Oregon’s recreational cannabis market continues to struggle with an oversupply issue, causing consumer prices to drop to record lows while businesses face shrinking profit margins. This challenge, outlined in a recent Oregon Liquor and Cannabis Commission (OLCC) report, has made it increasingly difficult for many operators to stay afloat.
The report states that in 2024, Oregon’s marijuana harvest reached nearly 12.3 million pounds, reflecting a 4% rise from 2021. Favorable growing conditions in southern Oregon contributed to this increase. However, demand only accounted for 57% of the available supply, creating an imbalance in the market.
The report highlights the difficulty of managing the oversupply, particularly since Oregon’s market is confined within state borders due to federal restrictions on cannabis commerce. As a result, businesses operate in an intensely competitive space where prices remain low for consumers, but profitability is increasingly challenging. The report warns that without federal legalization, this trend is unlikely to change, leaving the industry to grapple with narrow profit margins.
State legislators have attempted to address the issue through licensing regulations. When state voters legalized recreational cannabis in 2016, Oregon introduced an open licensing model with comparatively low fees.
To prevent excessive supply, legislators implemented a moratorium on new grower licenses in 2019 through SB 218. In 2022, HB 4016 adjusted this restriction, backdating the moratorium to permit new producers into the market. More recently, in 2024, HB 4121 transitioned the moratorium into a per capita licensing model.
Despite these efforts, the OLCC anticipates that the current trend of oversupply will persist, further driving down prices and tightening business margins. Market consolidation may follow as smaller operators struggle to compete.
The financial strain is evident in declining prices. The median cost per gram of marijuana dropped to $3.85 in 2023 and further decreased to $3.75 in 2024, reaching the lowest levels since 2016. The industry experienced its peak sales during the COVID-19 pandemic, with revenues hitting $1.2 billion. However, sales have since declined, stabilizing at $964 million last year.
Beau Whitney, an economist specializing in marijuana markets, believes the OLCC could take more decisive action to regulate supply. He argues that while regulators focus on public health, they neglect the financial sustainability of the businesses they oversee. This imbalance has led to increased business closures and an oversaturated market that cannot sustain all its participants.
According to Whitney, the average Oregon marijuana retailer generates approximately $1.1 million annually, a figure far below the $2.5 to $2.9 million needed for long-term sustainability. He suggests that requiring suppliers to demonstrate demand for at least 75% to 80% of their product—an approach used in other states—could help stabilize the market.
Whitney also points to declining consumer demand as a major factor. He attributes this trend partly to falling prices, which reduce revenue, and to the distribution model, which relies solely on dispensaries. He argues that this model limits consumer participation, as many potential buyers avoid dispensaries altogether. Expanding distribution options, he says, could improve legal market participation and help businesses remain viable.
Without significant intervention at both federal and state levels, Whitney predicts little growth this year. While national sales may grow as more states legalize recreational cannabis, the overall industry remains fragile. He warns that ongoing inaction could cause the U.S. to lose its leadership position in the global cannabis market—a shift he believes could have been prevented with better regulation.
Looking ahead, Whitney advocates for a comprehensive overhaul of industry regulations, calling for a “marijuana regulatory 2.0” to create a more sustainable and balanced market. The oversupply challenge affects most markets in which marijuana has been legalized and it would help all concerned, including leading enterprises like Verano Holdings Corp. (CSE: VRNO) (OTCQX: VRNOF), if a lasting solution to controlling marijuana production is implemented.
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