How Dispensary Prices are Determined in Nevada

How Dispensary Prices are Determined in Nevada

When Nevada opened the floodgates to allow for legal, adult use of marijuana in July 2017, it is true that prices for cannabis and cannabis-related products were considered high in comparison to other legal states, as well as the black market. Nevada’s high prices were a result of simple economics – incredible demand coupled with a scarcity of cultivators, production facilities and a shortage in overall supply of product. Legal establishments had no choice but to raise prices to the point that the market would bear. Nearly two years later, many question whether or not the cost of marijuana in the Silver State has adjusted up, down or remained the same. Read on and take a closer look, as well as learn more about current pricing for cannabis in four other major markets.

Nevada Compared to Other Legal States reports that a high price for cannabis in a newly-legal market is nothing new, but almost two years in, Nevada still has the highest cost per gram for cannabis flower, concentrates, pre-rolls and vape pens. On the other hand, Washington has an oversupply problem, making legal cannabis in the Evergreen state the cheapest of the early legal states (Colorado, Washington, and Oregon), even with its 37 percent tax rate. Too much weed is not necessarily a good thing either though and can put cultivators out of business.

A gram of marijuana flower normally costs $12 to $20 at licensed dispensaries across Nevada while the same quantity of pot can be purchased legally in Portland and Denver for $6 to $10. An eighth of cannabis flower, priced at $35 to $70 in Nevada, runs from $17 to $50 in Oregon and Colorado’s largest cities.

Even though the price of cannabis in Nevada remains rather high, across all categories, the most expensive cannabis is in California, where the average item price is $30.90. Nevada was second, at $26.94, followed by Oregon, then Washington at $15.33. When it comes to non-inhalables, like tinctures, capsules, topicals, and edibles, Nevada’s average price was still higher than California, Washington, and Oregon per milligram, but it does has the lowest price for tinctures.

Why is the Cost of Marijuana High in Nevada? states that even though cultivators are refining methods and learning how to produce large amounts of cannabis for the cheapest cost, wholesale cannabis prices in Nevada remain high, as opposed to other legal states whose wholesale prices post-legalization have dropped. Marijuana Business Daily discovered that the “fair market value per pound of whole flower – a metric used by the Nevada Department of Taxation to levy taxes on the state’s marijuana growers – has jumped more than $650 from July 2017 to July 2018, a 30 percent increase.” suggests that this increase parallels incredibly high demand for cannabis in Nevada, more than analysts anticipated. They explain that in the first five months of 2018, legal marijuana sales neared $38 million a month, a 16 percent increase from the $32.6 million average in 2017.

Nevada’s comparatively high pot prices are due to costs paid by dispensaries to state-mandated testing labs and a tax on the plant as high as 38 percent in some cities by the time the pot reaches buyers. As the industry expands to include more dispensaries and cultivation facilities, more pot supply will force shops to compete for customers. Nevada has less than one-eighth the number of open dispensaries in both Oregon and Colorado, and costly lab testing standards for those states are not as stringent as they are in Nevada.

There are factors other than high demand and an initial market launch undersupply that could be keeping cannabis prices high. Cannabis Company CEO Alex Tacracki told Marijuana Business Daily that some additional challenges facing the market are cultivation facilities that are hindered by the extreme heat temperatures in the summer here, as well as strict testing standards that are slowing supply at the retail level.

Will Prices Decrease?

Leaders in Nevada’s cannabis industry have indicated that the price of cannabis could come down, if a few things happen. The Las Vegas Sun summarizes what John Mueller, CEO of Acres Cannabis, told the Las Vegas Medical Marijuana Association at a monthly luncheon back in September 2018 regarding cannabis price reductions.

Mueller said price reductions could come as early as next year when up to 42 additional state dispensary licenses are issued in 2019 for new pot stores to open across the state. The new dispensaries should help to take some of the strain off the current operators in Nevada. Mueller mentions that growers in the Silver State are also building out their cultivation facilities and streamlining grow methods which, for the time being, will allow Nevada to meet demand without growing too much supply.

The current discrepancy in price isn’t necessarily a knock on Nevada’s marijuana industry, cannabis consultant Jeremy Jacobs said. The Kentucky-based consultant, speaking at the Thursday event, said a “decent balance” between the number of cultivation facilities and dispensaries has helped Nevada’s industry continue to grow as a “fair pace.”

Both Mueller and Jacobs said they expect access to the industry — for both consumers and business owners — to become easier in the next few years if and when the federal government removes the plant from its list of Schedule 1 illegal drugs. Mueller said consumer recognition of brands, similar to a beer drinker ordering “Michelob or Bud Lite,” will also grow, reducing customers’ need to rely on budtenders for marijuana advice. Mueller stated, “we want to take it out of our hands as dispensary owners and allow consumers to interact directly with their favorite brands.”,

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