7 Reasons Why Some Cannabis Companies Are Leaving California
Hey cannabis companies, where are you going?
Recently we have seen several high profile cannabis companies leave California, the proverbial epicenter of the industry, and the question is Why? Wana has exited, and both Curaleaf and Trulieve are closing retail locations. Binske reported that sales were down 27% and estimated their cost to the consumer is almost 40% higher than the illegal market. California is unique because we have many established brands here already that new cannabis companies have a hard time penetrating the market. Combined with regulatory requirements, taxes and slotting fees to get the best placement on the shelf, makes the profit margins so slim investors and business owners are opting to pursue markets with fewer barriers to entry. Doing business in California for a cannabis company is more like doing business in multiple states, as municipal, county and State taxes and fees make it nearly impossible to create a viable business enterprise.
In my expert opinion there are several reasons why some cannabis companies are leaving California:
High taxes: California has some of the highest taxes on cannabis in the country, which can make it difficult for businesses to turn a profit.
Strict regulations: California has a complex and ever-changing regulatory environment for cannabis businesses, which can be difficult for companies to navigate and comply with.
Black market competition: Despite legalization, the black market for cannabis remains a significant problem in California, providing stiff competition for legal businesses.
High cost of doing business: The cost of doing business in California, including rent, labor, and compliance costs, can be high, making it difficult for cannabis companies to compete.
Limited access to banking: Many banks and financial institutions are still hesitant to work with cannabis companies due to federal laws, making it difficult for them to access banking services, credit and loans.
State’s oversupply: California’s cannabis market is also dealing with an oversupply of cannabis products, putting pressure on legal cannabis businesses to lower prices to compete with the black market.
Other states with more favorable cannabis laws: Some companies are choosing to relocate to other states, such as Colorado, Oregon, and Michigan, where cannabis laws are more favorable and the market is less saturated.
All of these factors combined can make it difficult for cannabis businesses to succeed in California, and some companies may find it more advantageous to relocate to other states where the environment is more favorable. However, it’s worth noting that California is still a large market with a lot of potential, and some companies may still find success there. As the industry matures, cannabis companies will be faced with the same question that all business owners must address-do we remain competitive by finding operational efficiencies, or by shocking the industry through innovation? Either way, politicians need to listen to their constituents and find more effective ways of supporting a huge opportunity for economic growth in the cannabis industry.
Comments
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Great article! It reads like something straight out of a reputable news publication. It is also evident that cannabis-related issues are not exclusive to California. States like Oregon and Colorado are also grappling with the challenges of an oversupply of legal cannabis.
I came across this report from Oregon's Liquor Control Commission that sheds light on the supply and demand dynamics:
https://www.oregon.gov/olcc/Docs/news/news_releases/2023/nr020123-MJ-Supply-Demand-Report.pdf
In 2022, the demand for legal cannabis products was 63% of supplyAdditionally, this article from The Denver Post highlights the difficulties faced by Colorado's cannabis industry:
https://www.denverpost.com/2023/05/21/colorado-cannabis-marijuana-weed-dispensaries-downturn
Colorado's cannabis industry has fallen on hard times. What does the future hold?
It delves into the issues of excessive supply, insufficient demand, declining prices, the absence of cannabis tourism, and more, which have collectively put pressure on the marijuana market.As an advocate of a free market, I appreciate the concept of buyers and sellers determining prices based solely on supply and demand. It's a system that operates with minimal government control, allowing for market forces to shape outcomes.
While this could translate to lower consumer prices, it poses a challenge for government revenue. I believe that the government's primary motivation for legalizing cannabis was to generate tax income, with little concern for the recreational consumer. With tax revenue now dwindling, it's likely that government intervention will occur to regulate supply and drive prices back up. This is a significant departure from the occasional $40.00 ounces I envisioned becoming the norm.
This situation further underscores the appeal of going off-grid and growing your own cannabis. Personally, I have no interest in having Big Brother dictate the cost or even the strain and quantity of my consumption.
Happy Growing, Shoe
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Waiting for some bud pics from bigfish?
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@Ozz feel like the seed connect kinda gave up on this forum.
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Those are awesome, hard to beat the sun for a light source.
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Last trip to the Doc. for my six month checkup, they put me on glucose and cholesterol meds and it doesn't mix with the weed. Kind of sucks, it's almost like being allergic to it kind of. Can't win no matter what you do.
