When Capitalism Meets Cannabis
nytimes.com
nytimes.com
What the people retailing pot will find is that an easily-growable agricultural commodity is subject to perfect competition and prices will be driven down to a very low level.
Applying the 'sell shovels in a gold rush' rule, I think being a medicinal-pot lawyer or consultant is probably the best way to profit from this. Each time the government gets nervous and changes laws, these people will be needed to help shop owners navigate the new laws. The shop owners themselves are facing a price-sensitive consumer, regulations and retail leases. I wouldn't be surprised if the eventual winning business model looks more like a Walgreens and less like Starbucks.
There will be something of a price floor set by virtue of cannabis potency. Already, black market cannabis when consumed efficiently is effective with dosages that cost around $1. Prices will fall, but not by 10-fold because people are willing to pay more to get high than they would for a single cigarette. A pack of cannabis cigarettes at a gas station is always going to cost more than a pack of tobacco cigarettes, because people expect to pay more for a product of sufficient strength.
Hmm, I was thinking the opposite. A fancier more "treat"-like atmosphere with higher prices and more exotic products would help to differentiate.
I guess both probably have a market.
That might depend on the regulatory constraints. From the article: "A batch of regulations known as Amendment 1284, signed by the governor on June 7, is expected to put many dispensaries out of business, eliminating the amateurs and semipros who jumped in because there was nothing to stop them, but greatly strengthening those who have the wherewithal to remain standing."
As in other industries, onerous regulations might help large companies by raising barriers to entry and hindering startups that can't afford to jump through the hoops.
That is, you can make niche highs just as you can make niche wine flavors.
Now perhaps once the major PR and ad companies get behind the concept we'll see luxury pot brands charging premium prices, and perhaps we'll even see pot snobs who look down on anyone paying less then $15 a joint. With the right marketing campaign you can sell basically anything for basically any price, so I suppose the $500 oz. will probably become a reality if pot is fully legalized, and there will no doubt be plenty of suckers lining up to buy it.
In fact, I was probably wrong when I said that legal pot won't see the same prices as high end wines. The reason we haven't seen those sorts of prices is because the semi to illegal nature of it has meant a lack of fully protected brands and trademarks and advertising. Once we have those then there will be real money to be made.
None of these applies to cultivation of pot, even the more exotic varieties. As it can be successfully grown indoors, the conditions for creating it can be created just about anywhere. There is none or very little post-processing involved and the supply chain is astonishingly short.
So I think the comparison to things like wine and coffee are incorrect, as these 'commodities' actually require exact growing conditions and post-processing to get high quality results.
A better comparison would be tomatoes. There is very little price difference between the cheapest tomato and the most expensive, highest quality, organically grown version. I'm not saying that pot is like tomatoes, just that the market conditions are closer to tomatoes than they are to wine, and so the price discrepancies are unlikely to reach the levels between a cheap bottle of no-label wine and a bottle of vintage Dom Perignon.
People who were in the game before competed against anyone who couldn't run a small time dry cleaning shop. They were in it because it was illegal and those good at business was instead running legal businesses.
IANAL, however, just an idealist, forever at odds with the Real World™.
An aggressive attorney general could therefore decide to prosecute them as federal criminals. It's happened before; see, e.g., Gonzales vs Raich.
I'm against excessive regulation, and this seems more egregious than most.
Are people with DUI's or other alcohol related offenses banned from owning bars? I don't know personally. If they are then I am okay with this.
But when was the last time your pharmacy had a milkshake night?
Well, I don't think there were doses in the milkshakes, but I used to go to drug stores in Indiana for a malted.
Those logistical efficiencies must work in the convenience store biz as well. Honolulu has all of these ABC stores. I even saw 2 almost across the street from each other.
http://en.wikipedia.org/wiki/Alcoholic_beverage_control_stat...
http://www.abcstores.com/about.htm> At the beginning of the temperance movement in the United States, many states curtailed where and when alcohol could be sold. Before this time, most alcoholic beverages for off-premises consumption were often sold just like any other item in stores or in saloons/bars. Because of heavy lobbying by temperance groups in various states, most required off-premise beverages to be sold in dedicated stores (primarily called dispensaries)
http://www.theanswerisliberty.com/2010/06/can-democracy-and-recreational-drug-use.htmlor could be worse, idk :)
And the consequences will undoubtedly be worse. To someone. And ideal to others. But if they can each live in a community with rules they prefer, there's no problem.
That is a major challenge and opportunity of good government. Drawing the lines so that people are free but not stepping on each other's toes.