Through this newsletter, I will give you insight into the business and economic forces that are governing our industry. These forces have the power to lift your business into amazing success, or blindside those who don’t properly use the latest knowledge to their power. I will tackle one important topic at a time, by sifting through the latest data and research to give you the insights to empower you. I promise to explain in a way that anyone can understand.
Introduction to the Boom in Bud
As of October 17th, a G7 economy is opening its doors to a brand new billion dollar market, overnight. Canada will become the world’s first major economy to legalize the commodity market for hemp and cannabis, creating over $7.2 billion dollars in opportunities that have never been tested or regulated at this scale. Since there is no precedent for this, it is critical that everyone, from growers to retailers to investors, have the latest facts and analysis that can impact their business sense and decisions.
The CBD, or Cannabis Book of Data, is the first monthly economic digest written internationally for everyone in the industry, so they can understand the fast winds of change affecting the market. My name is Nima Veiseh, I am a graduate of the Massachusetts Institute of Technology (MIT) and researcher in economics. I will address every part of the business for you, from public policy to growers to retail supply chain, and give you the latest information to help you best understand what is happening — empowering you for what is ahead.
The Supply Side of “Supply & Demand” – Staying alive in a new hemp economy.
Today’s brief is a quick introduction into two of the most important concepts, supply & demand, and what that means for the cannabis market.
So why does understanding supply and demand matter? Because the market decides the price based on what supply and demand are. And unless you can understand price, you won’t be able to accurately figure out your revenues and how your business should grow.
Cannabis is not the only market to have ever become legalized overnight, but it is still one of the largest we have seen in recent history. We can learn from the past to guide the future. Starting now through the next decades, we must be aware of some the big pricing themes that will affect the market as it matures from legalized infancy to a trillion-dollar industry.
Higher Supply, lower price. Legalization means that supply is going to go up. That means Economic theory predicts prices to fall in markets that are suddenly legalized.
How can we think about this? More producers arrive on the market, adding to the amount of hemp and cannabis available. More supply and access means that people do not need to pay as much, because wholesalers and retailers are competing for the same customers by lowering their prices.
Why does this matter to me? Because those in the cannabis business must be careful to look at the year ahead, and watch their costs as falling prices hurt lower revenues while costs stay the same. This means if you’re a dispensary, you may want to be purchasing from more than one grower, in case they go out of business. The same goes for growers, where their dispensary partner might also go out of business, so they should be diversifying their supply chain.
How can we see this already happening? Companies in Colorado and Washington are starting to feel the pressure of downward prices, some already going out of business early in the Green Rush. We can see that the last of the states to fully legalize, California, is still the highest priced, because supply has not yet fully flooded the market to bring down the prices to Denver levels.
Now Imagine if what you sold in your business dropped in price quickly by 25.7%?
What kind of impact would that have on your operations?
Would you go out of business?
What would you plan to do to keep your doors open?
In Conclusion
These questions are the major ones you should be aware of when looking at the quickly evolving cannabis industry. Each of these concepts presented in this periodical is useful and valuable to guiding your thinking about every part of the industry. If you have any questions, comments or suggestions for future topics, please do not hesitate to reach out to me at nimav@alum.mit.edu.
About The Author
Nima Veiseh is an Advisory Board member for CannabisBPO. He is a doctoral researcher in data-science who has worked across several industries, including pharmaceutical, cannabis, energy, financial services and more. He is an award-winning visual artist, and has degrees from the Massachusetts Institute of Technology (MIT), Columbia University, The George Washington University, and Georgetown University. Please visit www.NimaVeiseh.com for more information.
About CannabisBPO:
CannabisBPO is a specialty provider of contact center services for the cannabis industry. With locations in Canada and the US, the company offers outbound and inbound contact center services in a 24/7 setting. The company’s core service channels are text, email, mail, phone, chat and social media for customer service, sales, and technical support projects. CannabisBPO helps cannabis companies drive revenue and mitigate risks.
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Media Contact
Kim Christmas, CannabisBPO, VP of Human Resources and CCO
kchristmas@cannabisbpo.com • 678.671.2019