twelve months. In all other markets, the average prices hardly changed.

Overall, the average price data history does not show that inflation caused retail prices to rise in the cannabis industry; However, studying average item prices is not the best way to assess the impact of inflation on the industry. This is because what consumers buy and the products available in the market have a huge impact on the average item price.

For example, suppose that the average prices of individual packs of flower boxes in a given market decrease over time. Over the same period, consumers are buying more premium flowers for $ 60 per eighth than their usual $ 40 per eighth product. The shift in consumer purchasing behavior towards a more expensive product would drive the average item price up in the overall flower category. A change in shopping behavior could offset the change in average prices, and that applies to an entire market as well.

A better way to understand if inflation is having an impact is to track the prices of individual products over time, which we at Headset can do with our industry-leading real-time retail SKU-level data.

Do cannabis product prices change over time?

Using data from all of our affiliated retailers, the graph above shows the average month-to-month price change for all individual cannabis products within a given market. In other words, we compared the monthly average price of a single item in one pharmacy to all other products in all other retailers to determine the monthly median price by market.

A steady rise in the price of individual products would suggest that inflation is having a major impact on the cannabis industry, but the graph does not reflect such a trend. For much of the year, prices either stabilized or decreased in most markets, as shown by the multitude of points below the 0 percent line in the graph.

What’s up with ‘Shrink Flation’?

While inflation is a hot topic these days, you may also have noticed that the term “shrink inflation” is floating around the CPG sector (there is even an entire subreddit dedicated to it). Shrinkage is when manufacturers reduce the package size of their products without updating the price. This practice would be difficult, if not impossible, with cannabis as most cannabis products are sold by weight (eighths, grams) or THC (100 mg packs). Any change in package size would be obvious to the consumer and therefore more difficult to market.

While inflation is not having a negative impact on consumers in the cannabis industry today, the future may be different. The cannabis industry is fast moving and constantly evolving, so we will continue to monitor prices and inflation in this area. If you are interested in tracking real-time cannabis market trends and price fluctuations, you can do so with an Insights Premium subscription.

Cy-scott-headset-mg-magazine-mgretailerCy Scott is co-founder and chief executive officer at Headset Inc.to turn retail data into real-time insights into the cannabis market. In his weekly blog he offers industry analysis and insights into innovative brands. Goods packed with cannabis. Prior to founding Headset, he co-founded Leafly and helped make the website the world’s leading cannabis information resource. In addition to his work at Headset, Scott started a monthly cannabis tech meetup with cannabis entrepreneurs and technology developers that has expanded to several regions in the United States. Scott’s favorite strain is Tangie.

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