- BDS Analytics, a company that concentrates on intelligence, analysis and research of the legal cannabis market, developed a consumer price index for the substance that went live in December. This index — intended to benchmark legal prices — includes data on how much consumers are paying for cannabis and related products in Arizona, California, Colorado, Oregon and Washington, which constitute more than half of all legal U.S. sales.
- The index includes data from more than 1 billion transactions, according to a company statement. The baseline that prices are compared with is sales from January 2018 and the index is updated monthly.
- "Every business in the cannabis industry is making assumptions about the current and future retail prices of cannabis products," Roy Bingham, CEO and co-founder of BDS Analytics, said in a statement. "After years of capturing and processing this data, we have decided to remove all of the guesswork for both businesses and investors by providing them with a sound basis for planning and projections."
This index is more evidence that cannabis is breaking into legitimacy. The federal government measures CPI for average food, housing, medical care, transportation and energy — calculations that determine cost of living and can serve as larger economic indicators. CPI data is also collected for noncontroversial food items like chicken and soybeans to help producers, manufacturers and retailers know what the food is worth.
Creating a cannabis CPI means that the substance has reached a critical point where there are enough transactions to measure pricing trends. But it also means that there is an audience for this data. A large enough number of manufacturers are interested in developing cannabis products for the information to be useful. And while the CPI includes all forms of cannabis products — both edible and inhaled, and those derived from marijuana and hemp — it has valuable insights for food and beverage manufacturers.
According to CPI data from November — the most recent month available — edible cannabis prices are increasing thanks to the nascent CBD trend. Items with CBD, a non-psychoactive cannabis compound that has been known to help with relaxation, make up a quarter of cannabis edibles, up from 17% last January. And when CBD is added to a product, it can bring a 66% higher price than other cannabis-containing food and drink, the index states.
CBD is almost guaranteed to be huge for business. Another BDS Analytics report cited that spending on cannabis edibles is expected to grow to $4.1 billion by 2022 from $1.5 billion in 2018.
Following the recent signing of the Farm Bill, which removed hemp and its derivatives, including CBD, from the list of Schedule I controlled substances, these numbers can be expected to skyrocket. The Farm Bill opened the door for CBD to become the next big mainstream functional ingredient in food and beverage. While the Food and Drug Administration works with stakeholders to develop rules and regulations around CBD as an ingredient, food and beverage manufacturers big and small will likely be developing new functional products to debut when the marketplace opens.
Alcoholic beverage giants are in front of the trend, working on cannabis-infused drinks. Constellation Brands invested $3.9 billion in cannabis company Canopy Growth. Molson Coors formed a joint venture with Hydropothecary Corp. to make nonalcoholic, cannabis-infused beverages to sell in Canada. AB InBev and Tilray have invested $100 million in a joint venture to develop CBD and THC drinks.
With all of this action in the marketplace, a CPI will help manufacturers and retailers deem fair prices and predict performance of products to come. While prices are likely to be more volatile in the beginning, this index will also help them level out. A CPI doesn't regulate how much producers, manufacturers and retailers charge for products, but it will help control outliers and keep prices consistent. It also shows that cannabis is truly on its way to being considered as a legitimate commodity — a far cry from its previous identity as illicit drug.