A call for Cultivators:
When Supply Can’t Keep up With Demand

The Role of Legal Cultivators and the Economics of Cannabis

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As Boston’s WBUR, Cannabiz Media, and others have recently reported, across the United States and Canada, legal cannabis dispensaries grapple with volatile supply chains while the black market for marijuana continues to thrive.

It’s been a little over one year since the first recreational cannabis dispensaries opened in Massachusetts, and the same story holds true here in the Bay State: demand far outpaces supply. Cultivators and dispensaries were prepared and had adequate supplies when the medical marijuana market first opened. But as recreational dispensaries went online in 2019, these same suppliers and retailers were caught flatfooted and unable to keep up with customer demand.

Sustained growth rates in the demand for legal cannabis looks like a trend that’s set to stay on track in 2020 as more recreational dispensaries open in Boston, Brockton, Salem, and in other densely populated areas throughout the state. As travel times to get to these new dispensaries decrease, demand could soar to higher than anticipated levels, even after accounting for potential increases in demand being met on black market.

To cope with demand and ensure that medical customers’ needs are met, dispensaries are limiting the amounts of cannabis and cannabis-infused products that retail customers can purchase per visit to one ounce or less, per state law—further proof that demand has outstripped supply.

Other factors bottlenecking the cannabis supply chain include a lack of testing laboratories (there are currently only two licensed cannabis testing labs in the entire Commonwealth). All cannabis products sold in Massachusetts must by law be tested for potency as well as harmful substances including mold, pathogens, pesticides, bacteria, and yeast.

A vaping ban in the fall of 2019 further impacted already diminished supplies, as an estimated 20-30 percent of legal purchases in Massachusetts were sales of vape cartridges and other vape-related products and accessories. Some of these customers went to the black market to buy illegal vapes, e-cigarettes and vape cartridges, while others switched to legally purchasing flower and edibles, further straining supplies on the legal cannabis market.

Looking for the next best move in Cannabis? Consider a cultivation (and manufacturing) facility.

Step 1: Evaluate your cannabis plan:

  • Who are your target customers and how will you reach them?
  • What marketing channels will you use and how will you promote your business?
  • Who will be on your executive team – and can they demonstrate proven experience and diversity?
  • How will you recruit and retain top talent?
  • What are the state-mandated management and operations details that support a successful cannabis operation?
  • Do you have a realistic and detailed financial plan for long-term funding and investment?

Next is Step 2: Getting buy-in from your potential host community is critical to your cannabis business’ success:

  • Who are the key players in your host community – elected and appointed officials, community leaders and neighborhood groups, etc. – who will have the final say over whether or not you open for business?
  • What are the necessary local zoning rules and regulations, and host community agreement terms?
  • What’s your community outreach plan, for the immediate future and over the long term?
  • Who will you work with when any inevitable issues arise?

And last, Step 3: Create a winning application and become operational:

  • Combine the above two steps and include critical knowledge of state requirements and compliance specific to licensing.
  • Add strategic and project management to keep your project on budget and on track with investor and state deadlines.
  • Work with a partner that can take you through the application process, the subsequent review and state inspection phases, and who can help you get ready for the first day of operations and opening the doors for business.

In cannabis, it only pays to plan ahead. Effective strategies and airtight plans will separate cannabis industry winners from losers, especially in untested, newer legal cannabis recreational and medical markets.

There is an urgent need for cannabis cultivators. Stratacann can help cannabis investors and entrepreneurs enter the legal cannabis cultivation space and get up and running with a targeted plan of action. Contact Stratacann today to start a conversation.

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Questions? We’re here to help. Feel free to leave a comment below or contact us for more information.