The supply glut is the symptom, and until the industry recognizes and focuses on the cause, they won’t be able to arrest the problem.
Every day for several weeks now, news media outlets, from Forbes to the Washington Post, reveal the breaking news that marijuana prices are crashing, largely placing the blame on excess capacity.
The writers often seemed surprised, but the truth is that this has been brewing for several years. The cannabis industry is populated with people who often don’t understand the fundamentals of business and do not grasp the industry construct of cannabis. The industry functions differently than almost any other—it is the only industry where state regulators have banned interstate commerce. As a result, supply gluts in one state drive prices down while supply constraints in another keep prices high. Just look at Massachusetts (experiencing a price crash) and New York (a newly opened shop had a line nearly completely encompassing a New York city block, link via NY cannabis attorney Jeffrey Hoffman).
So, what is behind the price crash? It isn’t the supply glut. The supply glut is the symptom. Until the industry recognizes and focuses on the cause, they won’t be able to arrest the problem. I recently heard of a successful Massachusetts cannabis entrepreneur who cashed out early and big and is now trying to raise $20 million to start an indoor cultivation operation in New York. Lightning doesn’t always strike twice, though, and as we have noted in past articles, as time passes by, we are that much closer to the first Armageddon—interstate commerce.
Read more at digboston.com