Cannabis sales in the U.S.'s largest legalized markets are slowing.
Total retail sales of cannabis-based products in the five-largest legal U.S. markets—Arizona, California, Colorado, Oregon, and Nevada—totaled $572 million in November. That figure is down 1.6% from October, and marks the third straight month in which sales declined.
That's according to the November Cannabis Retail Price Index (CPI), the latest report from cannabinoid market research firm BDS Analytics.
The Cannabis CPI hit 100.95 in November, a marginal 0.1% increase from the previous month. The CPI is designed to illustrate demand shifts, pricing adjustments, and other trends in the cannabis industry for consumers, producers, and investors. Through its GreenEdge Platform, BDS compiles retail transaction pricing data for dispensaries in Arizona, California, Colorado, Nevada, and Oregon, which make up 50% of the United States' legalized cannabis product sales.
The report also showed that average retail prices have fallen approximately 2% on a year-over-year basis, though total sales are up over 15%.
The index shows a positive price trend in pre-rolled joints and topicals on a year-over-year basis, while flower, vape, ingestible and dabbable concentrates continued experiencing negative price pressures due to lower sales.
The slowing sales are in-line with what has been an overall downtrend in the industry. Though cannabis continues to make headway on the legalization and regulatory fronts, many cannabis stocks ended 2019 in full correction territory. In the private markets, a slowdown in dealmaking has led to a capital crunch for some companies.
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Despite the recent pullback however, there's a belief that the industry will rebound. According to BDS, cannabis sales tend to historically spike in December, and optimism remains high among industry insiders that investor money will flow back into the industry now that valuations have come down.
"I think the focus has shifted more towards underlying fundamentals," said Greg Chin, a partner at CohnReznick and member of the firm's national cannabis industry practice.
"All the deals we look at are focused on verification of revenues and EBITDA, and understanding how these businesses are going to generate cash flow. So I think that there's more focus on that now. We think when the capital markets normalize a little bit and capital becomes a little more available, I think we'll start to see deals to pick up again."
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