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Dispensary owners say they're losing customers to the black market

What are your guys’ thoughts? Are you seeing sales drop off with increased legislation? Have you lost customers to “unknowns”?

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With the 20% tax in Colorado, there are some price sensitive folks who really don’t want to pay recreational prices. But for most the convenience and variety trump that factor.

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I’ve heard the same from a dispensary owner. I think we are in for a big shake down in the CA market.

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Yes and whats sad is this is happening in the states who have legalized and implemented these insane taxes and that is what is pushing the black market.

Even here in California where I’m based, I already hear consumers talking about going back to black market. That is normally the response you hear when 15-30% taxes are brought up.

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learn too adapt in current Economics or fail. every one ous trying tip get in the cannabis jackpot. most having little or no clue how. black market can provide cannabis at around 120$ a ounce. with taxes, overhead, etc. combating the dilemma your trying to retain a exceedingly ridiculous profit. . it’s not illegal Anymore it’s every where. . take a economics class

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Exactly. If you don’t want to lose to the black market, you have to be able to compete with it.

Something that might keep a customer away from purchasing off the black market is that the product from a dispensary may be more regulated as far as what was used to produce it. But even so, there are not yet a lot of regulations when it come to production. You still hear about PGRs and pesticides being found on medical grade cannabis that’s sold in a dispensary.

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Related article!

http://growersnetwork.org/market-projections/projection-2018-black-market-sales-in-ca-will-skyrocket/

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The huge problem that I have noticed is that most if not all dispensaries have been using the abundance of available product to their advantage and driving whole sale prices down so low that most wholesalers cannot even afford their cost of production. Most dispensaries are still selling $15-$20 grams and not offering anything over $1500 a pound to wholesalers. Its not a huge surprise that a lot of people slipped back to the black market .They have inadvertently created their own monster. Its more of a reckoning then them “losing”. Until the market balances out everyone is gonna lose.

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What is the average cost to produce a pound for a wholesaler? I moved to SE Colorado about 6 months ago and have seen offers on the table anywhere from $1800-2400 for quality bud on the black market. If it looks, smokes, and smells like fire, they buy (no testing, no standards, and half the guys offer to come right to your door (oh yay!))

There’s a black market for extraction as well; I’ve had a few offers extended to me to have entire harvests blast on the spot and Facebook is filled with suggestive posts of “let me turn your trim into gold.”

Personally (and opinionatedly,) I find the flower from most dispensaries here in SE Colorado to be just mediocre. Ho-hum. My first experience EVER as a consumer in a legal dispensary in Pueblo (NuVue) left me with an 1/8th of top shelf flower with SIXTEEN SEEDS in it. First time experience, tainted forever lol (and either Weedmaps only holds reviews for a few months or they removed the constructive feedback I left for them.)

Quality control is a huge issue I’m finding more than price personally.

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About 2 years ago we were getting solid 2400-2200/pound.Two to four years prior to that it was 4000-3000.It started to dip slowly over the past year to now about 1600 for our “top shelf”. We do drop about 20+ pounds a week, which is also a way to bargain the price down.
Between us competing with peers and the black Market the price was drivin down in Southern Cali to below production cost. Coupled with all the new testing regs, testing prices,permits,and taxes , most companies are gonna get gobbled up or drop back to black market.
We are reorganizing to lower our over all production cost, but the power always rested with Dispensaries and probably will for quite a while.
My point is that growers hearing dispensaries cry about losing money is falling on deaf ears right now.

Edit: One of my guys were just telling me they got 1800 a pound last week.My guess is that its following Jordan’s comment about quality, everything tested above 27%. It’s still losing game for us until we get production down to about $400-$500\pound. I still chuckle when people think we are making money hand over fist.

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That is quite the drop! I can only imagine how frustrating that can be to work with those numbers and trying to project a game plan going forward too! Are you noticing a trend in the wholesale price that can at least be anticipated/forecast beyond trying to cut production costs?

I grew up in North Dakota in oil country and honestly I see a lot of striking resemblances to the up’s and down’s, gains and losses of how the oil industry works (or at least how I perceive it to work) compared the cannabis industry (even the control and power.) When you say the power rests with the dispensaries, that’s the sentiment most people out in the oil patch feel about the oil companies (and those companies too complain about the regulations, taxes, etc, while pumping out record breaking profits.) To play Devil’s Advocate though, there are a lot of smaller companies that get wrapped up those blanket statements too (at least on the oil side of things,) though I’m sure the same can be said of the cannabis industry.

