Portland, Oregon could very well be the hottest cannabis market in the country.
Of course, that depends on one’s perspective.
For consumers, it’s like cannabis heaven: nearly 200 licensed retailers to choose from; highly competitive prices; a wide range of top-quality products and brands; and options to serve customers looking for either an in-store experience or straight-to-your-home delivery. There’s a style of retailer for all preferences, from the cowboy-styled Wild West Emporium to the hip-hop-themed Green Hop, from the funky Electric Lettuce to the angelic Serra. There’s high-end and low-brow; medical-minded and sheer pleasure. There are big chains, there are small chains; there are single-store standouts and mom-and-pop operators. There’s a Jayne, a Plane Jane and two Mr. Nice Guys; there’s a Treehouse, two Trees and four Five Zero Trees. Portland is a veritable cornucopia of cannabis shops.
But for the businesses themselves, it’s also probably the most competitive market in the United States — roughly one licensed marijuana retailer for every 3,200 residents. In a city with about 650,000 residents, some see the abundance of dispensaries as unsustainable. Others say it’s the free market at its finest, survival of the fittest.
By the Numbers
As one of the first states to legalize medical marijuana, Oregon has always been a hotbed for cannabis. Since 2014’s Measure 91 ushered in the adult-use era, the floodgates have opened for new and existing businesses.
The state of Oregon has granted 197 cannabis retail licenses in Portland, including delivery-only businesses without a storefront and those that have yet to open their shop. By comparison, Seattle has about 100,000 more residents, but Washington state’s limited licensing approach means there are only 55 state-approved cannabis retailers in the city.
Meanwhile, Portland has roughly the same number of licensed cannabis shops as Los Angeles with less than a quarter of its population. Two streets in Portland — Powell Boulevard and Sandy Boulevard — have more cannabis shops than the entire state of New York, a state with 20 million residents (albeit with one of the more restrictive medical-only programs in the country).
Unlike most other markets in the country, the relatively low barrier to entry and the free-market approach embraced by the state of Oregon and the city of Portland made it feasible for just about any ambitious entrepreneur to get into the cannabis game.
Staying there, however, is a bit of a different story — but that phenomenon’s not unique to cannabis; every industry sees its share of successes and failures, due to natural attrition, bad management and business mistakes, among other reasons.
But cannabis businesses also face a far greater level of regulation and need for compliance than, say, a laundromat. The Oregon Retailers of Cannabis Association (ORCA) has taken up the mantle of making sure there’s an even playing field for state-licensed marijuana companies.
“Our goal as a trade association is to reduce some of those bureaucratic hurdles everywhere we can, so it’s easier for cannabis businesses, and specifically cannabis retailers, to keep the money they work so hard to earn,” ORCA deputy director Jesse Bontecou says, adding that working toward that goal helps many of the goals of legalization, such as reducing the illicit market.
John Widmer recognizes the cutthroat level of competition in the area, but says he appreciates the free-market approach. Widmer is the co-founder and president of retail for Kaleafa, a dispensary chain with one shop in Portland, three others in Oregon and another in Washington state.
“I don’t mind it,” he says. “I think it’s kind of great.”
Oregon is basically the opposite of the East Coast, where every state with a medical or recreational cannabis program has a highly restrictive licensing process.
“The West Coast is trying to create a level system, and I can respect that, whatever that looks like,” Widmer says.
At Your Service
Dispensaries don’t just face competition with one another. Just like those in non-cannabis categories, delivery services threaten to disrupt the entire brick-and-mortar model.
“That’s a model that Portlanders can really get behind,” says Gabe Rodriguez, a manager for Diem. Rodriguez learned the cannabis retail ropes at the company’s brick-and-mortar dispensary in Salem, before Diem launched its Portland-based delivery service in October 2017. “Not everybody wants to go to the store. A lot of people don’t want to go out and about.”
The biggest challenge for the delivery company started with getting people to go to the company’s URL. Diem invested in a “strong SEO strategy” from the very beginning, Rodriguez says. The company also used billboards around town and an outside-the-box marketing campaign with branded bicycles and signs that helped generate consumer awareness. Rodriguez says the blue bikes would be locked up for a couple days at a time in areas of the city with a lot of foot traffic.
“Word of mouth has taken us from there,” he says.
Rip City Deliveries owner Dave Fuegy says his business has grown steadily, but even as one of the few delivery-only retailers, it’s a highly competitive market.
Rather than serving the entire city of Portland, Rip City sets itself apart by being hyper local, which allows the company to deliver products faster than most people can get in their car, drive to the local dispensary, make a purchase and get back home.
With nearly 200 retailers fighting for market share, Fuegy says he doesn’t think that level of competition is sustainable.
For him, he emphasizes the convenience of delivery and works hard to develop a loyal customer base, which makes up about 70% of his sales.
“Repeat customers are the holy grail,” he says.
Rather than trying to be the cheapest retailer in town, John Widmer of Kaleafa says he doesn’t pay too much attention to what’s going on around him. Kaleafa takes the approach of drilling down on what it does best.
“From Day 1, we just focused on really good customer service,” Widmer says. “I try to put my head down and find what I think are the best value products for our consumer.”
Kaleafa carries a wide selection of products — more than a hundred varieties of shatter, for example.
“By having lot of price points and a lot of variety, you can kind of neutralize the amount of competition,” Widmer says.
However, he has noticed the saturated market in Oregon has affected the company’s ability to raise capital for future growth. He says this issue has come up a lot in conversations with prospective outside investors.
“There’s no question that the sheer valuation on businesses in Oregon are depressed compared to other markets, just based on what’s going on in the market,” he says.
But not all investors are shying away from the Oregon market, or more specifically, the cannabis retail minefield of Portland.
Stem Holdings, a publicly traded company based in Florida, recently acquired the parent company of TJ’s on Powell, a dispensary in Portland, among other brands. Even with 190-plus competitors, the high-traffic location was a valuable asset for the growing company that already owns state-of-the-art cultivation facilities.
“It is strategic for our company to have a retail presence in Portland, the state’s largest and most populous city,” says Adam Berk, CEO of Stem Holdings.