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Dispensary Profit Margins in 2021

Owning a cannabis dispensary can be a profitable endeavor. While the license application process, the physical build-out, and regulatory compliance all require patience and fortitude, there are good reasons to remain optimistic about owning a retail cannabis dispensary. According to the MJBiz Marijuana Business Factbook, U.S. regulated cannabis sales will exceed $15 billion in 2020, nearly a 40 percent increase from 2019. CNBC reported that primarily due to COVID-19, average retail cannabis sales rose an astounding 52 to 130 percent from January to March 2020. All of these aggregate numbers are a reason to celebrate, but what do the trendlines mean for dispensary profits? It’s safe to assume that dispensary sales numbers remain pointed in the right direction, but is there an average dispensary profit margin? To answer that question, a bit of history is illustrative.

MJBiz data revealed that in 2016, 18 percent of dispensaries reported they were very profitable; 41 percent had a modest profit; 29 percent broke even, 11 percent had some losses, and 1 percent had larger losses. A 2017 Statista.com analysis surmised that dispensaries averaged $3 million in annual revenue, with operating expenses averaging $1.2 million. In 2018, a study from ArcView and BDS revealed that “dispensaries have the ability to turn a 12 percent profit after taxes.” A 2020 Leafly.com study found that “…long-term legal retail cannabis profit margins will be around 15 percent.” This is consistent with additional research that indicates dispensary profit margins range between 12 and 15 percent. Fortunaly.com found that in 2020, medicinal dispensaries’ average profits ranged from $500,000 to $3,000,000, depending on geography, regulations, and taxes.

It’s important to remember that a smaller, so-called “mom and pop” dispensary in a less populated location will have different sales numbers and operating costs than a larger, urban dispensary. Planet 13, in Las Vegas, Nevada, is an extreme example. Covering more than 16,000 square feet of operating space, it’s the top-selling dispensary in ‘Vegas. Planet 13 reported 2019 revenue of $63.6 million, accounting for 9.1 percent of all Nevada cannabis dispensary revenue. It had a 2019 EBITDA of $9.9 million and reported Q1 2020 revenue of $16.6 million, on track to exceed its 2019 numbers.

Managing the Margins

At a basic level, there are common elements that drive net profits:

  • Price per product
  • Spend per transaction
  • Total daily transactions
  • Operating costs (inventory, rent, salaries, marketing, utilities, security, etc.)
  • Taxes
  • Operating efficiency (compliance, staff hours, inventory control, administration).

According to the data analytics firm New Frontier, consumers spent an average of $213 per month during the first three months of 2020, with record highs in April and May averaging $290 and $296, respectively. June’s sales numbers fell slightly to $282, but still up from early 2020. The data company Headset calculated that in 2020, on average, U.S. consumers spend between $25-$50 on each dispensary visit.

What is Rule 280E?

For cannabis businesses, Section 280E of the internal revenue code forbids cannabis businesses from deducting ordinary business expenses from gross income. This results in lower overall profits as businesses can’t take deductions that the IRS affords to most other companies. Rule 280E excludes tax write-offs for labor, rent, utilities, insurance, professional fees, etc. Harborside, the Oakland, California dispensary co-founded by industry legend Steve DeAngelo, has been fighting 280E’s cannabis exemptions since 2009. Unfortunately, in 2018 Harborside lost their case in U.S. Tax Court and is appealing the decision. However, until the federal government legalizes cannabis, most tax professionals and cannabis attorneys do not envision the IRS (or federal courts) ruling in dispensary owners’ favor.

Improving Dispensary Profit Margins

Every for-profit business owner’s goal is to generate sales, grow income, and make a profit. The simplest way to do so is to sell more products and reduce operating costs. For dispensary owners dealing with high taxes and burdensome reporting regulations, increasing operational efficiency can play a crucial role in improving profitability. Increasing operational efficiency is our core mission. It’s one reason why BLAZE partnered with Weedmaps and directly integrated Weedmaps Orders with a dispensary’s POS system. It’s perfect because the BLAZE Dispensary POS platform now offers cannabis retailers a single, seamless sign-on to update Weedmaps menus and receive customer orders. This improves the accuracy of the dispensary’s Weedmaps menu, leading to increased sales. The integration also enhances employee efficiency because it eliminates the need for manually updating the Weedmaps menu. The BLAZE POS platform also simplifies supply chain management and compliance reporting leading to better operating efficiency, which translates into higher profit margins.

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While there are notable differences between independent dispensary owners and Multi-State Operators (MSO), the primary goals remain the same; increase daily sales transactions, improve each customer’s per transaction expenditure, and increase the store’s profit margins. The BLAZE software suite helps dispensary and delivery service owners operate more efficiently, and the adage still rings true; time is money. We’re here to help you succeed, and we can’t wait to get started!

