Marijuana retailers are in the driver’s seat now

By Colette Thomas

When Washington’s recreational marijuana industry was unveiled to the public on July 8, 2014, the demand was high and the supply was very low. Initially, retailers were frantically contacting licensed processors to secure product. Some were successful and able to open with a minimal amount of product. However, shortly thereafter, they were forced to close their doors until another delivery arrived. Wholesale prices were as high as $15 per gram, and retailers had no choice but to pay the exorbitantly high prices. As we all know, closed doors do not generate revenue.

Now, the tables have drastically turned. Many processors are currently making desperate attempts to get their product on the shelves. The Washington State Liquor Control Board intends to have 334 licensed retail stores across the state, but so far, less than 80 have currently opened. The amount of licensed producer/processors has exceeded the retail shelf space.

As stores receive their license, they are eager to purchase product for their grand opening as soon as possible. Several have purchased five to 10 pounds of whatever they can get their hands on, not realizing that prices have substantially dropped.

With product being purchased well above market price, the consumer’s wallet suffers. This is a difficult position to be in, when the store down the street might be selling the exact product for much less. The store with the lower price was able to purchase its product from the vendor at a later date, much cheaper. Inevitably, this makes it very difficult for the higher-priced store to turn product.

I have spoken to several buyers for retail stores, inquiring about which factors are most significant when negotiating a sale with a processor.

After an initial phone conversation or face-to-face meet and greet, most preferred further communication via email. The email should include photos and a list of available products, full test results, price per gram, and photos of the company’s packaging. They also expressed the importance of the company’s representation, and if the product was grown indoor or outdoor. If you are unable to compete in any of those categories, you may find yourself struggling.

One factor that I continue to see being overlooked from producer/processors is that they are not considering the importance of networking. Before they know it, they are harvesting their first crop with no idea of who they will sell to. As demanding as it is to build a business, be mindful that the hustle will not end until your product is delivered to a store.  Most retailers already have a list of their preferred suppliers that they have established strong relationships with and will continue ordering regularly from. Aside from those, they seem to be placing minimum orders from newly licensed processors.

Inventory is readily available and the market has become much more aggressive. I anticipate it being a rollercoaster for quite some time.

Colette Thomas is a partner of Recreational Marijuana Management, which provides consulting services for I-502 retailers on licensing and compliance. RMM has assisted multiple retailers pass final inspection and open for business.