“Race to the bottom” is a long-standing socio-economic term that applies to business enterprises that go to extreme lengths to beat the competition and bring cheap products to market, regardless of potentially negative impacts. The workers, environment, laws and responsible business practices are compromised in order to come out on top of the competition heap.
Early in our quest to become part of the legal cannabis industry, I was invited to an investment meeting where the race-to-the-bottom mentality was the core business plan — dump cheap weed on the market in huge quantities at low prices for long enough to drive out the competition, then emerge as the dominant player. It disgusted me to my core.
Call me altruistic, but I really hope us little guys can prove that we can play in this sandbox as thriving, small business people. Unfortunately, the cottage industry in Washington is vastly under-capitalized as we face the costly challenges of building codes, zoning issues, testing, packaging, labor costs, distribution hurdles, compliance issues and huge market volatility. Desperation has sunk its sharp teeth into the belly of aspiring cannabis farmers who are forced to dump their product at less than profitable rates just to put some cash in the coffers to pay the bills.
The price for an eighth-ounce on the West Coast has been $40 for decades; in the interior U.S. it is closer to double that. Now that the product has moved from the street to the storefront, consumers are treated with prices that even an unregulated grower would shy away from. BOTEC, the company that consulted the Washington State Liquor and Cannabis Board, projected producer-to-processor prices of $3 per gram and processor-to-retailer sales at $6 per gram, so the end product on the shelves would be about $12 per gram. You can make a good living at those rates. However, the prices have gone so low that it is conceivable that a shifty profit plan could work to buy legal cannabis in a Washington store and haul it to who-knows-where for a healthy profit on the black market.
The sad fact is that the consumer will pay a premium rate for the impressive variety of legal, safe, convenient weed offered, but they are being groomed to expect a bargain while the market is ripe for a price increase. According to state records, the average expenditure per customer is about $50; they are increasingly getting more and more product for their money. I hate leaving money on the table.
People will always pay for quality and Washington state growers have a reputation for excellent cannabis. They have been providing quality products for the medical marijuana consumer and the street consumer for decades. Now that there is a regulated, legal system, it would be a travesty if the whole thing were to collapse because the demand is controlled by underpriced products and profit margins for the growers that are slim to none.
This race to the bottom is an unhealthy race for everyone concerned — even the consumer who is thrilled to have the luxury of storefront access and cash in their pocket to spend. Let’s think long term and ensure that safe, legal cannabis sticks around to not only provide great products but prosperously support those who create them.
Shawn DeNae is CEO of Washington Bud Company, an aspiring applicant for a producer/processor license. She is one of the founding members of the Marijuana Business Association Women’s Alliance.