Gotta Pay To Play
You Gotta Pay To Play
Words / Whitney Branshaw
Photo / Chevelle Abel
Tourist season is here ya’ll, and there’s no denying it. Our streets are lined with folks from anywhere and everywhere, all with the same wild look on their face that says, “Alaska! Here! Take my money! Show me some cool shit! Where is the legal weed at? Let me get a picture with that stuffed bear in front of the sunset!” So we oblige them. We take pictures of them with their phones, we show them the cool shit, and we point them in the direction of our favorite retail locations that house the legal marijuana industry in Alaska. I always offer a salty piece of advice when I part ways with the legal weed seekers, “Now don’t smoke those pre-rolls on the street ya, hear? The state of Alaska wants to fine you for that.” But that’s a story for another day. This week, I want to update you on supply and demand and the wholesale cost. At this point it is, without a doubt, a cultivator’s market.
In mid-April I decided to touch on the cost of legal wholesale product and how supply and demand impacts that cost. At that time, legal marijuana had a wholesale cost of around $5,000. Now, that’s to the retail location, not the consumer, so don’t get it twisted—you’re going to see a markup. If you gram that pound up and sell it at $21 a gram, you end up with $9,408. Almost a 200% markup, ayeeeeeeee! But when you think of the cost retail has to cover—which is hard to understand if you don’t know the tax structure these businesses are under, so don’t be a dick about the price until you educate yourself or have respect for other people’s business plans—then this price seems meager, right? These people have families to feed and employees to pay.
(Note: The numbers cited here are based on information I gathered in April. The tides have changed, as they always do, and as we knew they would. Now, legal weed is more expensive than I had ever imagined. Not even in my wildest weed dreams.)
A few weeks ago I was on the phone with Ron Bass of Calm N Collective setting up a time to check his spot in Houston. I wanted to interview Ron and his wife Lacey, the other half of the business. Those who know Ron know how he communicates, and there is no doubt that he’s a busy man these days—half giving instructions to his employees and half talking to me he lowers his voice and tells me, “can you believe these motherfuckers are offering us $7,000 a pound before the shit is even grown? Its fucking insanity, I can’t really believe it.” My heart skipped a beat. 7K for a pound of legal weed? Jesus motherfucking Christ. We hung up with plans to link up in the next few weeks. I was left thinking, “okay then, it’s time to look into this and see if the market rumors are legit.”
Fast forward a week later and I am sitting with Loren Dreyer. Loren is the owner of a retail and cultivation site in Anchorage that goes by the name of Alaskan Leaf. It’s days away from opening. He’s also the founder of AKcannex, a wholesale exchange website that is offered to marijuana licensees in Alaska. Since we last spoke he has finally seen transactions go live on his site and boasts that 30 percent of license holders in the state are registered to use his services. One important thing to point out about his business is that he makes not one single cent off these transactions. Not a penny. He uses this platform to bring people together in a way where they focus on the transaction less than personal interaction. “AKcannex helps limit the interaction between the two parties and gives precious time back to those business owners. When you’re someone like me who is the sole employee between my cultivation, retail and AKcannex, you have to find a way to be efficient. I saw this tool as a way to focus on the parts of my business that need me most, like my plants.”
Loren says that most of the wholesale transactions he’s seeing on the website are running between $6,000-$6,500 per pound. Well, shiver me timbers, documented proof that legal weed can be expensive as fuck right now. Nevertheless, these types of transactions are happening and the market is holding steady. However, there are cultivators out there that are not engaging in “price gouging,” as one might call it. But then again, a free market is a free market. So how do you get to what we like to call the “fair market” price? Is there such a thing?
You hear folks talk about the “end game” often in the industry. The bigger picture involves doing business in a smart way that is ethical and respectful while still protecting your own interests first. It’s no easy feat, especially when the short term burst of cash on the market have people feeling greedy.
Right after I checked in with Loren from AKcannex, a harsh post about AKcannex appeared on Facebook from the new retail location Bad Gramm3r. It condemned AKcannex and their business model for encouraging competitive bidding. Bad Gramm3r wanted all their customers and affiliates to know how they felt. My first reaction was one of an empath, I felt bad for Loren. I know him as a person and know his true intent is to try and make something that can be difficult easier. But then the journalist in me came to the surface and I decided to check out the other side of the coin.
Another thing you hear folks in the industry talk about is the importance of cultivating relationships with people you hope to do business with in this state for as long as your business is successful. I am a testament to that; I have met some of the most wonderful and influential people in my life through this industry, so I respect and appreciate the closeness that Alaska offers and how we’re all connected. However, we don’t always have the time to interact with everyone like we would hope to, so I appreciate Loren’s approach in simplifying the process by cutting the bullshit, if you will.
