Think Out Loud

What decrease in demand means for Oregon’s cannabis industry

By Rolando Hernandez (OPB)
July 14, 2022 4:20 p.m. Updated: July 14, 2022 8:27 p.m.

Broadcast: Thursday, July 14

Public input has prompted the Washington Liquor and Cannabis Board to revise proposed rules to the state's marijuana industry.

Oversupply and falling prices are just a few challenges facing the cannabis industry right now in Oregon.

Alan Sylvestre / OPB


As inflation has increased the cost of gas and groceries across the nation, there is one Oregon industry that is actually seeing a decline in cost for consumers: cannabis. As the Portland Business Journal reports, the median price for usable cannabis is down 19% from last year. But this decrease in price does not mean stores are selling more. Jessica Clements is the owner of Gud Gardens. Ben Nastoff is a general manager with Virtue Supply Company. They join us to share what is happening in the industry and what it may look like in the future.

Note: The following transcript was created by a computer and edited by a volunteer.

Dave Miller: As inflation has increased the cost of gas and groceries and so many other consumer goods across the nation, one Oregon industry is actually seeing its consumer prices fall: cannabis. As the Portland Business Journal reported recently. The median price for usable cannabis is down almost 20% from last year. But this decrease in price has not meant that stores are selling more because consumer demand has dropped as well. For more on what’s behind this and what it means for the industry, I’m joined by Jessica Clements and Ben Nastoff. Jessica Clements is the owner of Güd Gardens, a grower in Grants Pass, and Nastoff is a general manager of Virtue Supply Company, a cannabis store in Portland’s Pearl District. Welcome to you both.

Jessica Clements: Thank you.

Ben Nastoff: Good to be here.

Miller: Jessica, first. What have you seen in terms of the price that you can get for what you’re growing over the last year?

Clements: Gosh, well, something that we’re seeing this year is similar to 2018, which is just typical oversupply in the market. Our prices have dropped. In 2018, they dropped 50% from $700 to $350 for the typical outdoor-grown flower found. And this year we’re seeing as low as $200 per pound to wholesale. So we’re seeing a quite steep drop in wholesale pricing.

Miller: At that price at $250 a pound, is your business model sustainable?

Clements: Absolutely not. We’re fortunate to be partnered with processing so I view my business now as a raw material producer. If I were, like many other cultivators in Oregon, an autonomous flower producer, like I was prior, I don’t believe that we could survive this, unfortunately, and I think a lot of other businesses are not surviving.

Miller: But so your model is different. You’re now, as you said, a producer of raw supplies for a processor that’s then making extracts or edibles?

Clements: Exactly. I’ve been historically just for dry consumable flower, but the flower market is so chaotic and has been since the inception of  legalization of recreational cannabis in this state that it doesn’t make sense that I grow only consumable flower anymore.  So we have to make our decisions about what grown flower will be used for every October when we harvest. We’re primarily an outdoor producer. We do indoor and greenhouse, but for that outdoor crop, I need to decide if that’s going to go into extract, which is a little more consistent market. Consistent pricing products can be stored longer when frozen or if I’m going to choose to make consumable dry flower goods again.

Miller: Ben, what about you? What has retail business been like over the last year?

Ben Nastoff: Well, we saw a big spike at the beginning of the pandemic. Obviously we had a bit of a captive audience. The three places you could go were the liquor store, the grocery store and the dispensary.  So we’ve definitely seen a drop from that in early 2020.

Miller: Is that something that you were expecting? Starting in March or April of 2020 and then going for say a year or two years, were you at the time thinking this is the new normal or this is a bubble and at some point it’s going to pop and drop out?

Nastoff: I believe we all saw it as a bubble.  It was a little, from a retailer’s perspective, a little too good to be true.  There were really no options for people to go out and entertain themselves. You couldn’t go to the bar, you couldn’t go to the movies.  So people were staying home and consuming more. Naturally as things have opened back up that’s gone down a bit.

Miller: Jessica, is one of the reasons for the price drop that some growers two years ago saw the huge increase in demand and started planting more or people got into the business because they didn’t see this as a bubble. They saw this as a great opportunity for the future?

Clements: That’s a great question. I do believe so. We’ve had a couple changes in our licensing. So a moratorium went in place; however, there was a queue of producer licenses that were still being processed. So well after 2018, a lot of businesses failed, licenses went up for sale or just generally closed.  We saw, again, a lessening of supply prices started going up. I think with the pandemic, we were deemed essential. Again, people were staying home, they had a little more disposable income and they were visiting the dispensary and buying more. And so a lot of people saw that as an opportunity and got licenses to jump back into the market or maybe they weren’t growing their entire licenses, their acre allotment at that time and decided to plant out more because we were busy for the last three years. And maybe a lot of people’s perspective is just one year. From a farmer’s perspective, it’s one year at a time. How did this year go? Are we going to plant again next year? And everyone started planting and then here we are. There’s a lot of liquidation happening.

Miller: What does liquidation mean in the context of this industry?

Clements: I believe a lot of my fellow producers are coming into the market and their businesses are closing or they’re just trying to recoup anything. At this point we are as well, trying to recoup as much of the expense that we put in to grow the crop and  we’re available for any price that we can get.

Miller: Ben Nastoff, on some level that’s, that could be seen as good news for a retailer because it’s going to cost you less to buy the products, you’re going to then turn around and sell to consumers.  But what does it mean that wholesale prices have dropped so much? What does it mean from the retail perspective?

