Shift With Seasons

In July 2022, Planet 13 co-CEO Bob Groesbeck, co-founder of arguably one of the most extravagant dispensaries in the world, headquartered in equally extravagant Las Vegas, told me that the company was “going to have to hunker down” and that he was telling his team—and advising the industry—to “mind your pennies and quarters.”

“It’s a scary time. … Unfortunately, we’re going to see some significant failures here in the near term in light of where things are going,” he said. And although economies have their cycles, this next one was looking particularly troublesome, he said, calling it “unchartered territory.”

He wasn’t the only cannabis industry executive sounding the alarm. Since that discussion, the financial landscape has grown more concerning, and many conversations the Cannabis Business Times team has had with cultivation and dispensary owners, no matter if they are from early adult-use markets like Colorado and Oregon, or medical-only Ohio and Pennsylvania, or newer programs in Michigan and Massachusetts, have revealed it’s a tough time, and many businesses are struggling.

Smaller companies are being acquired or going out of business. Multistate operators are closing dispensaries, laying off employees and exiting markets. The “significant failures” are happening, and though each market has its nuances, we’re hearing about similar challenges in many states: price compression largely due to oversupply to meet the demand surge during the COVID-19 pandemic, vendors not paying bills, lack of banking support, high taxes without the usual write-offs businesses are afforded, and competition from the illicit market and unregulated, hemp-derived products. Just to name a few.

For the past several months, CBT editors have been publishing articles with conversations about the cause and ideas for how to weather the economic downturn, and excerpts from dispatches from Massachusetts, Pennsylvania, Michigan and Colorado comprise the cover story. University of California, Davis economists and authors of the book “Can Legal Weed Win? The Blunt Realities of Cannabis Economics” also weigh in with their theories, including how easing regulations could help operators better compete with legacy suppliers.

Permitting interstate commerce is another proposed solution, and an examination of how that might play out in the U.S. is here.

Though it’s not clear exactly how long this will last or if federal policy will change to improve the financial outlook for the industry, a closer look at wholesale pricing trends in five adult-use state markets during the past few years serves as a reminder that we’ve been here before. In 2019, before the pandemic hit, wholesale cannabis prices were sliding in many places. Then many operators had to pivot, expand production and reinvent themselves virtually overnight to serve customers and patients in completely new ways in 2020 and 2021. And they did.

Now, challenges have shifted once again. But we’re also hearing that customers are not dwindling, and although many may be chasing the lowest prices now, thinking about how to increase loyalty is always important. It won’t be this way forever, and there are many companies silencing the noise, zeroing in on what matters most, dialing in efficiencies and bolstering their brands.

Tough times don’t last. They change, and evolving with those shifting seasons is the best that can be done.