12 ms·

Legal Marijuana Isn’t the Boon Small Businesses Thought It Would Be

94 points by matt4077 9y ago

Chardok 9y ago
This is interesting for the fact of watching a black market item go to retail and the expectations of "street" price versus actual market price might have been just too high. There will certainly be a niche market for gourmet, organic, homegrown and cared for buds, but for the remainder of products: oils, waxes, edibles, infusions - you are not going to notice the difference between a small business and a larger growing operation except on price. It seems rather obvious when you think about it though. I would compare cannabis to produce rather than beer/wine/spirits, in the sense that your small growers are going to have a tough time competing with giant farm operations, and will really have to differentiate themselves in specific ways to actually make it worth while.
- walrus01 9y ago
  I think it is pretty similar to the boutique small volume/high-cost products sold in Whole Foods. There are still a number of small artisanal handmade soap manufacturers, and they command premium prices for what is perceived as a premium product. People buy them. People also buy giant packs of soap at Walmart. Both markets exist simultaneously. The small places will almost certainly not be able to compete in a race to the bottom on pricing with corporate entities that have the capital to spend several million on a farming facility.
wils1245 9y ago
Two things of interest that the article doesn’t go into: - Taxes on weed in CA are going to be very high, ~20%. This may drive black market sales. - Online ordering through Eaze is popular, which might drive the familiar winner take all online commerce market dynamic. A lot of people don’t care for the dispensary experience. At the end of the day, this is an agricultural product, and a commodity. It was optimistically compared with beer, but beer is made from a recipe, of which there are endless variations to try. Some heavy users care about certain strains and the like, but I have a feeling that for most people weed is weed. The new edible products are a development, but those too will be comoditized.
- stevenwoo 9y ago
  Those taxes on weed don't look bad compared to what I think is the current equivalent product with even higher taxes - cigarettes - how is the situation different in your view?
  - wils1245 9y ago
    There’s a much more robust black market already in place for marijuana than for cigarettes. Washington has all the same products and is right next door, and taxes at 3% [1]. Also at least in CA municipalities are adding their own taxes, so the distance you need to travel to enable black market arbitrage might not be much. 1 - https://dor.wa.gov/sites/default/files/legacy/Docs/Reports/2017/Marijuana_SalesTax.xlsx https://dor.wa.gov/sites/default/files/legacy/Docs/Reports/2...
    - ryanlol 9y ago
      >There’s a much more robust black market already in place for marijuana than for cigarettes Dunno, it's easier to order black market cigarettes online with a credit card than to order black market marijuana.
    - nitwit005 9y ago
      There seems to be no shortage of prosecutions for people smuggling cigarettes, or avoiding the taxes.
      - PhasmaFelis 9y ago
        I've literally never heard of a cigarette-smuggling prosecution. I don't doubt that it happens, but it's small-time. Given the option, it seems that most people would rather pay a bit more than creep around like criminals to get their fix.
        frankharv 9y ago
        Here in Virgnia they have police set up on the north side of the Chesapeake Bay Bridge Tunnel. Alot of contraband moves to NYC via US Highway 13 North and the police are pretty good at spotting smugglers. Coming out of the tunnel you are in a pinch spot and they use this area for recon. The tax on cigarettes in NYC is so high they smuggle from Virginia. Lot of guns move the same route and the NYC people keep complaining that we have weak enforcement.
itomato 9y ago
Access to the banking services other small businesses enjoy would help. I will pay tax on an 1/8th before I will subject myself to Criminal Prosection.
walrus01 9y ago
One of the things left out entirely is that WA state cannabis farmers are not yet allowed to grow outdoor under sunlight, so they're facing massive price pressure in wholesale $/gram sold to processors, but still have the huge operating costs of running indoor farms with electrical bills for lighting, lighting equipment, ventilation, climate control etc. I honestly don't understand this, since it is a lot less expensive to build a highly secure double-perimeter razorwire fence around a farm than it is to pay $4500/month electrical bills. Sunlight is free. In Canada's recently announced system, which gives a lot of control to individual provinces, BC has announced that they will allow greenhouse based farms.
- c256 9y ago
  I think (speculation based on some light reading) the WA indoor/outdoor split is based on requiring a very high level of oversight and control on the growing operation — from what I understand, WA processes have per-plant requirements. Put roughly, it’s a lot harder to smuggle 5 plants out of a climate- and access-controlled building than it is to toss a bundle of foliage over a fence. I live in WA, and have since before the legalization efforts were passed. (I voted for it but do not partake, for various uninteresting reasons.) The approach here was based at least as much on trying to slowly open small, controlled ports in the dam as it was trying to create a viable business opportunity. The idea seems to be “there’s enough demand for a boom now either way, and we can open up later more easily than we can close down.” Honestly, bitcoin miners using super-cheap electricity might be a greater concern for the government, at the moment.
- jayd16 9y ago
  A fence only matters if you have a guard on patrol and that easily offsets the electricity cost.
pravda 9y ago
Holy guacamole those weed prices are off the scales! $7.50 a gram? Weed should cost about the same amount as catnip. I can buy 4 oz of catnip for $8 on eBay. That's over 100g, about 8 cents a gram.
