We continue our 4/20 special series with a look at the economic conditions operators are navigating this year. Flower prices have been falling in key export markets, cultivation hiring in the US dropped nearly 23% in the first quarter, and the cost of staying compliant keeps climbing. The response across the supply chain has not been uniform, but it has been consistent in one respect. The industry is getting more selective about where value actually lives, and cutting everywhere it doesn't. What that looks like depends on where you sit.
Retail
For brands with genuine consumer loyalty, the margin conversation starts from a different place entirely. Seth Sznapstajler, Co-Founder of Sluggers and Vice President of Product and Sales at Natura, argues that the pressure being felt across the market is, for operators who have built real repeat business, largely someone else's problem.
"When your product is genuinely wanted, when consumers come back for it by name, when it sells through consistently, when it's culturally relevant and not just sitting on a shelf, margin pressure is someone else's problem," Seth says. "We focus on building something people actually want: high quality, fairly priced, innovative, and rooted in the culture. That combination creates real sell-through and real repeat business. The brands getting squeezed are the ones chasing volume without loyalty. If consumers aren't coming back for you specifically, you're always going to be vulnerable to price. We don't have that problem, and we don't have to change a thing because of what's happening in Germany."
Cultivation
Further up the supply chain, the calculus looks different. Growers are not insulated by brand equity in the same way, and the choices they are making with constrained budgets reflect that. Ras "Kaya" Paul, breeder at Arcana Collective, describes a reallocation that is playing out across operations of different sizes.
"Most are pulling back on marketing and promotions while putting more time, money, and effort into sourcing genetics," Ras says. "What we're seeing more of, especially with larger farms, is a move toward outsourced selection and nursery services. In seeking out external professionals to provide verified, 'designer' genetics, they can keep rotating in a steady stream of new offerings for a market that demands variety. It gives them a point of differentiation, which is more essential than ever in the current market."
The logic is essentially the same as Seth's, applied at the cultivation level. To put it bluntly, cut what doesn't move product and invest in what does. The consumer side of that equation has also shifted, Paul notes, in ways that are driving the genetics spend. "The demand for verified, healthy stock and unique offerings is expanding rapidly, particularly from growers with tight budgets," Ras says. "These operations need genetics that fit their growing methods and meet consumer expectations, and those expectations have matured significantly. For years, producers worked within their existing programs with little regard for emerging markets. As those markets and consumers developed, the demand for diversity, distinct terpene profiles, and specific effects has followed."
Workforce
The workforce data fills in the rest of the picture. Payroll figures from Wurk, compiled across cannabis operators in the lead-up to 4/20, show the same logic playing out at the headcount level. Dan Obendorfer, Director of Product at Wurk, describes what the numbers look like.
"Wurk data shows cannabis operators heading into 4/20 are increasingly relying on overtime rather than broad headcount expansion," Dan says. "In Q1, operators spent $6.2 million on overtime, up 17% year-over-year, even as cultivation hiring declined nearly 23%. At the same time, retail staffing increased 7.5%, suggesting operators are selectively adding customer-facing roles while asking existing teams across cultivation, manufacturing, and extraction to work longer hours. Together, the data points to a targeted, efficiency-driven approach to seasonal demand, with flexibility and compliance top of mind."
Fewer people in the grow, more on the floor, and the ones already there working longer hours. Taken together with where growers are directing their genetics spend and how brand-loyal operators are insulating themselves from price pressure, the picture that emerges is of an industry concentrating its investment in the parts of the chain closest to the consumer, and trimming everywhere else.
Click here if you miss part 1, and don't miss part 3 tomorrow!
