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Oregon Marijuana Sales Soared 29 Percent in 2018. So Why Aren't More Entrepreneurs Happy?

According to a new state report, tax revenue is way above projections, but prices are down.
Oregon Marijuana Sales Soared 29 Percent in 2018. So Why Aren't More Entrepreneurs Happy?
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Let's start with the good news. Recreational marijuana sales in Oregon are far outpacing projections by state economists. In a recent economic report, the state’s Office of Economist Analysis noted the rapid changes in Oregon's marijuana business. They are now revising their tax revenue projections up to $26.8 million for the 2017-2019 period and up to $20.3 million for the 2019-2021 period. They also noted that further upward revisions are anticipated if current trends hold. 

However, despite the growth in sales, the cost of marijuana itself has dropped 50 percent. Oregon takes in tax revenue as a percentage of the cost of the product. As prices have dropped, the state is taking in less revenue per item sold.

But according to the report, “the ongoing growth in underlying sales volumes, usage rates, and black or medical market conversions has been more than enough to make up for the price effect,” the report stated.

Related: In Michigan, It's Beginning to Smell A Lot Like Cannabis

A $543 Million Market

Current projections call for total recreational marijuana sales in Oregon to reach $543 billion in 2018, which is a 29 percent increase over 2017. The state is projecting that by 2025, recreational marijuana will be a billion dollar industry in Oregon.

The state’s report also offers a snapshot of the cannabis industry nationwide -- particularly on where growth will materialize in the coming years.

Oregon’s economists expect the biggest long-term impact of recreational marijuana won't come from growing and selling cannabis. They called such areas “low-wage and low value-added market segments,” although clearly a cornerstone of the market.  

Instead, they anticipate the largest economic value, in the long run, to come from products such as oils, creams, edibles and specialty strains of cannabis.

The manufacturing processes for such value-added products, as well as growth in the “broader cluster” of cannabis suppliers and ancillary industries, is where the economists project Oregon will experience the biggest economic impact.

Related: The Green Industry Goes White Collar

Large Inventory, Low Prices

These optimistic projections come even as the state is seeing a dramatic fall in marijuana prices. Part of this is driven by the state's decision to offer incentives for black market marijuana operations to enter the legal market. While this has apparently worked to substantially lower the amount of illegal marijuana sold in Oregon, it’s also caused there to be a glut of product. Oregon has nearly 1 million pounds of flower -- a massive amount for a state with roughly 4 million people . The result has been a 50 percent drop in prices.

That’s great news for consumers. But bad news for marijuana entrepreneurs. Many of whom fear they will lose their business if prices remain this low, according to The Oregonian.

To help stop the glut, the state stopped processing applications for new marijuana licenses earlier this year.

Follow on Instagram to stay up to date on the latest cannabis news.

By Javier Hasse
From retailers to growers, producers, and suppliers, there’s a seemingly never-ending list of startup opportunities in this emerging market. In Start Your Own Cannabis Business, marijuana, biotech, and entrepreneurship reporter Javier Hasse introduces forward-thinking entrepreneurs like you to the industry and shares hard-earned tips and success stories from pioneers and visionaries in the marijuana industry.
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