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Minds, Margins, Mediocrity

The following views are that of a contributor and do not necessarily represent the views of the Maine Potcast. Generally, flower, as well as its pre-rolled derivatives, cover over half of all retail sales. Driving patients through the door whilst paying a large chunk of storefronts bills, bud is paramount to any businesses’ successful operation.

With massive overhead regarding employees, real-estate, packaging, payroll, and POS systems, businesses are forced to juggle a pallet of equally crucial costs. Necessary for profits, a constant stock from multiple growers with emphasis placed on maintaining top-quality only adds to the complexity of operations.

Convincing caregivers to part with only their best buds and strains is one of the toughest parts of operating a cannabis retail-space. With primarily outsourced products, running a storefront requires sustaining a constant, yet diverse, supply-stream from caregivers statewide. For any business, simply shopping, buying and maintaining this level of stock is immense work in itself. Compounded by harvesting cycles and unpredictability, this continuous process culminates into an unreliable, headache-inducing task.

Let alone the constant and exhausting search taking place within all corners of the state, keeping up with the every-dynamic state and local fees can easily become profit-prohibitive. Looking within Auburn, the fees quickly rack-up. On-top of state requirements mandating a registered caregiver be on staff, a $5,000 city-invoked licensing fee is placed in addition to state mandated licensing costs, easily amounting to costs greater than some can handle. To make matters even more expensive, as some storefronts also operate complimenting grow-facilities, their businesses are only further burdened, having to pay these fees two-fold.

With any for-profit lust, most large scale growers are in the mindset of keeping their operating costs as low as possible all  while maintaining results that can fetch top-dollar. Growers on social media constantly post about reducing costs, which although understandable, can sometimes result in less than favorable growing standards and conditions. As consumers demand low-dollar yet top-quality products, the logistics of supply fall onto storefronts. In result, these businesses', in a deeply competitive market, are forced to meet these ever-increasing expectations in regards to both cost and quality. Clearly unable to dish out top dollar for products that may not move, businesses avoid speculatory decisions, instead looking towards cutting corners to ammast a desirable product.

For growers I know generally all harvests are premised upon achieving end-results below $1,000 per pound. This price ceiling is all-encompassing, including taxes, fees and growing costs. In stark-contrast, as it currently stands, the wholesale flower-market resides around the $2,300 per pound mark. (These numbers are averages assumed from speaking with local caregivers.) , With such a price disparity, wherein margins are more than fifty-percent, it seems unreasonable for growers to state that profit-margins are not suffice. Pumping out quality flower at a low cost, it seems like many well-off growers are creating a narrative of struggle all whilst ever expanding into larger and larger warehouse complexes. If there was an issue with profit, maybe growers should focus less on large warehouses, instead, reducing costs by maximizing efficiency within the system they already have churning. Perhaps running grows as businesses, opposed to the black-market-entiies they evolved from, would overarchingly benefit the cannabis-community.  In large, production costs are definitively low, leaving growers with healthy profits and a subsequently comfortable lifestyle (albeit if you were to have any financial sense whatsoever). Pay your costs with flower as an absolute worst case (if you can’t do that, just quit now…) and look towards plant-extractions to fill any voids.

Currently, growers are more than in the green and the future narrative doesn't fall far from the tree. With seed to sale tracking upcoming, a grower/caregiver selling to a storefront could only be required to pay as little as $0.25 for an RFID tag to legally package and sell a full pound. Yet, while their margins remain unchanged, and possibly even greater than ever before, once the cannabis exchanges hands to a storefront, breaking down the product into individual eighths would accrue fees of $32 in RFID tagging alone. While nominal on paper, the significance of these bared costs becomes clear. As growers keep asking for more money, despite a constant of low total-production costs-in the future-storefronts will face an even more challenging logistical burden. Their fees increase simultaneously as growers raise their wholesale-costs further, compounding subsequent reductions in margins for end-consumer sales. As a result growers’ profit-margins continue to rise all whilst storefronts are forced to the opposite.

Although an argument can be made for delivery companies, as well as caregivers operating via meetings with individual patients, these small scale businesses notably lack significant upfront and running costs that come along with brick and mortar storefronts leading to profit-feasibility far above most retail-shops. Notably however, these businesses do still incur the same packaging, sales tax liabilities, and actual physical costs of delivery as a storefront meaning that their costs as well will rise with the fruition of increased regulation.

A simple grow can thrive off of running just a few select strains that have gained traction in the consumer community. A store shouldnt be burdened to make up for a growers poor strain choice, and likewise, these stores cant pay top dollar for something that might not sell. Storefronts often dish out weekly what growers with a thirty light facility can produce over a full harvest cycle. A bad harvest can ruin a storefront just as quickly as it can ruin a grower.

It is also important to note that growers also operate with less oversight from local municipalities and have far less upfront costs. If shit hits the fan, ceasing production eliminates a good chunk of running-costs. Combined with less foot traffic, these factors culminate into minimized risk for growers, more than considerable in contrast to storefronts.

Common misconceptions surround the profit margins of stores, and although the higher margins may be set in the soil, they’re quickly eaten away by all the summation of all involved operating costs. While taking so much risk, incurring the logistical stress and being held to constant, ever-increasing quality standards, yet actively-lower costs by end-consumers, storefronts concerningly carry a disproportionately-vast weight on their shoulders.

- Jake

Maine Potcast Contributor

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