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Dispensary Profit Margins and Falling Marijuana Prices

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Dispensary owners often find themselves in a difficult position when it comes to properly setting the prices on their products. Supply and demand fluctuate far more dramatically than in many other industries, new legal regulations can suddenly manifest which require significant compliance cost, and competition is fierce.

Marijuana Business Daily determined in its 2017 factbook that the average profit margin for recreational and medical cannabis dispensaries is around 19%. Although dispensary profit margins can vary widely based on business climates and state regulations, recreational stores and businesses that sell both adult-use and medical cannabis typically have the highest profit margins.

average dispensary profit margin

How to Maximize Your Dispensary Profit Margin Despite Falling Prices

Today we’re going to take a look at a few fundamental issues your dispensary will likely face when it comes to appropriately setting your retail marijuana prices in Colorado or elsewhere. Here are some options you should consider in order to help keep your profit margin healthy over time:

Tip 1: Embrace Competition

Since the initial introduction of medical marijuana to the general population a number of years ago, marijuana prices in Colorado and most other states have already fallen by up to as much as 40%, as the blue-sky advantage begins to dissipate and the realities of supply and demand set in. Only one thing is certain; that competition will grow increasingly fierce in the future. Your dispensary needs to adapt to the changing marketplace, and fully embrace the spirit of competition to succeed. This means delivering a superior customer experience, high-quality products, maintaining a strong local marketing presence, and everything else that being an agile and competitive business entails .

Tip 2: Product Differentiation

One way most dispensaries can increase their basic profit margins is by engaging in product differentiation. Invest in flower strains that no one else in the area provides; what you lose on yield you may recoup by way of novelty factor , strain fans, or other developments. Consider providing cannabis formulations not easily available on the black market, such as live resin , shatter, or wax – prices on these types of products are higher, and less resistant to market stress. In fact, cannabis concentrates are the one class of products that has actually slightly risen in value over time; concentrated marijuana prices in Colorado are up several per cent in recent years.

Tip 3: New Product Lines

Along with investing in product differentiation, you may additionally want to consider diversification into entirely new product lines as well. Profits in the edibles market have remained higher than those of most plain flower due to the enhanced regulatory burden inherent in manufacturing them - think legal compliance requirements related to labeling and packaging, for example. Continued demand for new product lines along with the less volatile nature and lower competition in these markets provide your dispensary a great opportunity to keep profits high for the foreseeable future, even as marijuana prices in Colorado continue to fall .

Tip 4: Research, Research, Research

Perhaps the most important aspect of setting price points at a cannabis dispensary is the competitive research process. Make sure your organization is doing all it can to keep its finger on the pulse of the market, and make your strategic decisions accordingly. This means checking up on competitors prices , learning about black market averages in your area, reviewing online internet sites and comment boards where people discuss cannabis pricing – even potentially looking at what is going on in neighboring states; in short, doing everything you possibly can to ensure that you have an accurate grasp of current trends related to marijuana prices in Colorado. The more research you perform, the better a judge you will be of where you should set your prices in order to maximize your bottom line.

Keeping these four fundamental principles in mind will help you best position your dispensary for success. Never stop engaging in competitive research, do everything you can to promote your brand, wisely choose the type of products you intend to sell, and your dispensary can enjoy a healthy bottom line over the years to come. While marijuana prices in Colorado will likely continue to fall in the short term future, dispensaries which take this approach will be insulated from the worst effects of the market.

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