February/23/2020
Adult-use marijuana flower wholesale prices remain high; however, as the more grower built more grow facilities, and the market expands and matures, the prices have reduced slightly.
Compared to another adult-use marijuana market, the prices are strong in Alaska irrespective of the enormous tax burden on growers, which amounts to $800 per pound of wholesale marijuana flower.
The heavy tax burden has given the illicit businesses a competitive advantage over the legitimate companies forcing them to close down their grow facilities. And for licensed marijuana businesses to succeed, they had to integrate vertically.
THC potency is the sole driving forcing behind the strong wholesale marijuana flower sales in Alaska.
According to the recreational marijuana business owner in Alaska, pounds of wholesale marijuana flowers are going for:
- Indoor testing at 30% THC $4,000
- Indoor testing at 25% THC at $3,500 of which last year it was $3,600 to $3,700
- Indoor testing at 20% THC goes for $3,000 of which in 2019 it was $3,100 to $3,200
- Indoor testing under 20% THC goes for less than $3,000
- Outdoor marijuana grown for extraction $2,600 to $2,800
According to the co-owner of Pakalolo Supply Co. Keenan Hollister, the prices for adult-use marijuana flowers have reduced slightly over the period. He noted that for quite some time, the rats were highly inflated. Pakalolo Supply Co. is a vertically integrated business and has a cultivation facility as well as retail stores in Fairbanks and Anchorage.
Alaska’s recreational marijuana market is dependent on potency despite it being one of the most mature marijuana markets in the United States.
Although the cultivators must still pay tax on marijuana whose THC tests below 18%, they have a hard time selling it.
The owner of Alaska Harvest Company, which is a cultivation firm based in Kasilof, said that all recreational marijuana consumers want the Wild Turkey 101 brand of the pot.
Due to the heavy tax burden, some cultivators have closed their facilities due to strict regulations. They also claimed that the high taxes imposed on marijuana flowers were not business-friendly.
In 2018, low-grade marijuana flowers, grown primarily for extraction, were taxed separately at $250 per pound.
The COO and owner of Green Jar Cannabis based in Wasilla, Bailey Stuart, said that the high taxes have led to the closure of growing facilities because farmers did not review their permits, and this creates a gap that allows illicit businesses to thrive. And the taxes have also let to the high cost of wholesale marijuana flowers.
Stuart further said that unless the tax structure is amended, the wholesale prices of marijuana flowers are not going to be lowered.
The CEO of Green Jar Cannabis and a board member of the Alaska Marijuana Industry Association (AMIA), Caleb Saunders, said that the tax system is broken. He also noted that with the high taxes, the black market is bound to outpace the legal marijuana market.
The AMIA is suggesting for the state to amend the cultivation tax in place of a 10% retail tax, and this would give the Department of Revenue in Alaska reason to go after marijuana businesses that are not paying tax. Saunder noted that nearly 30% of farmers are late on tax payments.
Even though Alaska is vast and has one of the most significant distribution, it is a challenge to operate as a wholesale marijuana flower distributor within the state.
Transporting marijuana flowers within the vast state is expensive as some are forced to ship via plane or by road, and it is only through vertical integration that some businesses can survive in the market.
The cost of essential goods and utilities in Alaska is also high, and this makes the cost of living in the state high.
Stuart further noted that the small marijuana cultivators within the state are struggling, especially if they do not own a marijuana retail outlet.
Saunders said that businesses are building more grow facilities and creating space for more companies to cater to the growing demand for recreational marijuana as regular customers buy more marijuana and newbies try marijuana for the first time.
Saunders is not worried about the market being oversupplied with marijuana because the state has significantly slowed down the licensing of new growers.
According to Hollister, Pakalolo Supply Co has expanded its cultivation facility such that now it can supply all its retail stores and some other retail stores.
Hollister is planning on opening a consumption lounge within the state, which is a space no other business has ventured into. However, he noted that before they can get approval for the consumption venue, they will have to overcome several hurdles.