So I call Tel White, the General Manager of Bad Gramm3r and asked him what was up. Tel immediately asks me if I saw the new statement they put out. I had not. So I read it. I asked if it replaced the old post, which was kinda shitty if you ask me, and he told me that they hid the original post from their timeline in an effort to make things less ugly. “We regret that we singled out AKcannex,” Tel says, “we really did not mean to cause his business any harm, and for that I have tried to apologize for. The message we wanted to send is that we are fundamentally opposed to auction-style competitive bidding as it does not have the consumer in mind.”
When a retailer has to pay a high price for product (quality or not) the price reflects that cost when the consumer comes in and makes a purchase. That is something Bad Gramm3r is obviously fundamentally against. In their second statement they set the record straight on their stance. “We recently made a post that was very critical of AKcannex. In hindsight, we wish that we had not singled out AKcannex but rather singled out the practice of auctioning cannabis with competitive bidding, often to the highest bidder. We recognize that some businesses benefit from the other services being provided by AKcannex and, like us, have nothing but disdain for the practice of auctioning cannabis. They use the site for its other services.”
Tel adds: “One of the reasons I think Alaska gets away with these prices is that there are no bordering states, no other interference from other markets. Cultivators need good relationships with retailers. This will protect these businesses when the market crashes. Auction websites will be a place that businesses go to die when we do see a crash in the market, like every other legal state has seen.”
Ok, so Bad Gramm3r isn’t down with auction-style competitive bidding because it fucks with the consumer, right? But what consumer are we talking about here? The recreational or the medicinal consumer? I’ll let you be the judge of that. I come from a school of thought where I believe all marijuana use is rooted in medicinal reasons, so the medical patient is something I will forever stand up for. But we aren’t talking medicinal market here folks, let’s not forget that. We are talking about the legal marijuana market. As it balances out, we’ll see who will survive and who won’t. Greed will only get you so far in this industry and, I can tell you, it’s not far at all.
Let’s take a quick trip down memory lane. Ya’ll remember when the market opened up and people were freaking the fuck out about the opening price? If anyone was paying attention, there were only two cultivators that had product for sale: Green Rush Gardens, LLC., a limited cultivation out of Sterling, and Greatland Ganja, LLC. out of Kasilof. There was a lot of negative chatter surrounding the price of the product, especially from Greatland Ganja, but what folks should know is that price point for them hasn’t changed. Their business plan has remained the same since the beginning, which entails a full service with purchase. That means the product comes to the retail location trimmed, cured, packaged, pre-rolled, including facility safety checks and training for the budtenders at each location directly from the cultivator so that the budtender is informed about the product and can share that knowledge with the consumer so they can make the best decision. After that, they offer phone support to help give answers to the questions that come up after they leave the store. “When it comes to cost, the public needs to consider several things,” says Leif Abel, co-founder of Greatland Ganja. “Were the taxes paid along with the cost? Is it pre-packaged? Is it just wholesale? Is it wholesale trimmed? What’s the moisture content? Did someone just cut down a plant and walk into the retail location and sell it? Was there enough ventilation? Is the product going to hold? Do you know the condition of the cultivation site it came from? Those are all really important questions to ask when you are thinking of doing business with someone. We have always been and will continue to be a full service cultivator. To my knowledge we are the only one in the state that provides the service we do. For us, it’s about a connection we have with the retailor and the trust we’ve built when it comes to marketing our product correctly. Getting the most money we can per pound is our last focus. Consistency and quality product is what I think about. We are in this for the long game.”
When it comes down to it, the legal marijuana market in Alaska is a free market. Folks are free to conduct business any way they want to, however they want to. From my experience and time in this industry I can already see folks who have lost their place in the race, they fell behind when they couldn’t carry anymore baggage or bullshit. Those that are in for the long haul are turning out consistent fire product. Tourist season has most definitely put a dent in our supply and drove up the price, and we can surely expect to see a small lull in price this fall, but most likely won’t see a desirable drop for the next 18 to 24 months. It’s just business, baby.
As we expected with the change of season, we are seeing more cultivators putting product out on the market and stores are staying open and busy. Which is exactly what we hoped for. Keep growing those trees so we can keep blowing those trees, Alaska. I’m proud of each and every single one of you. And never ever forget, you gotta pay to play.
Whitney can be reached at email@example.com