The following editorial was originally printed in the December 2017 issue of Marijuana Venture, on sale now.
With California’s big jump into full legalization of adult-use marijuana, I’ve been thinking about how fast things will evolve in the Golden State.
Washington and Colorado’s laws are dissimilar enough that growers have progressed at vastly different speeds. In Colorado, where vertical integration is allowed — and even encouraged — the need for cannabis cultivation methods to evolve has been retarded by laws that allow retailers to grow their own supply. Obviously, this reduction in competition is good for inefficient producers, but not so good for those who want to rapidly advance the supply side of the business.
In Washington, where retailers are not allowed to grow their own cannabis, the competition between cultivators is far more intense, resulting in a wider selection at retail and lower prices for consumers. In Washington, $5 grams are now as common as Donald Trump’s lies.
Naturally there are proponents and detractors of both approaches. In some ways, vertical integration keeps marijuana more like a mom-and-pop industry, but in the end, capitalism invariably wins in the U.S. and the most efficient producers prevail.
There are plenty of examples of artisan producers in just about every industry — think beer and wine — however, in a state as big as California, the relentless push for profits will drive production and sales. Eventually, big chains and commercial-scale producers will determine the vast majority of the business.
After watching how fast things have evolved in this industry and seeing countless mistakes and miscalculations, my advice to California growers is to be very careful. Many growers in Washington based projections of $2,500 pounds of bud. Despite what you might read in High Times, a legal marijuana retail store or processor in Washington can buy good-quality, outdoor-grown bud, fully trimmed and tested at 15%-20% THC, for 90 cents a gram or less (or about $400 a pound in five-pound lots).
Indoor-grown cannabis is going for more, but even the highest quality, “top shelf” bud is selling for $1.50 to $2.50 a gram. The rapid drop in prices shocked many, but was also predictable to others. The truth is that cannabis is actually a very simple plant to grow. Our early talks with growers were often punctuated with lines like, “We hired a master grower who won a Cannabis Cup.” Those conversations were quickly replaced by, “We fired that idiot and hired a professional with commercial agriculture experience.”
Stark reality is not something a lot of people in this industry like to hear about, but at Marijuana Venture, we’d rather speak the truth and deliver tough love than see people lose their life savings on a pipe dream. Preparation is key. If your business model is based on premium, pre-legal prices, go back to the drawing board and cut your projections by half or even two-thirds.
We heard over and over in the early days that “our weed is so good people will pay more for it.” The truth is that everyone grows “great weed,” and it doesn’t matter. In the end, it’s a supply-and-demand issue: creating a huge supply is pretty simple with a plant that grows just about everywhere and shoots up a foot a week in the summer.
So be careful with your life savings. Hire people who know commercial agriculture and real estate and consult with attorneys and accountants. Finally, I’ll finish by saying that there are plenty of happy growers in Washington, who love what they do. However, very few — if any — are getting rich, and plenty wish they’d put more thought into their business plan.
Greg James
Publisher