Cannabis Sales Decline as Economy Weakens

Closing Bell

Well, we're starting to see macro economic pressures hit every industry including the cannabis space states and growers reporting declining sales as inflation and a salary jobs market caused people to cut back on buying cannabis. Cheddar news is yellow took a deep dive into the phenomenon. Take a look as earnings season draws to a close. Cannabis earnings are just getting started. Some of the major U S cannabis companies have begun reporting and it's clear the industry is feeling the effects of soaring inflation. Florida Bass truly reported on Wednesday, the company saw fourth quarter earnings and revenue declined year over year. Although as Ceo Kim Rivers pointed out full year revenue climbed by about 32%. The company also forecasted lower first quarter revenue following several rounds of layoffs. Rivers attributed some of those layoffs to redundancies after its 2021 acquisition of harvest health and recreation, but all of this also comes as cannabis sales have contracted in many markets. River says true leaves customers some of whom live paycheck to paycheck have adjusted their behavior to meet macro economic pressures and inflation. She said that the number of visits by consumers to dispensaries has increased, but the spend per visit has declined as consumers pick value over luxury, take a listen. It's not that customers are necessarily leaving cannabis. Um It is however, that they are being more frugal because everything in their life is starting to come under pressure, right? When eggs are more expensive, when gas is more expensive. Um everyone I think is there a lot of folks in um in our customer base anyway, are feeling that that pressure truly, the only company facing these challenges. Wholesale pricing has declined across the board, particularly in mature markets like California. But as beside an asset management's Morgue unpack CIA pointed out in kipling are declining price in some cases, can make the legal market more competitive with the illicit market making up in sales volume for what was lost in price. The question on everyone's minds has been whether cannabis is recession proof and that will be important to determine if the U S heads into a recession as the Federal Reserve works to tame inflation during the early pandemic. Signs pointed to yes, but there were some important mitigating factors. Cannabis shops were deemed essential in many states amid the pandemic and there weren't quite as many activities to engage in leading to more cannabis consumption. Consumers benefited from stimulus checks and extra unemployment benefits. All of this sent sales spiking as the economy has soured however, and inflation has soared. A number of pressures are coming to a head including tumbling wholesale prices. A funding drought, illicit market competition, inflation and regulatory snags. This has contributed to declines in sales and overall market growth, particularly in more mature markets. According to headset in February 2023, California, Colorado, Oregon and Nevada all saw sales decline Anywhere from 7.6% on the low end in California to 13.6% in Colorado. Even emerging markets like Arizona and Maryland contracted. Although several others including Florida, Illinois, Michigan and Massachusetts did grow year over year inertia on federal legalization has also been a major stumbling block for us cannabis companies as well as those looking to step into the US market from overseas Congress failed once again to pass meaningful cannabis reform in 2022. And the odds don't look great in 2023 with a Republican majority in the house still executives and the industry are holding out hope for the future. Alright. Alright. Thanks to Cheddar News is Chloe a yellow for that report.