Alaska’s recreational cannabis market is slowly maturing.
Supply is catching up to demand, but wholesale and retail prices remain some of the highest in the nation among adult-use marijuana markets.
According to several business owners in the state, prices for a wholesale pound of cannabis flower in the Last Frontier range from $2,800 to $5,000 a pound.
That’s down from a year ago, when some cultivators were asking as much as $6,000 a pound.
An ounce of flower is selling for up to $400.
“The average is higher than most states,” said Keenan Hollister, co-owner of Pakalolo Supply Co., a vertically integrated cannabis business in Fairbanks.
“But we pay a lot more for milk here, too. It’s Alaska.”
While prices remain on the steep side, more cultivators are coming online, improving their growing processes and building out their facilities.
“The wholesale market is coming back down to Earth,” Hollister added.
Prices are expected to continue to decline somewhat, although there’s a limit on how low they can go.
Alaska’s Department of Revenue taxes wholesalers by weight.
Cultivators pay a flat tax of $50 an ounce – or $800 a pound – on cannabis to be sold to retailers.
“Until that changes, there’s a rock bottom,” said Leah Levinton, co-owner of recreational cannabis store Enlighten Alaska in Anchorage.
Supply loosens some
Alaska legalized the sale of adult-use cannabis through a 2014 ballot measure, and sales began at the end of 2016.
For the first year of sales, Hollister said, business owners’ sole concern was having enough product on the shelves.
Since then, the supply situation has greatly improved.
Now, Hollister said, “we get to be a lot more choosy with what products end up in our store.”
Levinton has also seen a shift in how she gets product through her doors.
“A year ago in March,” she said, “we were literally sweating, really nerve-wracked because we weren’t sure we were even going to keep our doors open because of lack of supply.
“Now we have a lot of cultivators giving us a call, rather than us hounding them.”
Greg Allison – co-owner and operations director of Good, a vertically integrated cannabis business in Fairbanks – expects the increase in visitors during the summer tourist season to test the supply, however.
But that dip shouldn’t last. While the majority of Alaska’s cannabis is indoor-grown, when the fall harvest of greenhouse cannabis hits the market, it’s expected to temporarily even out any supply worries.
“We’ll see a lot of product hit the shelves,” Allison said.
Wholesale flower, trim
Leif Abel, co-owner of Greatland Ganja in Kasilof, said the market is “saturated” and prices for wholesale cannabis flower range from $2,500 to $3,800 a pound. Trim ranges from $650 to $1,000 a pound.
“There’s a lot of product out there,” he added, “but retailers still have to differentiate based on quality.”
Levinton’s buying wholesale flower at a range of $2,800-$4,400 per pound. The higher end of that range is primarily indoor-grown cannabis.
She hopes that, as supply improves and wholesale prices decline, she’ll be able to pass on the savings to her customers.
“Demand is high,” she said, “but if we can get the wholesale price down even more, I think we can offer a lower rate.”
In Fairbanks, prices for wholesale flower are a little higher, ranging from $3,900 to $4,900 a pound, according to Allison.
Hollister has seen prices hit that $5,000-a-pound mark for indoor-grown.
Trim is roughly $700-$1,500 a pound near Fairbanks, Hollister said, though Allison has seen it a little lower, at $500-$1,000 a pound.
And in Anchorage, Levinton is seeing trim at $500-$1,200 per pound, down from $2,400 per pound at a high point.
She said retailers were purchasing trim for pre-rolls in 2017, but now the supply is strong enough that businesses can use flower instead.
The tight supply has kept Alaska’s retail prices high, though they’re expected to slide downward along with wholesale prices.
“There aren’t a lot of companies giving big deals on ounces like you see in other markets,” Hollister said, noting that retailers are selling ounces of flower for more than $400.
But he expects prices to fall as the industry matures.
“As the market’s growing, it’s benefiting the consumer,” he said.
Levinton doesn’t package cannabis by the ounce yet – she still sells by the gram.
But now that the wholesale supply has increased, she plans to give customers discounts for buying in bulk.
A gram of cannabis currently sells for $12-$20 depending on quality and THC content.
A $20 gram averages 18%-28% range for THC content, Levinton said.
Allison added that he also isn’t seeing many retail shops selling in bulk quantities, but retailers who are selling ounces have them priced at $300-$400.
Ken Alper, director of the Alaska Department of Revenue’s Tax Division, said the flat tax rate is becoming an issue for cultivators.
“We’re starting to get some pushback from industry members who would like to see it as a sales tax,” he said.
But he’s fine with the tax as is.
“Having a flat tax by volume rewards quality,” he said.
“The guy who’s producing a $500 ounce has a lower tax rate than a guy who’s producing a $200 ounce.”
But Abel disagrees, citing the tax structure as the key issue slowing Alaska’s transition from an unregulated market to a regulated one.
He’d like to see the tariff assessed as sales tax on the retail side, not paid by the cultivator.
“I don’t see any scenario where keeping the tax burden the way it is now creates better quality for the consumer,” Abel said. “I think that’s ridiculous.”
Regardless, only the big fish will make it in the Alaska market, according to Levinton.
Larger cultivators who can utilize economy of scale to keep costs low will stay in business. The smaller businesses will struggle, she added.
More cultivation licenses are being added every other month by the Marijuana Control Board.
“In about a year we’ll see a whole bunch of people shake out,” Levinton said, “and we’ll see who can remain steadfast and evolve with the market.”
Bart Schaneman can be reached at [email protected]