Big businesses are getting blamed for cultivating more cannabis than the market demands and for pushing out smaller businesses that can’t keep up. According to CannaSaver.com CEO Brian Shapiro, wholesale weed prices fell 60% in 2016, from $2,500 to $1,000 in the past year.
“When marijuana sells for $750 a pound, it starts to become difficult to make a profit. When it gets somewhere below $500 a pound, it becomes impossible,” said cofounder of the cannabis incubator group Gateway, Carter Laren.
Experts agree there are two ways that businesses can compete in this new market, one of the fastest growing in the country, and that is by developing new farming technologies and producing more and more marijuana. Unfortunately, both of these challenges are not easy for small businesses to pull off, especially in view of the federal ban on cannabis that keeps pot-related businesses from being able to deal with banks, get loans, etc.
Douglas Brown of Contact High Communications told Forbes that it wasn’t existing farmers that tipped the market, but rather the newer and bigger growers entering the scene. Brown stated, “At some point—and we are probably there now—flower becomes a commodity, like soybeans or corn. And then only the biggest players make any money selling it. Margins are thin, but they grow a lot of flower.”
Another concern is that recreational marijuana has a noticeably larger market now than medical, which means large corporations are ready to corner the market, pushing out smaller medical marijuana dispensaries. We also know that when there is a drop in profit margins, big businesses are the ones with enough money to withstand it. If they can eliminate the smaller businesses, they can cut the market down to just a few players.
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