- Synaesthesia 9y ago
  It should maybe but it doesn’t.
- mrob 9y ago
  Catnip is sold as leaves and stems, but marijuana is usually sold as the flowers. The percentage waste is much higher. And catnip does not require careful segregation of male and female plants to avoid unwanted seed production.
- teach 9y ago
  Catnip and marijuana are different enough that I wouldn't expect them to cost the same. However, I don't see why it wouldn't be similar to growing bittering hops like the ones used by beer homebrewers. I can buy a pound of "Mosaic" hops -- 450 grams -- for $30 at my local homebrew supply store. That's less than 7 cents per gram....
- sporkologist 9y ago
  Weed "should" be mandatory for every citizen, supplied free from the Government.
- GordonS 9y ago
  Black market prices in the UK are around $14/g for weed, so these prices seem great from the other side of the pond! What's with the catnip comparison?
jchook 9y ago
If you ask me, this "slow roll-out" of legal cannabis in the United States has been planned and directed entirely by big business the entire time.
- Animats 9y ago
  Maybe it's a plot to make the lower classes more passive so they don't revolt. I've been amazed to see the GOP reverse course on this.
  - adventured 9y ago
    The GOP largely reversed course because of the obvious reason: their voters have changed their minds about marijuana over the last two decades. Opinion polls among GOP voters from the early 1990s to now, tell that story. It's the same reason the GOP is gradually shifting its mindset on how to deal with opioid addiction (incarceration vs treatment, decriminalization, lessened criminalization, etc). GOP voting districts are getting hammered by it. It has become personal. It's likely everyone living in a GOP-dominated area, knows someone who is dealing with or has dealt with opioid addiction. There are now millions of opioid addicts in GOP voting districts in a given five year time span.
  - mythrwy 9y ago
    Plenty of Democrats have "reversed course" as well. I think Hillary was against legalizing the herb wasn't she? Did she ever reverse position? Politicians are just politicians for the most part. Whatever they think will get them in office.
    - Synaesthesia 9y ago
      She’s always been against legalization. Still is AFAIK.
StanislavPetrov 9y ago
That's because what we need is deregulation of cannabis, not "legalization". You need only look at the massive tome of over 200 pages that California has proposed to regulate recreational marijuana starting in 2018 to see what the issue is. Laws and regulations have their place in society to a certain degree. Our country has gone way, way overboard as far as laws and regulations are concerned. This massive over-litigation on every level acts as a massive drain on our resources, our economy, and our society as a whole. Any regulations "needed" for cannabis should be able to fit on a single sheet of paper - but we would be far better off if the government had no role at all. The burdensome, poorly-written, oft-conflicting tangle of regulations written by unintelligent politicians at the behest of their wealthy donors do far more harm than good in most cases, and certainly as it regards cannabis. It isn't some sort of an accident that startup costs for regulatory compliance are massive - that's the whole reason for their existence. We are $21 trillion dollars and debt on the federal level and saturated with even more debt on every level from state to county to village. Our bridges and roads are falling apart, our pensions are underfunded and every year more Americans slide into poverty. Not only is the nanny state a terrible idea, but its an idea that we no longer afford - especially when the nanny is a corrupt Wall Street crony.
shams93 9y ago
Well for growers you can get better quality on a smaller scale so the grow side of the business will always have a door open for people who can grow high quality medicines.
topshelfdata 9y ago
Hi folks, I'm one of the founders of https://www.topshelfdata.com https://www.topshelfdata.com, the site that provided most of the data used in the article. Let me know if you have any questions related to the data that I can answer (it may take a few hours since I am about to hit the sack). Related: here's our Show HN post that was on the front page of HN earlier this year. https://news.ycombinator.com/item?id=13767772 https://news.ycombinator.com/item?id=13767772
skimaskninja87 9y ago
Easy answer.... Squares don't know how to sell weed. It's been so underground for so long, walking in a store or searching online comparing prices is both a foreign and weird process. These shops may need to recruit some real hustlers. No different than hiring a sales staff.
- draw_down 9y ago
  The shit sells itself. And there are plenty of such stores already in existence in nearby states to crib from.
featherverse 9y ago
This is the consequence of the United States' governments and citizenry refusing to move on reform in a reasonable timeframe. While citizens are fighting against the insane hordes for legalization on a state by state level, corporations are starting operations in states where it is already legal, because they have the capital to do so. By the time weed is legal in all 50 states, the marketplace will be completely locked down by giant corporations. What I'm saying is you people are fools. You lack foresight and you dig your own graves and now you're whining about it. Maybe if everyone would start using their critical thinking skills a bit more instead of crying about how I'm being hostile or rude or whatever you'd see I'm right and what you all needed is a kick in your collective asses. I want whats best for everyone, but the people don't listen to me, and they treat me like the problem when the real problem is themselves. shrug For those of you who aren't taking irrational personal offense at my words, heed this: All legalization MUST include provisions that allow citizens to grow their own pot. This is the only victory we'll have against the corporations. They're going to steal the marketplace, so be it, but if we can grow our own then it won't matter.

