When Will The Oregon Cannabis Industry 'plateau' ???

[Trixxi]

I would love to see an open discussion on this concept: saturation of cannabis in the marketplace. What do you guys think will happen as the future progresses? Will there be more cannabis dispensaries or less? Will it be a survival of the fittest? Will cannabis prices drop incredibly low as the market is inundated with a massive amount of product?

Based on my experience of interviewing and working in multiple cannabis grows in Clackamas, Marion and Multnomah counties, I foresee that the fall harvest of 2017 is going to make the industry plateau. Prices will drop dramatically as literally hundreds of legal cannabis farms who have been approved begin distributing their flowers to the open marketplace. This will be a boon for wholesale shops who can get the flowers at a reduced price (competitive market) and then sell the flowers at a lower price for the consumer.

This will not be the boon that the growers were expected, as they have been investing their own personal time and finances into these initial boom grows, only to have their end product compromised by an inundated marketplace saturated with cannabis. Will profits be made this first season? For growers, some but not all will make a profit. For dispensaries, some but not all will make a profit.

I may be wrong and I would love to see a discussion about this concept, from Oregonians and others in other legal states with an active marijuana marketplace.

 

[Ignignokt]

This is fundamentally an economic question - rather resembling 'Peak Oil'. There are macro and micro aspects to your conjecture that lack insight to the 'other' market that make the outcome more opaque than you allude to in your analysis.

You are assuming an ordered market with little or no opaque transactions that consume production. Somehow, I think that may be the fallacy in most every projection I have come across. There is no measure for what I would call the 'grey' market ( certainly 'black' in some respects ) that seems to be the safety valve in what I have seen in the California market. The prices for 'legal' pot seem to be fairly stable, and given taxation, I cannot see how the market can move much from where it is here. The product finds an outlet to elsewhere when the local prices fail to meet expectations. I have yet to see a price war between dispensaries.

 

[Dan789]

I have yet to see a price war between dispensaries.

That would be something to experience, but the dispensaries have the upper hand in the equation till we start forming grower co-ops, that then could balance out the situation. imho

 

[Herb Forester]

'Peak oil' - bahahahahaa.

http://blog.dilbert.com/post/102892952926/is-economics-a-real-thing

And like Adams, I also have an economics degree :jimlad:

 

[Derf Werfler]

@Trixxi Great subject to bring up!

I do not have a degree in economics, so I am unqualified to make a professional projection. All I can share are personal thoughts and hopes.

I first considered getting into the producer end of the business in late 2015. I was living in the East side of the state, where dang near every county and municipality voted NO on measure 91. Within a 100 radius around me was all No-Ville. I weighed the thoughts of moving to the west side of the state and start a grow, or looking for a different business venture in the vast redneck Mars like mental wasteland of Eastern Oregon.

I opted to move and seek out a foothold in this new business. This would take some time to find the right place, at the right price, that I could afford. During this time I knew that those pioneers already established on the West side would be able to jump in and get a decent foothold in the market. They would be able to supply eager retail owners with their products, and get themselves established as reputable quality growers.

It was also easy to imagine that there would be many others that, like myself, would take some time to get established while the early birds gobbled up the worms. It was also no stretch of the imagination to determine that as more growers came on line, the market would indeed hit this plateau that you now write about. "Supply and Demand" theory, correct? There are only so many people that consume our product. Again, not being Economics scholar, it does not take a college education to predict that at some point the market would become glutted. Just like the wheat and hay farmers, many growers may possibly hold on to their crops because of the markets ever lowering price. Hold and wait, and hope for better days ahead.

It is my "guess" that some growers that borrowed money from family and friends will be in a pinch to pay that money back. Either they will be forced to sell at ever lower profit margins, or even a loss, or risk losing the whole tamale. Losing their friends and family money will be the worst option, so possibly they will stay in the game long enough to hopefully pay them back, and then fold due to lack of profit margins enjoyed by those that got in during "The Good Old Days." Many possible scenarios come to mind as people try to claw out some profit in this trade.

I also feel that when the Rules were first drawn up, the Oregon Residency 2 year requirement was a good plus to help out resident growers. I was disappointed when that requirement was kaboshed. Disappointed in "The Powers That Be", not in those entrepreneurs that then came to seek out opportunity.

