No, this time I’m not referring to the Trump presidency and the enormous number of scandals, lies and incompetent nincompoops our “idiot in chief” has appointed to important positions. (Jared Kushner handling Middle East peace? What’s next, Bernie Madoff overseeing the Federal Reserve Bank?)
No, the nightmare I’m referring to is the ongoing problems sprouting up with alarming regularity in the legal cannabis space.
At the top of that list is the rapidly growing number of marijuana cultivation businesses in Washington and Oregon that are going bust. I always expected growers would have a much harder time than retailers simply because the numbers were not in their favor. However, it’s turning out to be a bloodbath. One thing that made the situation especially bad in the Northwest was that the number of growers were not restricted, and retailers often were, even if it was simply because good retail locations were much harder to find than suitable grow sites. In Washington, this led to 1,100 growers fighting to get into about 400 stores. In Oregon, it was pretty much the same, as the cultivators created a huge oversupply (I’ve heard the number was 2.5 million pounds of bud in Oregon, a state with about 3.5 million people!).
This unbalanced landscape was compounded by the fact that many growers learned to cultivate marijuana from books written by High Times authors who had zero experience in commercial farming and knew even less about management, leases, commercial irrigation systems, industrial greenhouse design and automation. In short, it’s been a slow-motion disaster as cannabis cultivators in both states violated some of the most basic laws of business. (Colorado growers fared better because of vertical integration, but their consumers lose out with high prices, crummy weed and less selection.)
My sources in California are reporting that early indications point to the same out-of-balance landscape as the Northwest; from what I’ve heard, there are now roughly 3,300 growers licensed and only about 375 stores in that state. That’s nearly a 10 to 1 ratio!
At Marijuana Venture, we’ve been unafraid to voice our opinion that commercial cultivators who relied on Cannabis Cup winners to manage their newly minted farming operations were going to have problems. This turned out to be accurate, and investors quickly dumped glorified hobbyists in favor of people who had experience running and managing a real agriculture business (you can teach them about pot later!).
Based on four years of observing and reporting on this business and, sadly, having seen good friends lose their shirts, here again are some basic recommendations that I hope will save some of our readers heartache:
– Skip traditional marijuana cultivation shows and go to Cultivate in Columbus, Ohio in July (www.cultivate18.org). It’s the largest controlled environment agriculture (CEA) trade show in North America. There are more than 700 booths, featuring all the major companies and loads of experts speaking about everything from biological controls to greenhouse design. It’s a no-brainer!
– Hire people who have experience managing real ag operations. Winning a Cannabis Cup is about as worthless as a knitted condom in the legal marijuana business.
– Get good advice for a qualified accountant or attorney. Current wholesale prices of quality bud in Washington and Oregon are now under 50 cents a gram in some cases, and retailers are flooded with $5 grams.
– Look into the CEA short courses that the University of Arizona offers (ceac.arizona.edu). They’re open to the public and several growers I know have attended and said it was an amazing learning experience.