94 points by matt4077 9y ago

This is interesting for the fact of watching a black market item go to retail and the expectations of "street" price versus actual market price might have been just too high. There will certainly be a niche market for gourmet, organic, homegrown and cared for buds, but for the remainder of products: oils, waxes, edibles, infusions - you are not going to notice the difference between a small business and a larger growing operation except on price. It seems rather obvious when you think about it though. I would compare cannabis to produce rather than beer/wine/spirits, in the sense that your small growers are going to have a tough time competing with giant farm operations, and will really have to differentiate themselves in specific ways to actually make it worth while.

walrus01 9y ago
I think it is pretty similar to the boutique small volume/high-cost products sold in Whole Foods. There are still a number of small artisanal handmade soap manufacturers, and they command premium prices for what is perceived as a premium product. People buy them. People also buy giant packs of soap at Walmart. Both markets exist simultaneously. The small places will almost certainly not be able to compete in a race to the bottom on pricing with corporate entities that have the capital to spend several million on a farming facility.

wils1245 9y ago

Two things of interest that the article doesn’t go into: - Taxes on weed in CA are going to be very high, ~20%. This may drive black market sales. - Online ordering through Eaze is popular, which might drive the familiar winner take all online commerce market dynamic. A lot of people don’t care for the dispensary experience. At the end of the day, this is an agricultural product, and a commodity. It was optimistically compared with beer, but beer is made from a recipe, of which there are endless variations to try. Some heavy users care about certain strains and the like, but I have a feeling that for most people weed is weed. The new edible products are a development, but those too will be comoditized.

