Updated: Aug 13
Editor’s Note: Today’s post comes from contributing editor Dr. Stefano Tijerina, a lecturer in management and the Chris Kobrack Research Fellow in Canadian Business History at the University’s of Maine’s Business School.
In the year 2020, the State of Maine officially legalized the sale of recreational marijuana—good timing for the industry, considering that the pandemic restrictions put in place by the administration of Governor Janet T. Mills provided an opportunity for medical and recreational users to sit back in their homes, relax, and partake in the consumption of cannabis. Initial sales of recreational marijuana in October 2020 set high expectations, but the opening boom was followed by an oversupply in local markets that hint at potential problems for the industry in years to come.
In the past, illegality kept marijuana prices high and supply low but not anymore. The legal market now faces the structural challenges of supply and demand, and, like any new rising commodity, cannabis must experiment with market adjustments, which will result in winners and losers. Unfortunately, it is small businesses that must confront these challenges in the middle of a pandemic. It is not all bad news for the consumer, though, since these are good times to enjoy the highest quality and abundant variety of “flower” in the state’s market history. Overall, there are good omens for the years to come.
In a tight November 2016 referendum that ultimately required a recount, the citizens of Maine voted to legalize medical and recreational marijuana production and consumption. The medical marijuana industry was quickly established and was up and running with little delay. The takeoff for recreational marijuana, however, was not as smooth. Opponents of legalization used legal and political tactics to delay the process with hopes of ultimately blocking recreational marijuana in the state. Nevertheless, the voters had spoken, and there was no turning back. In October 2020, almost four years after the legalization vote, Maine’s market for recreational marijuana finally launched.
One month after the first eight licensed recreational marijuana businesses opened their doors to customers, Maine authorities reported cannabis sales of $1.4 million, which brought the state $140,945 in sales tax collections. Initial data showed that smokable products represented 76% of total sales, while concentrates (14%) and cannabis-infused products (10%) made up the rest of the market.
2020 Maine Marijuana Sales; source: State of Maine Office of Marijuana Policy
These early numbers revealed the potential of Maine’s marijuana market, and it perhaps leaves policy makers salivating over the potential growth of tax revenues in the years to come. Although we are in the infant stages of the Maine, national, and global marijuana markets, it is clear that the legalization of medical and recreational marijuana—locally and globally—will change the world in the twenty-first century. (See this earlier post for more information about the potential of Maine’s marijuana market).
It has already changed Maine’s social, business, and economic development landscapes, giving the marijuana industry agency while also providing citizens the freedom to enjoy the commodity without the burden of criminality. A recent Portland Press Herald story, for example, reported that “cannabis is now Maine’s most valuable crop,” doubling in size partly due to the beginning of recreational sales. In 2019, total sales of marijuana were $109.2 million, while 2020 sales are projected to reach $266.2 million. Cannabis is thus on track to beat the total 2019 sales of other local crops, including potatoes ($184.1 million), milk ($123.6 million), hay ($38.8 million), and blueberries ($26 million).
Current Status of Marijuana by Municipality in Maine; source: State of Maine Office of Marijuana Policy
Not everybody, though, has capitalized from the marijuana boom. Increased competition is slowly pushing some small businesses out of the market, while others have been forced to redefine their business strategy. The “invisible hand” and the macroeconomic dynamics of a young market have also forced adjustments based on fluctuating supply and demand.
There is no data yet about households growing (up to six) legal plants for personal use, but it is evident that this production capacity often eliminates the need for dispensary visits. Illegal sales—part of the continuing market adjustments—bring down prices, but these sales will tend to wind down as time moves forward. On the other hand, supply continues to outpace demand, but this market adjustment takes time—as is the nature of capitalism.
In free-market societies, consumers naturally desire the best-quality products and services. Amateur growers will likely be slowly displaced by market forces, as the burden of time and the costs of production force home-growers to make decisions based on a cost-benefit analysis. It does not take much effort or investment to grow a low-quality “flower,” but it takes time, dedication, discipline, and money to grow a high-quality product. Now that the recreational market has been officially legalized, I personally know several backyard growers who are already planning to give up growing next season in favor of retail purchases.
The future is uncertain—particularly when it comes to a young commodity market like marijuana. One thing is clear, however, the quality and the diversification of available products will continue to grow. Research and Development and the science behind the current and future development of cannabis products will change the industry going forward. The marijuana business will become more sophisticated, investing in marketing and product development as new consumers enter the market.
Full legalization has just begun here in Maine, and yet cannabis is already dominating the local crop market. Down the road, perhaps marijuana will become the backbone of the state’s economic development, bringing added value to the retail, product development, tourist, hospitality, and entertainment industries. Maybe cannabis will alter the landscape, just like the microbrewery industry has over the past ten years.