Why economists say there could be hope for Oregon's stalled cannabis market

The news is mixed from state economists looking at cannabis market trends.

Sales have slowed (no big revelation there), although not in a way that was unexpected as pandemic restrictions eased and consumers gained access to wider spending opportunities, according to the Oregon Office of Economic Analysis.

Still, that puts more pressure on many industry players struggling to eke out a profit due to confiscatory federal tax rules and, despite moves to limit new licensees, a highly competitive environment.

Consolidation and concentration are a continuing consequence; retailer Nectar, the largest cannabis employer in a recent Business Journal survey of the state’s industry, now has 640 employees and 35 outlets, up from 514 and 32 a year ago, respectively. Chalice has also been growing its piece of the pie, boosting headcount from 173 to 301 and store count from nine to 16 through acquisitions.

Falling wholesale and retail prices are another feature of today’s market (and another trend in place for several months). This affects companies differently but is uniformly damaging to growers — and means less revenue for the state from a 17% tax on adult-use sales.

On the latter point, economists trimmed their cannabis tax revenue forecast for the biennium that ends June 30, 2023, by $4.3 million to $351.2 million. The loser there is the state’s voter-approved drug treatment and recovery effort. It effectively gets everything beyond the first $90 million in cannabis tax money that comes in each biennium. That works in its favor when revenue is rising, as it was until early last year, but against it when receipts fall.

But for the industry, there were glimmers of hope sprinkled in the analysis released last week.

“Over the medium and long term, sales are expected to increase as Oregon’s population, income and spending grow,” the economists say.

Then there’s the possibility of usage-rate growth — something many in the industry are hopeful of, but that the economists haven’t yet built into their models.

“Marijuana sales are expected to remain a steady share of income and spending,” they say. “As such, the risks lie primarily to the upside should usage and broader social acceptance continue to increase in the years ahead.”

For now, usage is trending flat in Oregon, although at a high level.

“The latest National Survey on Drug Use and Health shows that the share of Oregonians using marijuana in the past month — a commonly used metric to define frequent or regular users — continues to hold steady at about 20% of the adult population, ” the state economists note. “Oregon ranks third highest in the nation trailing Vermont and Colorado, while Washington ranks just behind in fourth.”