I know this isn’t normal Future4200 talk, but I want to ask you guys this anyways because this board has some smart in the loop folks.
My partner and I are thinking of getting back into the retail space and putting up a licensed dispensary in SoCal. We have a good chunk of retail experience with 2 shops under out belt from 2014-2018(used prop 215 loophole). They were pretty successful and we think we can do a 3rd one even more successful. However, getting a recreational setup is very pricy.
Our main dilemma is, how will federal legalization affect dispensaries? We’re not looking to put one up for 2 years and sell it. We want to play the long game. However once federal legalization hits, what will happen to retail? Will anyone be allowed to sell? Such as liquor stores, smoke shops, CVS, Wal-Mart, 7-11, etc etc etc? Because that would kill dispensaries. Would make them obsolete. Sure some connoisseurs would still want to come in and smell and look at flower up close, but vast majority of folks wouldn’t mind one bit buying pre-packeged goods at their local gas station.
The only reason cannabis has had a high price was due to the scarcity of prohibition. If it ever becomes completely legal the price will crash further. Most of the price in the legal markets are from taxation as compared to cost of production.
I don’t see them going away from dispensaries. It will likely be up to the state as to where cannabis can be purchased. One of the biggest concerns will be keeping it out of areas like Walmart where families and more specifically children are shopping. Here in alaska they ran the bill largely the idea that they would treat cannabis like alcohol but they really don’t. It’s far more strict. I think it will stay that way.
I believe the regulation on long term will make cannabis prices more or less as tobacco was before hard regulations.
Maybe a good option is to focus the dispensary on healthcare more than recreation.
Combine products to help people depression or anxiety or sleeping or pain and so on so on.
I think it will vary from state-to-state. For example, in Virginia, you can only buy liquor in state-owned and operated “ABC stores”. In Maine, there is an entire aisle of liquor in every Wal-Mart, grocery store and gas station.
In LA specifically if you have good product you’ll do great in my opinion. Other states like Utah will be state ran facilities. California liquor stores are open late and all over. I imagine California will be the more resilient of the states to withstand changes. The underground will still thrive but convenience and well thought business should do well imo.
Anecdotal, but my uncle has lived in Long Beach for 35 years and he said the bubble is about to pop from over saturation of the dispensary market.
On a side note, visited the ONE rec dispensary in all of Upper Michigan. $620 for a half ounce of flower. I’d like to cordially invite the folks there to kiss my ass. Bought a $25 gram of their “Platinum” shit, I got better bud from a dude in a beat up toyota in P-Town VA.
I completely understand the price drop that will happen, much like what happened to the CBD industry
But I’m not concerned about that. Retail will just adjust. I’m concerned about whether or not dispensaries will become obsolete ore not. Price is not what will affect that. It will be the fact that either only dispensaries can sell product(even if it’s dirt cheap), or will everyone and their mother be able to sell product like smoke shops, gas stations etc etc
California varies greatly depending on locale, but statewide there’s only around 1.5 REC dispensaries per 100,000 people. Compare that to Oregon’s 16 per, Colorado’s 10 per, Washington’s 6+ per, etc.
My generalized thesis is: dispensary licenses are valuable now, in the medium term they will be extremely valuable, and in the long term they’ll mostly be worthless. There’s the other possibility of a federal oligopoly being gifted for certain verticals, but I’d assume consumer distribution will be left up to the states (think if California only issued 5 distribution licenses).
Sorry if I’m rambling… but on the pure business side, federal legalization also touches on the hemp cannabinoid vs MED/REC markets. Look at hemp first movers like Charlotte’s Web. They’ve only focused on hemp and have great big box retailer relationships, large scale cannabinoid biomass farms, interstate commerce, etc - all relationships and opportunities that MED/REC businesses can’t legally use obviously, but will become relevant to MED/REC when federal legalization hits.
Almost every LP+MSO is going into hemp now just as the market is crashing. This is because of the perceived profitability of hemp, but also because many cos have failed to execute and have temporarily lowered the valuation of many licenses/assets. If a proven hemp operator used their cash made from the glory years of hemp to go into MED/REC markets in 2020 I think they’d have more longterm leverage than most LPs+MSOs.
If dispensaries cant turn a profit…ya theyll be obsolete.
The only way they can’t turn a profit is if everyone will be granted permission to sell retail cannabis such as every corner store . But again, that will have nothing to do with price. No matter how cheap something is, it’s still going to need a retail outlet to get moved to the people, and you’re never going to be able to order weed online for the same reason you can’t order alcohol online.
But I guess answer is no one can predict if dispensaries will keep their monopoly on sales or of they’ll be granted to everyone. In that case, investing 1-3 million into a dispensary just seems like too high of a risk.
On a rambling side note, if everyone will be allowed to sell retail…smoke shops would see a huge surge in business…just a thought
Sorry for the delay - I’m not sure. Admittedly I’m not well versed in alcohol, but it seems that the initial successful craft brewers were fairly small in scale and then mostly acquired by larger companies and then scaled up (Dogfish acquired by Samuel Adams). Now, the newly established craft brewer space seems highly saturated, especially on the regional scale.
I think most of those first brewers attained gradual success. An interesting tidbit is that as breweries such as Dogfish were acquired for high valuations, there have been many attempts to replicate said success in countries that are desperate to emulate American culture such as China. These new companies replicated the the branding, recipes, marketing, etc of successful US craft brewers, but started at a much higher scale expecting an overnight success - most if not all have failed within 1-3 years of opening. We’ve all seen multiple terrible attempts at this in cannabis; the term “craft” cannabis even became a meme.
Overall I’d say just focus on the product, don’t try to replicate the success of other cannabis businesses or other industries. With that being said, one good example for alcohol would be Screaming Eagle Winery. They stay low scale (400-750 cases/year), and have maintained a cult following for decades.
It seems like it’s all going to come down to unique IP. With that in mind, @Roguelab is there recoverable DNA in distillate that could be used for tissue culturing? I’m leaning towards no, but better safe then sorry.