Nastoff: Well, from the retail perspective, I guess the customers expect the prices to drop with the wholesale, with the wholesale prices dropping as well. So while in a perfect world, our margins would just increase, we do have to stay competitive  and drop our prices.

Miller: So how much have prices dropped for your various products?

Nastoff: The top shelf has gone down by about $20 or $30 in the crisis.

Miller: And percentage wise, is that significant?


Nastoff: That’s about 10-15%.

Miller: So are you also expecting to see what Jessica is talking about?  Are you expecting to see retailers going out of business because of this sort of one-two punch of lower prices, lower profits and lower demand?

Nastoff:  Yes. We’re already seeing it, that’s not us but you do see around town a lot of shops pop up and a lot of shops go away right now.

Miller: Do you see this drop in demand as being the new normal, a kind of permanent change in Oregonians habits or a lull because of inflation or financial insecurity?

Nastoff:  I’d call it a lull, inflation has definitely taken its toll as well as you know, the price of everything increases. People are tightening their belts there. They’re spending less on cannabis.

Miller: Because you see it as a kind of entertainment or luxury good?

Nastoff: Yes, that is how a lot of consumers do it.

Miller: As I noted, your store is in Portland’s Pearl District, it’s just something  four blocks away from Powell’s books. Does that mean that you get a lot of tourists as a business?

Nastoff: Oh, we definitely do. This time of year we see a huge influx of tourism and that really helped. That really helps us.

Miller: Are there general trends in terms of what tourists buy people who are visiting from outside the city or outside the state compared to what Portlanders would buy?

Nastoff: Yeah, we see them gravitate more to the kind of goods they might not be able to get in their state. Obviously they can probably get flour where they live, but things like cartridges, extract  edibles. They tend to gravitate towards those things that they might not be able to find in their home state.

Miller: Is that good for your bottom line? I mean as we heard from Jessica there seems to have been more stability in those product lines than in flower. Does that mean you can also make more money from them?

Nastoff: There is, yes, there’s a lot less volatility in the pricing of of those goods,

Miller: Jessica.  I can’t forget that one of the first words you used to describe the market the last couple years, which is chaotic. It does seem like one of the hallmarks of this industry in Oregon, certainly since it became state legal, it’s just this roller coaster with big peaks and then big valleys in terms of supply and price leading to booms and absolute busts. So what does it take to stay in business with all this volatility?

Clements: Yes, you’re absolutely correct about peaks and valleys and no single year has been like the year prior. And that’s something that I’ve learned early on.  A simple way to put it is I stay as flexible as possible in my business model. I have been fortunate to have made relationships in the wholesale and retail spaces to maintain my flower on shelves, but it takes a lot of imagination and trying to predict the future with very little information. So we looked at historical trends, we looked at COVID-19, was this bubble, this very interesting time where everybody was home and had some money.  We thought that maybe that was an indication of market health and that there’s no way that we could go back to 2018, but here we are in kind of a worst resurgence of that and we don’t see that getting any better maybe a little bit. But our business plan, again, is going towards extreme optimization of operations. We need to be very conscientious of our spending and what we grow.

Miller: What does that mean in terms of hiring or firing?

Clements: That’s a great question. We have a pretty robust staff. We built our business to be  well run, we have departments, post production department, cultivation departments, and all these things as we’ve grown.  And so that’s been really difficult for us. So we’ve had to slim our post production staff just slightly. However, we have a good community of employees and we always pull them back temporarily because the truth is that once you stop producing something, usually the market demand will come back for it, so we have to stay flexible so we’ll bring them back temporarily and have temporary layoffs.  But the truth is that it just costs what it costs to grow the crop. And so you need people on the ground, you need farmers out there in the field. We just have to maintain it all.

Miller: Ben, what about you, have you had issues with labor either not having too many people that you can’t afford to pay or not being able to get enough people to work the shifts you need?

Nastoff: Well, we haven’t really had a hard time finding people, we’ve got a pretty  pretty solid core group of people. We have seen a bit of turnover, but luckily we’ve been able to maintain most of our crew.

Miller: Finally, Jessica, Willamette Week had something that caught my eye yesterday when they had an article about the price drop for cannabis. They said that cannabis growers, no matter how difficult it is, that what you’re going through, you’re in a better position than hemp growers. They said in 2019, a pound of hemp biomass went for $43 and late last year I was down to $1.50. What happened?

Clements: That’s a good question. The green rush with hemp happened. I live in a very agricultural area and I think it was  2018 and 2019 when federally hemp became an agriculturally-recognized crop. Every single property in my area was the hemp field that wasn’t OLCC licensed. For old farmers who felt that they could rent their land to a hemp farmer and make more money per acre than maybe growing corn or beans or whatever their crop was at that time or maybe it was a pasture all went to hemp. So their oversupply far outpaced our oversupply in the state. Even with national exposure where they can actually cross state lines and sell their goods.

Miller: Nevertheless, it was still way too much in terms of demand.

Clements: It was incredible. And there’s a lot of waste, there was a lot of failure on those farms as well. A lot of people jumped into agriculture not actually being farmers or having any agricultural background and so it was a bit chaotic. I think the market again, to use that word, it’s not stable. It wasn’t stable still. Maybe still it sounds like.

Miller: Jessica Clements and Ben Nastoff, thanks so much. And best of luck to both of you.

Clements: Thank you.

Nastoff: Thank you.

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