Welcome to the Legal Adult Use Cannabis Farming Industry
Please deposit any dollars and “sense” you had at the door
Preface (not really a preface but more of a pre-apology): The purpose of this preface is to warn the reader that this article is snarky, and I kinda, sorta apologize for that. It should be taken as a bit of dry humor in a less than perfect industry.
I am a cannabis professional and have many opinions that may or may not be contrary to what you may know to be your particular truth. My goal is to share information through my day to day story in our great industry, and to share my deep industry knowledge to help build a vibrant and sustainable cannabis and hemp industry.
So who am I? My Name is Noah Persin, and I am the founder of such businesses as: Price Index Associates (dba MJCharts), the Emerald Trade Alliance, The Eris Group (dba GreenSea Distribution), and GreenSea Group. I have owned and run several other non cannabis startups as well, and have had business dealings on four continents. However, cannabis has been my passion and I have actively worked in the cannabis industry for over 30 years (I’m not new), mostly based out of Oregon since 1990 (time flys).
I have written and/or contributed on many articles over the years, and was encouraged by some of my consulting clients to write about subjects relevant to them. I was specifically asked by one client to “write about what you spoke to me about, it could a bunch of companies like mine”.
My answer to that is sure, but no. What I will do is go through a typical vendor meeting (with some commentary), which should prove to be if not informative then hopefully entertaining.
Grower (Producer) Meeting No.1
Me: “Welcome Farmer Brown, please have a seat. Your business model is shit”, I say with a smile.
(Ok, so I’m not that brutal but you get the gist of where this conversation is gonna to go. Admittedly this only accounts for about 88% of producers, and before you start hating me just go ahead and assume that you are in the 12%. Cause you are of course.)
Vendor: Hi, I’m…wait, what? What’s wrong with my business model? What do you know about my business model?
Me: I’m going to take a wild guess that your business model looks at least a bit like this:
You identified a low barrier of entry (easy and inexpensive) to acquire a Producer’s license in the Oregon professional cannabis industry. you’ve been in the illicit market in (pick a state, it really doesn’t matter) for XX many years and had been very successfully growing weed and selling pounds for $3,000, $4,000, $5,000? So you pitched a buddy, family member, or client on some investment capital knowing that you can grow “craft weed” for under $500 per pound no problem. Even at the lowest it’s “worth” $3,000 per pound. You’ll make a killing! So you projected (heard as a promise by your investor) a ROI (return on investment) of 18 months. Even at the worst that should give you plenty of time. This should be simple, I grow a great product, and they buy it.
But things didn’t go quite as projected did thay? And now your investors are calling you three times a day and becoming increasingly agitated.
Vender: Uh, that’s pretty close, but I sold it for $6,000 a pound.
(At this point I go through how GreenSea operates. Then I show them my spot pricing guide that I make weekly and work from. I build a spot pricing guide weekly from previous weeks wholesale numbers. It looks like this, except when you visit me, I use the version with numbers):
Me: Here’s what we sell BUD for, as you can see it’s by the THC point.
(Before you get all bent about selling by the THC point allow me to explain that, (a) I’d rather sell purely on quality and terps, and (b) the way the majority of consumers purchase is dollar to THC point.)
Vender: I sold a pound for $X amount more than that the other day!!!
Me: That’s great! So what are you doing here?
Vender: I only sold six pounds this week, and I grow 120 lbs a month.
Me: Oh, I see. So you’re looking for volume sales?
Me: Why do you think you’re not selling volume, or better yet, what do you think you need to do to sell more?
Vender: Uh, lower price? But this is craft!
(At this point 7 out of 10 Vendors will leave more than slightly agitated. But not to worry because 9 out of 10 of those that leave call back within two weeks)
Why am I sharing this conversation? Well, it’s because people entering the industry need help understanding that farming is expensive and competitive work. This is NOT a get rich scheme.In conclusion I’d like to leave you with a few ideas that may help you with your future (or current) cannabis farm:
- You’re a farmer – farming isn’t sexy and very few farmers get rich
- Farmers do not have investors, they take on loans, and spend the rest of their life servicing those loans. When farmers have a good season they don’t start popping corks, they save that money; next year may not be so great. When farmers retire (die) they pass on the farm to their kids. When their kids finally pay of the loan they the first thing they do is sell the farm and move to a big city.
- What is cannabis worth? Cannabis (like corn, sugar, flax, etc..) is an agricultural commodity and subject to price fluctuation that stems directly from supply and demand. It is only worth what people will purchase it for, which is directly related to prices they are offered, and those prices are directly related to supply and demand.
- When EVERYONE is craft, NO ONE is craft.
- Demand changes, but very slowly.
- Know your market, demographics and data are real things (After being in the cannabis industry forever and a day I felt as though I knew it all, yet this one surprised me as well). Hint- Your market isn’t who you think they are
- Find the balance between scale of efficiency and quality
- Price to survive, don’t worry about big money yet. It’s about volume. This will be a long war, not a short battle
- Get out there and visit dispensaries. Tell your story. People feel special when they get to meet the people that make what they sell
Follow these 10 tips and you’ll have a better expectation of the industry as it is right now and you’ll be better prepared than most of your competitors. Or you can schedule some consulting time with the GreenSea Group.
If you enjoyed this read, please come back for “The Four Markets: Ascension, Millennial Dude, Canna Pro, and Medical; and why I only have 1.1 of them”