Me personally, I feel I have taken way too long get into the mix, but I am still going for it. I am not looking for a million dollar a month net income. My little grow is intended as personal enjoyment with enough income to pay for my ObamaCare and beer. It will keep me busy and active instead of sitting on the couch, watching reruns of Oprah and Gilligan's Island. :)

I do regret in not yet having paid enough attention to whom I will actually be selling my product to. I keep hearing stories that growers are already sitting on their product, they have nobody to sell to. It seems the glut plateau has already hit. I have spoken to my wise personal coach, and she says not to sweat it and that I can just smoke it all myself and give it away to friends and watch my goals go up in smoke, all puns intended. She is pretty damn wise but kinda casual on our finances. Her name is "Nipper" and she is my 18 month old Boxer companion. :)

I guess we can keep our eyes on fellow legal states that have blazed the trail ahead of us. Perhaps they, and experienced Oregon pioneers will chip in with comments to your question.

@Dan789 I agree and am interested in what forming co-ops can do.

@Herb Forester I read your Dilbert article. I may have to go see a Chiropractor! This afternoon I am going in to see my Acupuncturist, maybe I will check with her first. :)

Peace and Good Green Vibes to all!!!

Derf

 

[Herb Forester]

In all seriousness, Adams' lessons on systems vs. goals are worth a look for anyone seeking an entrepreneurial edge. @Derf is obviously a systems thinker. I'd be just another sob story had I stayed on my initial path into this. But after numerous failures due to faulty reasoning and poor choices, I switched my approach and ended up with a much different 'job' than planned.

Fwiw @Trixxi your other thread about industry careers echoes the beginnings of a smart "talent stack", which Adams demonstrates at length: http://www.powells.com/book/how-to-...ig-kind-of-the-story-of-my-life-9781591847748 (and at the blog linked above)

 

[MIMedGrower]

This is fundamentally an economic question - rather resembling 'Peak Oil'. There are macro and micro aspects to your conjecture that lack insight to the 'other' market that make the outcome more opaque than you allude to in your analysis.

You are assuming an ordered market with little or no opaque transactions that consume production. Somehow, I think that may be the fallacy in most every projection I have come across. There is no measure for what I would call the 'grey' market ( certainly 'black' in some respects ) that seems to be the safety valve in what I have seen in the California market. The prices for 'legal' pot seem to be fairly stable, and given taxation, I cannot see how the market can move much from where it is here. The product finds an outlet to elsewhere when the local prices fail to meet expectations. I have yet to see a price war between dispensaries.

We have had price wars in dispensaries in Michigan for years. And now weed is cheaper all around as a result.

They advertised prices and then a competitor ran a special and then..........

 

[MIMedGrower]

And on the other side of the coin. There are only half as many registered caregivers than 4 years ago which says to me that many could not get the job done. And lost their investments.

I know of a few families that got hurt investing in a larger Grow pretending it would be easy money.

 

[Ignignokt]

Indeed - this is farming. Farmers have crop losses and blights. And you are not competing with a mexican dirt farmer and the associated cartel. Nope, there are fine high quality established producers that have their game down, know when to direct a crop to the concentrates processor and when to ship flower. Anymore in my market, any free cash is going to branding and real marketing spends. We have tourism developing - fer christ sakes, there is a group here that bought a former winery to chase that thread. Lots of folks chasing the new gold here. And yes, there will be two-buck chuck (Charles Shaw made out on that). I figure that will come from Adelanto, Ca. The margin here is in boutique product. Personally, I'd like to see entire (12-24") cured colas of my favorites encased in a glass bottle, to be opened on special occassion. I may do that with some of my better grows.

An important thing to keep in mind is that the nature of the business (as with most crops) is transaction based, rather than relationships for new players. Just because you have something to offer does not mean there is a willing, waiting buyer for that particular product. For most grow enterprises with real costs (power, etc) it is actually pretty easy to fail to the point of insolvency.

 

[Ignignokt]

They advertised prices and then a competitor ran a special and then..........

markets experiment, usually with what they already know. Small markets can actually be affected like that, although buyers eventually figure out what they are willing to pay for a particular value, vendors are not necessarily selling the same, exact product. In larger markets, supplies are relatively limited for specific items and then price becomes rather inflexible as there are many buyers at all price and or value points.

 

[Ignignokt]

I may find out for myself. I just bought some commercial property in Oregon. Wow, folks are really nice there - but they drive really slow like everyone is tripping. I know the look. That will take some adjustment on my part perhaps.

Nice thing is... I get to design from scratch there. And I found a cannabis friendly realtor. The adventure begins.

