Is inflation impacting cannabis-related businesses?

Published on Oct 28, 2022

Is inflation impacting cannabis-related businesses?

Cannabis-Related Businesses (CRBs) have been flourishing over the past few years, despite facing regulatory restrictions that prevent them from obtaining even basic financial services. However, now that the country is facing record high inflation rates, is the cannabis boom about to bust?

Cannabis industry insiders have differing opinions.

On one hand, unlike most other products during an inflationary period, cannabis prices have actually dropped over this past year, leading some people to say it’s inflation-proof. According to Business Insider, premium flower prices dropped from approx. $1,100 per pound in 2021 to between $400-$600 this year, due largely to an oversaturated market.

However, as the product prices fall, production prices are on the rise, as the costs of labor, packaging, construction, transportation, and energy have all increased.

This would typically lead CRBs to increase prices to cover costs, however many businesses are afraid to do so. Demand has slowed for cannabis products post-COVID. According to Marijuana Business Daily, total sales growth across five Western state markets was 39.2% in 2020, during the height of the pandemic, and dropped to 15.9% in 2021.

Still, cannabis – like alcohol – continues to sell well during rough economic times. While consumers may switch from premium to more inexpensive products, they’ll likely still buy.

Ultimately, the legal cannabis industry is still relatively new, and hasn’t been tested in an inflationary period before. Time will tell how the industry fares but it seems clear that most CRBs are feeling the effects of inflation, but perhaps not as significantly as some other businesses.

Valley supports CRBs

Valley believes that every business should have the opportunity to take advantage of banking services to support their business. That’s why we’ve evaluated the risks and have opened the door to having conversations with cannabis-related businesses about helping them with their banking needs. 

Advantages of working with Valley include: 

If you need help with your CRB, visit the Cannabis Banking page on our website, or contact us today.