stevenwoo 9y ago
Those taxes on weed don't look bad compared to what I think is the current equivalent product with even higher taxes - cigarettes - how is the situation different in your view?
- wils1245 9y ago
  There’s a much more robust black market already in place for marijuana than for cigarettes. Washington has all the same products and is right next door, and taxes at 3% [1]. Also at least in CA municipalities are adding their own taxes, so the distance you need to travel to enable black market arbitrage might not be much. 1 - https://dor.wa.gov/sites/default/files/legacy/Docs/Reports/2017/Marijuana_SalesTax.xlsx https://dor.wa.gov/sites/default/files/legacy/Docs/Reports/2...
  - ryanlol 9y ago
    >There’s a much more robust black market already in place for marijuana than for cigarettes Dunno, it's easier to order black market cigarettes online with a credit card than to order black market marijuana.
  - nitwit005 9y ago
    There seems to be no shortage of prosecutions for people smuggling cigarettes, or avoiding the taxes.
    - PhasmaFelis 9y ago
      I've literally never heard of a cigarette-smuggling prosecution. I don't doubt that it happens, but it's small-time. Given the option, it seems that most people would rather pay a bit more than creep around like criminals to get their fix.
      - frankharv 9y ago
        Here in Virgnia they have police set up on the north side of the Chesapeake Bay Bridge Tunnel. Alot of contraband moves to NYC via US Highway 13 North and the police are pretty good at spotting smugglers. Coming out of the tunnel you are in a pinch spot and they use this area for recon. The tax on cigarettes in NYC is so high they smuggle from Virginia. Lot of guns move the same route and the NYC people keep complaining that we have weak enforcement.

itomato 9y ago

Access to the banking services other small businesses enjoy would help. I will pay tax on an 1/8th before I will subject myself to Criminal Prosection.

walrus01 9y ago

One of the things left out entirely is that WA state cannabis farmers are not yet allowed to grow outdoor under sunlight, so they're facing massive price pressure in wholesale $/gram sold to processors, but still have the huge operating costs of running indoor farms with electrical bills for lighting, lighting equipment, ventilation, climate control etc. I honestly don't understand this, since it is a lot less expensive to build a highly secure double-perimeter razorwire fence around a farm than it is to pay $4500/month electrical bills. Sunlight is free. In Canada's recently announced system, which gives a lot of control to individual provinces, BC has announced that they will allow greenhouse based farms.

c256 9y ago
I think (speculation based on some light reading) the WA indoor/outdoor split is based on requiring a very high level of oversight and control on the growing operation — from what I understand, WA processes have per-plant requirements. Put roughly, it’s a lot harder to smuggle 5 plants out of a climate- and access-controlled building than it is to toss a bundle of foliage over a fence. I live in WA, and have since before the legalization efforts were passed. (I voted for it but do not partake, for various uninteresting reasons.) The approach here was based at least as much on trying to slowly open small, controlled ports in the dam as it was trying to create a viable business opportunity. The idea seems to be “there’s enough demand for a boom now either way, and we can open up later more easily than we can close down.” Honestly, bitcoin miners using super-cheap electricity might be a greater concern for the government, at the moment.
jayd16 9y ago
A fence only matters if you have a guard on patrol and that easily offsets the electricity cost.

pravda 9y ago

Holy guacamole those weed prices are off the scales! $7.50 a gram? Weed should cost about the same amount as catnip. I can buy 4 oz of catnip for $8 on eBay. That's over 100g, about 8 cents a gram.

Synaesthesia 9y ago
It should maybe but it doesn’t.
mrob 9y ago
Catnip is sold as leaves and stems, but marijuana is usually sold as the flowers. The percentage waste is much higher. And catnip does not require careful segregation of male and female plants to avoid unwanted seed production.
teach 9y ago
Catnip and marijuana are different enough that I wouldn't expect them to cost the same. However, I don't see why it wouldn't be similar to growing bittering hops like the ones used by beer homebrewers. I can buy a pound of "Mosaic" hops -- 450 grams -- for $30 at my local homebrew supply store. That's less than 7 cents per gram....
sporkologist 9y ago
Weed "should" be mandatory for every citizen, supplied free from the Government.
GordonS 9y ago
Black market prices in the UK are around $14/g for weed, so these prices seem great from the other side of the pond! What's with the catnip comparison?

jchook 9y ago

If you ask me, this "slow roll-out" of legal cannabis in the United States has been planned and directed entirely by big business the entire time.

