The price of cannabis in the US has halved. “It’s common in any market that prices will start to normalize in a couple of years, so it’s very important to prepare and operate in a business-friendly manner and to anticipate and respond to market developments,” said Will Bowden. , CEO of Locust Farms.
The Michigan-based company grows the best cannabis outdoors. Although the price has halved in its state, several circumstances have led to this state, Will explains. He is optimistic that the Michigan market will recover in the near future.
According to Will, the current situation in Michigan is normal for a new market. “In the first year, everyone experiences margins that don’t last long. Usually things normalize in the second year. That’s when more licensed companies come online and the market becomes saturated.”
As long as you run a viable business, Will believes there are plenty of businesses in the market in Michigan. “Whatever you grow in the first year will sell. But after the first year you have to organize yourself with solid business processes. You have to let the numbers tell you what to do and react to the market.”
But in Michigan, there are some variable factors contributing to the current state of the market. Will explains: “First, the state has had a stronger healthcare market for a longer time than the commercial medical market. The commercial medical market started in 2019, 2 years before the adult-use market. It’s one of the sectors. During situations like Covid or a recession, it’s very global. It was a chaotic time, not the best time to assess how the industry was going to perform as a result, and the start of the adult app was a bit cautious. Then, as Covid got a little more under control, more businesses in Michigan came online.
Will explains that something else had a big impact on Michigan. “In November 2021, when the government challenged the results of the testing laboratory, $250 million was withdrawn. Initially, everyone panicked because they were afraid of losing their revenue. But the government explained how companies would reintroduce products to the market if they met certain criteria. As a result, Everyone wanted to get rid of their product quickly and lowered their prices to speed up the sale of everything, which sent the market into a free fall when it came to the price per pound (0.45 kg) in Michigan. ) Cannabis prices normally range from $800 to $1200 per pound, but now we’re half that.”
In addition to the recall, prices would also have fallen as more suppliers came online. “One of the ways people try to survive in this competition is to sell. Let’s say you normally sell for $1000 a pound, and suddenly you drop the price to $300. In that case, you’re not talking about a discount. Period, but once you set your new price, it’s very difficult to go back to your normal price, And it’s very difficult to get your customers to buy from you.”
This is the case now in the fourth year of the commercial market in Michigan. So how will it evolve in the future? “I think it’s going to be a very challenging 18 months ahead as companies go through this period or close their doors. It’s the same in most states. However, there are other issues that every market has to deal with. For example, companies in Oregon and California are facing tax issues, but the average market in the U.S. Looking, they are all similar to the period we went through in Michigan.After clearing the first hurdles, we end up on the other side!
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