As a relatively new industry, regulated cannabis sales are trending in the right direction both in the U.S. and internationally. This bodes well for everyone working in the cannabis sector. Yet finding ways to lower operating costs, increase sales, and improve dispensary profit margins are fundamental business practices that dispensary owners should never take for granted.

Let us know how we can help you. Contact our sales team, and let’s start a conversation about improving your dispensary’s profits. After all, there’s no margin for error.

Cannabis Seeds Market Size ($4,642.6Mn by 2028) Driven by Medical Industry (18.7% CAGR) Impact of Coronavirus Outbreak and Global Analysis & Forecast by TheInsightPartners.com

The cannabis seeds market size to reach $4,642.6 million by 2028 from $1,217.4 million in 2020 to grow at a CAGR of 18.7% from 2021 to 2028; while North America held the largest revenue share of the global market in 2020.

October 28, 2021 15:19 ET | Source: The Insight Partners The Insight Partners

New York, Oct. 29, 2021 (GLOBE NEWSWIRE) — Cannabis Seeds Market: Key Insights
According to our new research study on Cannabis Seeds Market Size and Forecast to 2028 – COVID-19 Impact and Global Analysis By Type (Regular Seeds, Feminized Seeds, and Autoflowering Seeds), Category (Organic and Conventional), Strain (Hybrid, Sativa, and Indica), and Distribution Channel (Wholesalers and Distributors, Specialty Stores, and Online Retail). The rising use of cannabis for medicinal and therapeutic purposes and the increasing legalization of cannabis in various countries are expected to drive the market growth. However, complex regulatory framework is acting as a restrain for the growth of cannabis seeds market.

Report Coverage Details
Market Size Value in US$ 1,217.4 million in 2020
Market Size Value by US$ 4,642.6 million by 2028
Growth Rate CAGR of 18.7% from 2021 to 2028
Forecast Period 2021-2028
Base Year 2020
No. of Pages 145
No. Tables 74
No. of Charts & Figures 72
Historical Data Available Yes
Segments Covered Type, Category, Strain and Distribution Channel
Regional Scope North America; Europe; Asia Pacific; Latin America; MEA
Country Scope US, UK, Canada, Germany, France, Italy, Australia, Russia, China, Japan, South Korea, Saudi Arabia, Brazil, Argentina
Report Coverage Revenue forecast, company ranking, competitive landscape, growth factors, and trends

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Cannabis Seeds Market: Competition Landscape and Key Developments
Key market players operating in the cannabis seeds market are Christiania Seeds, Barney’s Souvenirs BV, Mountain Top Seed Bank, Paradise Seeds Family, Seed Supreme, Sensi Seeds, Serious Seeds, Sweet Seeds, The Seed Cellar, and Dutch Passion. Major market players are adopting strategies such as mergers and acquisitions and expansion of their geographical presence and consumer base globally.

In 2020, North America held the largest revenue share of the global cannabis seeds market. The market is growing across the region due to the increasing legalization of cannabis for medical and recreational purposes in North America. Furthermore, the medical application of cannabis is rapidly expanding as consumers become aware of its medicinal benefits. The presence of firms such as Medical Marijuana Inc.; Aphria Inc.; and Tilray, Inc. in North America contributes to the growth of the cannabis seeds market in the region. Furthermore, these businesses are interested in mergers and acquisitions, as well as expanding their production areas, all of which will help to enhance the cannabis seed industry in the region in the coming years.

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Increasing Legalization of Cannabis in Various Countries is Exected to Drive the Cannabis Seeds Market Growth During Forecast Period:
The legalization of cannabis has allowed people to practice substance use safely while realizing its medicinal benefits. As a result, many countries around the world are gradually legalizing cannabis use. For instance, several countries, including Canada, Australia, Italy, Chile, Colombia, the Netherlands, Poland, and Portugal, have legalized the medical use of cannabis. Consumers in cannabis-legalized states in the US are mostly over the age of 50. This demographic profile is expected to boost the cannabis demand in the country due to the increased risk of chronic diseases after the age of 50 and the effectiveness of cannabis on such conditions. Along with this, in December 2018, the US government passed the Farm Bill to legalize cannabis with THC levels below 0.3% in the country. In addition, some of its derived compounds have been approved for medicinal use by the Food and Drug Administration (FDA). Marinol, Syndros, Cesamet, and Epidolex are cannabinoid drugs that the FDA has approved. Additionally, in February 2016, the parliament of Australia amended the Narcotic Drugs Act, which has effectively legalized the growing of cannabis for medicinal and scientific purposes. Along with this, in April 2017, a joint Australia and New Zealand ministerial forum agreed to amend the country’s shared Food Standards Code to permit the sale of low-THC seed as a food product. The amendment took place in November 2017; post the amendment, the cannabis seeds industry has grown.