I went to the local High Times thingy and indeed - all the spare change is going to marketing. The thing that surprised me were the number of farms represented that seemed to be attempting to go vertical or somesuch. The state laws in California discourage that to some degree - but we have a lot that is discouraged in California that has cash run-rates in the millions to billions.

Economics are mostly poorly calculated observations against vague data. It is seeing through the glass, darkly. However I find it more rewarding than poker.

 

[frebo]

I may find out for myself. I just bought some commercial property in Oregon. Wow, folks are really nice there - but they drive really slow like everyone is tripping. I know the look. That will take some adjustment on my part perhaps.

Nice thing is... I get to design from scratch there. And I found a cannabis friendly realtor. The adventure begins.

I went to the local High Times thingy and indeed - all the spare change is going to marketing. The thing that surprised me were the number of farms represented that seemed to be attempting to go vertical or somesuch. The state laws in California discourage that to some degree - but we have a lot that is discouraged in California that has cash run-rates in the millions to billions.

Economics are mostly poorly calculated observations against vague data. It is seeing through the glass, darkly. However I find it more rewarding than poker.

How’s Oregon working out for you? It seems like, where I am, that most growers are loaded with inventory and dispensaries are giving $4 gram specials. It’s over!!!!
Big business has taken our little “cottage pharm” dream away. It’s sad.

 

[Madbud]

Doesnt look like wineries have ever plateaued:

 

[GT21]

Doesnt look like wineries have ever plateaued:

Neither has good quality crystal meth.

 

[1diesel1]

Neither has good quality crystal meth.

It has in forest grove. They just got to stop blowing up there houses.

 

[GT21]

It has in forest grove. They just got to stop blowing up there houses.

Haha... Well pot heads blow themselves up too i guess...yay butane!!!

 

[Ignignokt]

How’s Oregon working out for you?

I bailed on the sales contract. The owner was sketchy, I started to see the underbelly of the place and well, it was a sorta nice thought while it lasted. For awhile, I thought they were gonna keep the deposit. The desperation in that market is palpable - and the players are getting popped for shipping in fake rocks and other things that seemed clever (I'm sure) at the time.

I really miss the small grower feel that used to be common. There is a point where the farm or the brewery ( remembering Mendocino Brewing ) with the authenticity we crave becomes a victim of the mainstream search for volume. And the money is apparently made elsewhere, reminding me of the days when folks smuggled Coors beer to the east. Yes, that was a thing.

https://www.nytimes.com/1975/12/28/...ly-in-the-west-coors-beer-is-smuggled-to.html

 

[1diesel1]

I bailed on the sales contract. The owner was sketchy, I started to see the underbelly of the place and well, it was a sorta nice thought while it lasted. For awhile, I thought they were gonna keep the deposit. The desperation in that market is palpable - and the players are getting popped for shipping in fake rocks and other things that seemed clever (I'm sure) at the time.

I really miss the small grower feel that used to be common. There is a point where the farm or the brewery ( remembering Mendocino Brewing ) with the authenticity we crave becomes a victim of the mainstream search for volume. And the money is apparently made elsewhere, reminding me of the days when folks smuggled Coors beer to the east. Yes, that was a thing.

https://www.nytimes.com/1975/12/28/...ly-in-the-west-coors-beer-is-smuggled-to.html

Got 2.5 acres in Washington county. Was going to go OLCC legal. Have a friend that is working for a large OD grow. Had him stop by with there main guy he schooled me on the process. If you are not connected to the upper OLCC good luck cuss your shit out of luck. funny, I remember Coors not being sold, we just shoulder tapped for beer, beer. White can that just had black bold letters BEER. Lol. Memories

 

[DGP]

What is perplexing to me is I stop in at several of the local dispensaries often to see what is selling and they have shit quality that has no apparent "bag appeal" which I always hear is so important and it is terrible to smoke. I bought a few grams here and there and garbage it is. Also, they are frequently so low on product it looks they are selling out so they can close. Why are the shelves so bare around the West-side of Portland. That doesn't seem to compute if it is a dispensary buyers market. If that was the case they would be selective on what they buy and they would get it at a low cost so their shelves should be stock with gourmet product.

Dee

 

[Ignignokt]

There are terrible, terrible things that can happen to fine produce after delivery to the dispensary. It isn't uncommon for the buds to be tumbled for 'house kief' and other product. If cannabis farmers were allowed to have farmer's markets, most dispensaries would close pretty quickly. It is a shame, but most are there to separate you from your cash and not a damn thing more.