Marijuana Business Magazine August 2019

Marijuana Business Magazine | August 2019 48 More than 80% of wholesale cultivators say they produce cannabis using methods that fall under Marijuana Business Magazine’s definition of “craft.” This includes 46% of cultivators who said their key differentiator was high-quality cannabis—a figure that is unlikely to be sustained in the current competitive marketplace. Beyond quality of production, 23% of cultivators said they are producing cannabis following organic methods and/or without the use of pesticides, while 8% said they follow sustainable practices and 4% said they compete on their terpene content and profile. Source: 2019 Marijuana Business Factbook WHOLESALE CULTIVATORS: What is the key differentiator of the cannabis you grow? commercially lucrative—for example, they may produce smaller yields or take a couple of weeks longer to harvest—as more mainstream strains. As an example, Pollock cited the strain Triangle Mints. “You can harvest at Week Eight. But if you harvest at Week 10, you’re getting a much better flower,” he said. “It takes longer, but it’s worth it, in our view.” Also: Hand-trim only, no machine- trim. THE SCIENCE OF PRICING Craft’s appeal to consumers is understandable—higher-quality products produced by a local whose story enhances the experience. But it also costs significantly more to produce craft products, making it harder for these smaller companies to stay in business. To offset the higher production costs, one obvious and justifiable answer—one that’s reasonable to many consumers— is for craft cultivators and manufacturers to charge higher prices. And just as there are consumers who prefer shopping at farmers markets and favor the local stores over chains, there will always be demand for craft cannabis, Berryessa said. But after recreational legalization in California, consumers saw prices at their local retailers increase by 35%-50%, undercutting brand loyalty, Berryessa said. What does that mean in terms of charging premium prices to offset costs? “You can’t right now. The next two years are all about survival,” Berryessa said. “And because there are 6,000-plus manufacturers and cultivators fighting for less than 800 stores (in California), it doesn’t matter how good your product is or how great you think your processes are. If you’re priced higher than something of a similar quality that isn’t produced at the same costs, you’re not going to get any more money for it at the retailer. Right now, it’s a margins game, a survival game. And because consumers don’t have a lot of brand loyalty, and it’s more about value, it’s a challenge.” In mature markets, meanwhile, charging premium prices as a way to distinguish yourself is a necessity, said Daniel Sloat, president and head grower at AlpinStash, a craft grow in Colorado. “Craft people have been somewhat insulated from the downward pricing trend because we are craft and small batch,” Sloat said. “It’s necessary to our survival to offer a craft product, because Craft Cannabis | Small-Batch Business High Quality Grown Organically/ Without Pesticides Low Cost Grown Sustainably Terpene Content/Profile Value for Money Other 46% 23% 12% 8% 4% 4% 4%