Cannabis legalization has been, for many people, a sucker’s trap. It has presented lots of opportunities to make a lot of money through growing, manufacturing, testing, distributing, delivering, and retailing cannabis products. Unfortunately, in most states, the Black Market cannabis industry was so well-established prior to legalization that the legal newcomers had an uphill battle to attract customers that had been buying from their favorite dealers for decades.
While the risk of buying illegal weed scared off plenty of customers, they were happy to line up to present their legal identification in order to buy their legal weed once it was available. The first problem that arose was lack of inventory as the crowds came from all over to buy at the few dispensaries that were open. To optimists, the cannabis industry was looking like a rocket ship of profits.
The next problem was reality. The costs of application, launch, and compliance made many cannabis businesses unprofitable, particularly if the owners had taken investor money to afford what could be easily as much as $500,000 to open a dispensary in some areas. Illegal growers and dispensaries could and did keep prices lower than the legal shops could afford and many went out of business.Couple that with the ever-changing rules and regulations. Revenue-hungry states and municipalities believed the gold-rush mentality instead of the reality of what it actually takes to nurture and grow a new industry.
And fueled by dreams of riches, many inexperienced cannabis growers, manufacturers, distributors, and retailers dove into the industry. Crops failed. Problems like poorly manufactured vape products and amateurish packaging of products hurt the supply chain and dispensaries. Black Market revenues account for as much as 80% of total industry revenues.
The time is ripe for consolidation. There still is big money waiting to come into the cannabis industry from established Black Market providers and corporations like Phillip Morris and RJ Reynolds, among others. They are waiting for weak individual owners to either give up or fail.
If you are one of those individuals struggling to keep your business going, you have two choices: either look for a way to sell out or partner with a stronger enterprise, or just keep struggling in hopes of managing to stick around until the regulation and taxation is revised enough to make revenues possible. You also will have to wait until the Black Market is shut down by law enforcement, which isn’t going to happen anytime soon. For that to happen, illegal producers will have to find it easier to turn legal than to continue to operate in the shadows. That will take a lot of realistic thinking on the part of state and municipal governments.
However, partnering with other small operators might give you the cost savings and time to wait out the needed improvements in industry regulation and control of the illegal marketplace. To do this, contact a well-connected industry leader that has been operating for at least a decade and has roots in the OG marketplace. Such consultants, like FTG Management Group, are in touch with other business owners throughout the industry who are looking to find a way to cut costs and increase business. They can place you with the right partners to fill in any gaps in what you are doing in your own operation.
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* Cultivating | Processing | Packaging | Transporting | Dispensary*
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