The cannabis industry, once hailed as a recession-resistant haven, is feeling the pinch of inflation. As prices for everyday goods soar, consumers are rethinking their spending habits, and the marijuana market is no exception. A recent survey reveals that two-thirds of cannabis consumers are cutting back on purchases, driven by rising costs and shrinking disposable incomes. This blog post dives into the economic pressures reshaping the cannabis landscape, exploring how inflation affects marijuana purchases online, wholesale, and white-label products, and what this means for the industry’s future.

The Inflation Squeeze: Why Cannabis Isn’t Immune

Inflation in the United States hit 9.1% in 2022, a 40-year high, driven by supply chain disruptions, labor shortages, and global events like the Russia-Ukraine conflict. While some believed cannabis was “inflation-proof” due to its consistent demand during economic downturns, the reality is more complex. The cost of growing cannabis has surged, with fertilizer prices skyrocketing due to reliance on exports from Russia and Ukraine, which supply nearly 30% of the world’s supply. Labor and transportation costs have also climbed, squeezing profit margins for growers and dispensaries. Yet, unlike other industries, cannabis retailers have hesitated to pass these costs onto consumers, fearing they’ll lose market share to competitors or the illicit market.

A 2022 survey by CBD Oracle found that 54% of cannabis consumers in adult-use states would buy less if prices rose to offset inflation. This reluctance to absorb higher prices has led to a unique paradox: while input costs rise, retail prices for cannabis flower, edibles, and vape products have dropped by 16.7%, 11.8%, and 12.4%, respectively, from January 2021 to January 2022. In states like Colorado and Michigan, wholesale prices have plummeted, with Colorado’s price per pound of flower falling from $1,600 in 2020 to $709 in July 2022. This deflationary trend, coupled with inflation’s broader impact, is forcing the industry to adapt.

Consumer Behavior: Cutting Back on Marijuana Purchases

The CBD Oracle survey, polling 1,450 Americans in legal cannabis states, paints a stark picture: 63% of respondents found inflation “painful” or “very painful.” As a result, two-thirds of consumers reported reducing their marijuana purchases to cope with rising living costs. While 52% said they’re consuming the same amount as last year, 23% admitted to buying less, opting for cheaper products or buying in bulk to stretch their budgets. Interestingly, 44% of respondents said they’d cut back on dining out to afford cannabis, highlighting its priority for some users despite economic pressures.

Marijuana purchases online have surged, growing by 80% in 2023, driven by convenience and competitive pricing. Online platforms like Cannazon reported $5.04 million in sales between January and March 2020, as consumers stockpiled during early pandemic lockdowns. However, as inflation bites, even online shoppers are becoming price-sensitive, gravitating toward budget-friendly options like lower-potency flower or discount brands. The survey also showed that 83% of consumers are willing to pay $30 for an eighth (3.5 grams) of cannabis, but only 57% would pay $40, underscoring the delicate balance retailers must strike.

Wholesale Woes: A Race to the Bottom

Marijuana purchases wholesale are under immense pressure as oversupply floods mature markets. In Colorado, the median wholesale price per pound dropped from $2,000 in 2014 to $649 in April 2023, a decline driven by increased competition and an influx of licensed growers. Oregon saw similar trends, with prices as low as $550 per pound in late 2022. This oversaturation stems from state-level legalization, which restricts interstate commerce and traps surplus product in local markets. For growers, production costs—often $800 per pound or more—leave little room for profit, pushing some to the brink of insolvency.

The wholesale market’s struggles ripple through the supply chain. Dispensaries, unable to raise retail prices due to consumer resistance, are forced to absorb higher input costs or negotiate better deals with suppliers. Some are streamlining operations, ordering in bulk, or focusing on high-demand products to cut costs. However, the black market remains a persistent threat, offering untaxed cannabis at lower prices. The survey noted that only a small fraction of consumers would turn to illegal sources, preferring legal options like growing their own or waiting for dispensary sales.

White-Label Products: A Bright Spot Amid Challenges

Marijuana purchases white label—products manufactured by one company but sold under another’s brand—are gaining traction as a cost-effective strategy. White-label cannabis allows smaller retailers or brands to offer products without investing in costly production facilities. This approach has helped some companies weather inflation by reducing overhead and focusing on branding and marketing. For example, white-label edibles and vape products have seen steady demand, as they’re often priced lower than premium branded alternatives.

The rise of white-label products aligns with consumer trends toward affordability. As inflation erodes purchasing power, brands like Curaleaf have expanded their white-label CBD wellness lines, including tinctures and edibles, targeting budget-conscious consumers. The survey highlighted that 55% of consumers prefer in-store purchases for personalized advice, but online white-label sales are growing, driven by competitive pricing and wider availability. This shift allows retailers to maintain margins without alienating price-sensitive customers.

The Road Ahead: Navigating a Turbulent Market

The cannabis industry’s resilience is being tested. While demand remains strong—55 million Americans use marijuana, and 88% support legalization for medical or recreational use—economic realities are forcing tough choices. Retailers face a dilemma: raise prices and risk losing customers or absorb costs and sacrifice profitability. The survey suggests that 46% of users wouldn’t change their consumption even if inflation worsens, but the majority are already scaling back, favoring cost-saving measures like bulk buys or cheaper strains.

Federal legalization could ease some pressures by enabling interstate commerce, balancing supply and demand across states. For instance, Colorado’s oversupply could meet demand in emerging markets like Texas, stabilizing prices. However, with marijuana still classified as a Schedule I drug, businesses lack access to traditional banking and federal aid, exacerbating financial strain. The SAFE Banking Act, if passed, could alleviate these constraints, but progress remains stalled.

Innovation and Adaptation: The Industry’s Response

To survive, cannabis companies are innovating. Some are investing in automation to reduce labor costs, while others are diversifying into CBD products, which saw a 20% usage rate among 18-29-year-olds in a 2020 SingleCare survey. Partnerships, like Canopy Growth’s 2024 collaboration with Constellation Brands to develop cannabis-infused beverages, aim to capture new markets. Meanwhile, retailers are leveraging data analytics to understand consumer preferences, focusing on value-driven products that align with shifting budgets.

The industry’s future hinges on balancing affordability with sustainability. As inflation continues to shape purchasing habits, companies that prioritize efficiency, strategic pricing, and innovative offerings like white-label products will likely thrive. For consumers, the message is clear: while cannabis remains a valued part of life for many, economic pressures are reshaping how, where, and what they buy—whether through marijuana purchases online, wholesale deals, or white-label alternatives.

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Reference:

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2.    Donnan, J., Shogan, O., Bishop, L., Swab, M., & Najafizada, M. (2022). Characteristics that influence purchase choice for cannabis products: a systematic review. Journal of Cannabis Research, 4(1). https://doi.org/10.1186/s42238-022-00117-0

Han, J. and Ng’ombe, J. (2022). The supply-side effects of cannabis legalization. Journal of Cannabis Research, 4(1). https://doi.org/10.1186/s42238-022-00148-7