Animats 9y ago
Maybe it's a plot to make the lower classes more passive so they don't revolt. I've been amazed to see the GOP reverse course on this.
- adventured 9y ago
  The GOP largely reversed course because of the obvious reason: their voters have changed their minds about marijuana over the last two decades. Opinion polls among GOP voters from the early 1990s to now, tell that story. It's the same reason the GOP is gradually shifting its mindset on how to deal with opioid addiction (incarceration vs treatment, decriminalization, lessened criminalization, etc). GOP voting districts are getting hammered by it. It has become personal. It's likely everyone living in a GOP-dominated area, knows someone who is dealing with or has dealt with opioid addiction. There are now millions of opioid addicts in GOP voting districts in a given five year time span.
- mythrwy 9y ago
  Plenty of Democrats have "reversed course" as well. I think Hillary was against legalizing the herb wasn't she? Did she ever reverse position? Politicians are just politicians for the most part. Whatever they think will get them in office.
  - Synaesthesia 9y ago
    She’s always been against legalization. Still is AFAIK.

StanislavPetrov 9y ago

That's because what we need is deregulation of cannabis, not "legalization". You need only look at the massive tome of over 200 pages that California has proposed to regulate recreational marijuana starting in 2018 to see what the issue is. Laws and regulations have their place in society to a certain degree. Our country has gone way, way overboard as far as laws and regulations are concerned. This massive over-litigation on every level acts as a massive drain on our resources, our economy, and our society as a whole. Any regulations "needed" for cannabis should be able to fit on a single sheet of paper - but we would be far better off if the government had no role at all. The burdensome, poorly-written, oft-conflicting tangle of regulations written by unintelligent politicians at the behest of their wealthy donors do far more harm than good in most cases, and certainly as it regards cannabis. It isn't some sort of an accident that startup costs for regulatory compliance are massive - that's the whole reason for their existence. We are $21 trillion dollars and debt on the federal level and saturated with even more debt on every level from state to county to village. Our bridges and roads are falling apart, our pensions are underfunded and every year more Americans slide into poverty. Not only is the nanny state a terrible idea, but its an idea that we no longer afford - especially when the nanny is a corrupt Wall Street crony.

shams93 9y ago

Well for growers you can get better quality on a smaller scale so the grow side of the business will always have a door open for people who can grow high quality medicines.

topshelfdata 9y ago

Hi folks, I'm one of the founders of https://www.topshelfdata.com https://www.topshelfdata.com, the site that provided most of the data used in the article. Let me know if you have any questions related to the data that I can answer (it may take a few hours since I am about to hit the sack). Related: here's our Show HN post that was on the front page of HN earlier this year. https://news.ycombinator.com/item?id=13767772 https://news.ycombinator.com/item?id=13767772

skimaskninja87 9y ago

Easy answer.... Squares don't know how to sell weed. It's been so underground for so long, walking in a store or searching online comparing prices is both a foreign and weird process. These shops may need to recruit some real hustlers. No different than hiring a sales staff.

draw_down 9y ago
The shit sells itself. And there are plenty of such stores already in existence in nearby states to crib from.

featherverse 9y ago

This is the consequence of the United States' governments and citizenry refusing to move on reform in a reasonable timeframe. While citizens are fighting against the insane hordes for legalization on a state by state level, corporations are starting operations in states where it is already legal, because they have the capital to do so. By the time weed is legal in all 50 states, the marketplace will be completely locked down by giant corporations. What I'm saying is you people are fools. You lack foresight and you dig your own graves and now you're whining about it. Maybe if everyone would start using their critical thinking skills a bit more instead of crying about how I'm being hostile or rude or whatever you'd see I'm right and what you all needed is a kick in your collective asses. I want whats best for everyone, but the people don't listen to me, and they treat me like the problem when the real problem is themselves. shrug For those of you who aren't taking irrational personal offense at my words, heed this: All legalization MUST include provisions that allow citizens to grow their own pot. This is the only victory we'll have against the corporations. They're going to steal the marketplace, so be it, but if we can grow our own then it won't matter.