It happens in every legalized recreational cannabis market, and no, yours is not going to be the exception. Wholesale prices for cannabis peak within a year after legalization, then drop fast. There are variations in the timeline and steepness of the drop-off, but it WILL happen. The question is how do you set your business up to continue to not only be competitive in this environment, but flourish, and grow?
- Invest in building a brand.
Having a recognizable brand that is well-recognized in the marketplace is worth every penny you put into it. If you have five products on the shelf, all comparable, all around the same price, the consumer will choose the brand they know (first of all) and second of all, the brand that makes a statement about THEM. For example, if you smoke Green Relief products, you’re making a statement to the world that the environment and sustainability are important to you. “Generic” will always die first when commoditization happens. Set yourself apart from your competitors with a brand that says something.
- Find a way to create differentiated products.
Not applicable in every market, but generally, products categories like extracts, beverages, and edibles have higher margins. Not only that, they are quickly-growing categories that are even overtaking dried flower in some places. Even better, jump to the top of a product category by creating a new one! For example, Aphria recently released a statement that they are developing quick-dissolve oral strips (like the Listerine strips), as a new dosing method.
- Implement automation and cutting-edge technology (notice the pun there? That was on purpose).
By automating as much of your cultivation and harvesting as possible, you will save money on labour fees, create more consistent products, and reduce the risks associated with human error in your production process. In the harvesting process, trimming has always been a chokepoint. It doesn’t have to be anymore, and that’s where our product the Mobius Trimmer M108 comes in. It’s the only automated trimmer available that’s been designed for large-scale, Canadian LPs. You’ll be able to drastically reduce labour costs (compared to using competitors’ machines), reduce cleaning time, streamline your SOPs, and smooth out the perpetual bump-in-the-road that is trimming. And think about it like this; some of your competitors have already implemented M108s in their trimming process. If you don’t do the same, you’re operating at a dis-advantage. It’s as simple as that.
- Don’t forget about customer service.
Customers understand that mistakes happen. It’s not about reducing failure to 0%, because that will never happen. It’s about how you deal with issues when they do come up. If somebody purchases a product from you, and has a question or concern about it, a poor or slow response is all it takes for them to move on to another brand. They have options. They don’t need to buy your products! On the other hand, if you “delight” them with your response, you have the opportunity to create a long-term customer that will act as a promoter of your brand.
No matter what market you're operating in, wholesale cannabis prices will eventually drop. Don’t panic! Follow the advice above and you will not only survive the impact, but flourish afterwards. If you’d like a deeper dive on this topic, everything above is covered in much more detail in The Harvest Report, our free e-book.