I think that’s a tough nut to crack to be honest, seems you’re at the mercy of those with the most money (but that’s kind of the status quo, isn’t it?) But that’s why we form together, bond, create communities and network. We were never meant to take on these challenges alone, we’re better together (until you make those millions, then the sentiment is “piss off, I’m rich!” haha I’m kidding!))

It’s great you are being proactive about it though (seriously!) I’m sure that’s a common challenge others are facing right now too; I’m curious if there will be more demand for consultants and cost reduction specialists? Would be interesting to get more perspectives on it from more commercial growers, my thought has always been if everyone is the same boat, let’s build a bigger and better boat to face the unforgiving sea!

Do you feel like $400-500/pound in production cost is achievable?

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Forecasting has been a pain in the butt, I don’t really see a way to unless your up to date with local and state regs. Most of what we run into is our buyers just don’t want as much product or they haggle my sellers down to nothing and we have to readjust rooms/strains accordingly. buying trends tend to help, lots of people down south always ask for OG strains, but when we go heavy on OG they don’t buy.Its still a guessing game at this point.
I do see value in consulting, but finding the right consultant is a task in itself.there are a lot of BS artists out there. Most people don’t have anything new to share that most experienced growers don’t already know.
Yes, I think $400-$500 a pound production costs are achievable, unfortunately it’s gonna take 100s of 1000s of dollars which most companies can’t get their hands on unless they sale their soul or super savvy.Getting investment is key, and getting the right investments is more key. We have some ideas , whether they pan out is the million dollar question,literally.

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You cannot forget to add in the cost of packaging and labeling the product on the dispensary side. Labor alone to pre-pack is very expensive. True cost to the dispensary at $1500 a lb is still around $5 to $6 a gram packaged per CO law - and avg per gram prices after discounts etc are $10 to $12. There are always higher tiers in the $15 to $17 range but is generally reserved for higher quality and more expensive wholesale or grow costs.

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I have definitely gotten better weed for a better price on the BM than I ever have from a dispensary, but I find it hard to beat the convenience. Weed dealers, in my experience, just kinda suck. Most of them are weird dudes to begin with, and I’ll gladly pay extra to not need to deal with hearing “I’m on my way” for 3 days while I wait for my weed lol. The price difference has never been so big that I would rather wait than just pay extra and go get it when I want it.

All that being said, even the “top shelf” stuff at most of the dispensaries I’ve been to has been kinda lackluster. I always go in lookin’ for big, frosty nugs and I come out with little rabbit turds or other small nugs that rarely have the frosty, virgin look to them that I remember getting back in college.

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New Cali regs have wholesalers prepackaging now with state testing labels. Dispensaries don’t have that cost anymore. We are having to package in 1/4,1/8, and grams now before it can even be sold to a state licensed dispensary.They cannot be opened or tampered with.

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lol we had a hell of a time looking for child proof resealable packaging last week. Everything was sold out!

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This is what I feel the natural evolution of things to come. States will continue to pass laws based on the plants use as a medicine. Eventually they will turn recreational. New laws will allow citizens to grow, and people will share their strains. Eventually it will become open to allow anyone to grow and/or sell cannabis like any other produce ex. tomatoes and carrots. Some of this will happen sooner in some states then others but eventually the power to grow and use your plants as you see fit will be given back to the people. It wasn’t that long ago in American history when cannabis was a free plant. But it will take a long time to get it back there.

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I think no matter where you go and what you do, in any market there is always things on the “black market” nothing will ever stop it, really. The goal through legislation was to hold accountable the honest business owner and hold them accountable to the taxation laws in accordance with their city/state.

That being said, we have had many of our “non-recreational” licensed shops just say screw it and either stay medicinal only or put their business on hold to see how the rules/laws modify over the next 3-6 months. To me, that means they have their private buyers and they are going off radar for a bit.

I can say though, my licensed Rec shops in California have almost doubled their daily income so i don’t think many consumers are caring about the taxation!

Dawne Morris
Passion Pusher
www.proteus420,com

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Black market to some, private transaction to others. Same with gun laws. The regulation nexus comes from being engaged in (their definition of) commerce. Next time you are stopped by the police for a traffic violation, tell them you are operating in private. <-- not even joking

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I agree with you. I think a lot of people are freaking out because they just aren’t use to the volatile back and forth this industry has been in for longer then the Rec and Props. Honestly, you have Sessions and Trump who are heavily backed by the prison sector and they see a large # of profit in all the arrests they could make here. there is a reason we have a sheriffs button built into our system. No need to make it easy for them.

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