Why Are So Many Cannabis Dispensaries Struggling?
August 11, 2022 08:00 am ET
Estimated Read Time: 5 Minutes
Cannabis dispensary owners must make a fortune—at least, that’s what a lot of folks think. But that isn’t always the case. Sure, when legal sales first start out, cannabis dispensaries tend to do well. We have all seen the long lines of excited patrons waiting to buy legal weed. But what happens when the newness wears off and other dispensaries start to pop up? Let’s explore why dispensaries are struggling across the nation.
Juggling Regulations, Products, and Sales
The legal cannabis market is burdened with heavy taxes and strict regulations coupled with a lack of access to financial services, advertising, and marketing. Operational costs are maintainable with profit when the lines are out the door, but when those lines go away, a cannabis dispensary can find itself begging for customers. It takes a lot to run a legal cannabis dispensary. There’s bookkeeping, compliance, security, insurance, and staffing to factor in. Not to mention the common expenses that come with running a business like rent, power, and water.
That doesn’t even touch putting products on shelves. All of this adds up, which makes the price of cannabis go up for consumers. Many people are excited to buy legal cannabis until they actually do it. One might rush home to open their goodies, only to find dried-up buds that crumble into a pile of dust. They lack any resin content or taste, and the aroma smells mediocre at best.
Too many places stock low-quality cannabis because it is abundant and cheap. Cannabis should be cared for during cultivation. It all starts by sourcing real genetic lineage and having a knowledgeable cultivation staff so that your strains offer consumers the true characteristics and attributes associated with a particular variety of cannabis. Some places offer top-quality cannabis like this that is flowered to perfection. Taste, potency, and aroma are all right where they need to be.
Cannabis like that isn’t cheap—unless you go to a state like Oregon where the newness has worn off. Hop one state down to California, and you’ll find cannabis dispensaries struggling to compete with the illegal market because of high taxes. Even the governor of California sees this as a problem. Michigan, set to be the second-largest legal cannabis market space in the U.S., is another state where cannabis dispensaries are having a tough time.
3 Legal Cannabis Markets That Are Struggling
Cannabis dispensaries in Michigan are facing closures. It’s not because government agents and state police are knocking down their doors either. Instead, the closures are resulting from an unstable market. Those who operate dispensaries in Michigan say prices are at an all-time low and that the industry is flooded with cannabis. A report in the Detroit Metro times shows the average cost for an ounce in Michigan was around $512 in January 2021—ouch.
Fast forward to now, and the average cost for an ounce of quality cannabis is $131. The Michigan Cannabis Regulatory Agency says that’s a decline of 74.4%. There are over a thousand dispensaries in the state of Michigan, and the city of Detroit is planning to add a hundred more as early as next year.
The state of Oregon is known for having some of the most affordable cannabis in America. When you hear that, you would think dispensaries are doing good. However, the overproduction of cannabis has caused prices to drop drastically. Many people traveled to states such as Oregon and Colorado because, at one time, they were the only places in America with legal access to cannabis. That has changed, and the newness has worn off. Now, regulators blame allowing too much cannabis to be grown for the current low prices. This is a problem that greatly affects dispensaries but not patients and customers.
California has a struggling legal cannabis industry because politicians in the state put too much tax burden on the industry to fix decades of misappropriation of public funds at the hands of political representatives. Now, legal cannabis businesses in California struggle to compete with the illegal market. This struggle is so rough that lawmakers in California have opted to give the cannabis tax structure there a complete overhaul. One of the measures in this overhaul includes removing the tax on growers completely.
Competing With the Illegal Market
Cannabis dispensaries are struggling for a few reasons. One is because too many people who know nothing about cannabis jump into an industry simply to profit. They offer substandard products because they don’t know any better and ultimately end up losing business because of it. The ones that offer good products do so at a cost. Operational costs combined with quality products are an expense that is handed down to patients and customers. In other places, cannabis dispensaries are struggling mainly because of excessive taxing by state regulators.
Cannabis dispensaries would really be feeling the pain if we all learned how to grow our own at home. Thankfully for them, there will always be people who depend on dispensaries to get their cannabis. If the goal of cannabis legalization was to knock out the illegal market, dispensaries need better-quality cannabis at more affordable prices. Until cannabis dispensaries can offer quality bud for around $100 an ounce and budget bud for around $25 an ounce, the illegal cannabis market will always be around.
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