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Moreover, most countries in different regions across the globe have not legalized the recreational use of cannabis, however the perception of its use and sale has changed over time due to its medical benefits, which has increased the popularity of cannabis use in various regions and has fueled the growth of the cannabis market across the globe. Thus, the increasing legalization of cannabis in various countries is driving the cannabis seeds market.

Cannabis Seeds Market: Segment Overview
Based on type, the cannabis seeds market is segmented into regular seeds, feminized seeds, and autoflowering seeds. The feminized seeds segment is expected to register the highest CAGR during the forecast period. Feminized cannabis seeds are genetically modified to produce exclusively female plants. The primary benefit for producers that utilize feminized cannabis seeds is that they do not have to identify or eliminate pollinating male plants. Growers have several advantages of using feminized cannabis seeds.

Based on strain, the cannabis seeds market is segmented into hybrid, sativa, and indica. The sativa segment held the largest share in the market in 2020. Cannabis sativa grows in hot, arid regions like Africa, Central America, Southeast Asia, and parts of Western Asia. Sativa typically has lower CBD levels and higher TCH levels. Sativa is known for its stimulating and anxiety-relieving properties. Sativa-dominant induce productivity and creativity while reducing tiredness. Because of high THC levels, psychological problems such as depression, PTSD, and anxiety are better treated with sativa strains. Therefore, sativa strains are being used to manufacture medicinal drugs that treat psychological disorders.

Based on distribution channel, the cannabis seeds market is segmented into wholesalers and distributors, specialty stores, and online retail. The wholesalers and distributors segment led the market with the largest share in 2020. Wholesalers and distributors of cannabis seeds are dedicated to supplying cannabis seeds to licensed retailers and dispensaries. They might be cultivators or producers of cannabis seeds or licensed third-party distributors or dealers. The third-party distributors purchase cannabis seeds in bulk from commercial cultivators and are responsible for distributing them to licensed retail stores and dispensaries. Distributors of cannabis seeds can distribute and store the seeds and function as an external sales staff for the wholesaler. Factors such as vast distribution network, bulk supply, and availability of various strains of cannabis seeds boost the sales of cannabis seeds by wholesalers and distributors.

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Impact of COVID-19 Pandemic on Cannabis Seeds Market:
The ongoing COVID-19 pandemic has had a relatively moderate impact on the cannabis seeds market. For instance, according to the 2021 World Drug Report, during the pandemic in 2020, more than half (56%) of people who had used cannabis in the past 12 months said that they had used the same amount of cannabis before the pandemic. Almost a third (31%) of cannabis users aged 24 and under reported using more cannabis than those aged 25 and above (19%).

The pandemic helped to develop more awareness and interest in the medical sector of cannabis. Various research has also been carried out during the COVID-19 pandemic, which focuses on the use of cannabis for the treatment of COVID-19. For instance, cannabis has shown great potential in the fight against COVID-19, largely due to its anti-inflammatory properties. The study published recently in Aging shows that cannabis could significantly improve the condition of COVID-19 patients by reducing a cytokine storm and protecting lung tissue from inflammatory damage. Research also shows that cannabis and its compounds have other important therapeutic properties, such as pain relief and anxiety reduction. While these may provide treatment to COVID-19 patients, more research into cannabis’s pain-relieving and anxiety-reducing qualities on COVID-19 patients is required before any conclusions. Along with this, a lot of countries during this pandemic have been hit with tax shortfalls. The government of countries are looking for various sources of tax income. A potential source of tax income can be the legalization of cannabis, which could become progressively engaging. An increase in the sale of cannabis by legal sellers would provide a potential tax income gain in the coming years.

Key Questions to Request for Cannabis Seeds Market:

  • Can you list some of the major players operating in the global cannabis seeds market?
  • Which region held the largest share of the global cannabis seeds market?
  • Based on type, why is the feminized seeds segment expected to grow at the highest rate during 2021–2028?
  • Based on distribution channel, which segment is the fastest growing segment in the global cannabis seeds market?
  • What are the driving factors of the global cannabis seeds market? What is the latest trend for cannabis seeds market?
  • Based on category which segment held the largest share of the global cannabis seeds market?

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Marijuana Sales Reports

The Marijuana Sales Reports summarize total sales made by medical and retail marijuana stores monthly by county. The Marijuana Sales Report has monthly total sales for the state. The Marijuana Sales by County Report shows monthly sales by medical and retail marijuana stores by county.

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