Steve Albarran, Co-Founder & Co-CEO of Confident Cannabis, recently spoke with Cy Scott, Co-Founder & CEO of Headset, the leading data and analytics company for the cannabis industry, and Emily Paxhia, Co-Founder & Managing Partner of Poseidon Asset Management, a leading cannabis venture capital firm, on the High-Rise podcast. Steve, Cy and Emily, talked poolside at Trailblazers in Ojai last week to talk about the reasons behind the recent drop in California’s wholesale flower prices and trends across different legalized states.
Check out the episode here and keep reading for insights uncovered in the episode!
Price Crashing of Flower
The cannabis industry is always changing and evolving. Emily observed some of these changes first hand at Trailblazers, “Yesterday, we pulled up and there was valet parking. And I was like, oh man, we’ve come a long way. Like cannabis used to be like the airport hotel in the basement. Like that’s where the events went down. But now we’re here.”
One change in the industry that’s been making the rounds in the news a lot recently is the crashing price of flower in California. While most industry participants know this, few have theories or evidence for why this is happening in such an established market.
“What’s causing the price crash? It’s not like demand is shrinking,” Steve said. So what’s causing the drop? Steve had the opportunity to speak to someone pretty knowledgeable at Hall of Flowers a few weeks prior to recording the podcast and explained that he learned about two primary factors contributing to this price drop. First of all, Lake County started issuing cannabis business licenses about a year and a half ago and it took about that much time for people to apply and get granted licenses. Because of this, it wasn’t until recently that Lake County started to supply the regulated California market. Given Lake County’s long-standing legacy of cannabis cultivation, this new supply to the regulated market was material. “That was interesting. You know, I didn’t really think that would happen so late in the game, but clearly it’s happening,” Steve noted.
“I don’t think that there’s the balance here in California,” Cy said, “And when you have other markets like Oklahoma and introducing those dynamics and the way the illicit market kind of overlaps everything in ways, it all makes sense.”
The States are Not Islands
“Being in the cannabis industry focused only on the legal markets, we kind of just tend to think that, you know, there’s a giant wall around each state,” Steve said. The mentality in the industry is that each state is an island and what may be happening in Oregon is very different from what’s going on in California. For the most part this has been the case, with every state evolving on their own path. Steve’s opinion on this matter is beginning to shift though, as he’s seen industry actions in Oklahoma and California affect each other.
Steve explained that a lot of the supply that was cultivated in California was going out of state. However, Oklahoma’s recent legalization of medical cannabis has led to a boom of new cultivators bringing supply to market. Some of this new medical supply in Oklahoma also gets diverted outside the state, meaning California now has a new formidable competitor in the unregulated market. As a result, California operators that would have previously diverted supply out of state are now forced to sell within California, pushing prices lower.
Emily noted that, “There’s still so many states that do not have access to legal cannabis, but one state turning it on and then having localized access to legal cannabis means it disrupts the supply chain in another state because it creates this whole other issue about what’s staying in state and what’s leaving.”
“The thing that was kind of eye opening to me is that these states are not islands, right?…But this is one example, a very real example, impacting hundreds or maybe thousands of growers in California, because of these seemingly unrelated regulatory dynamics, right? It’s hitting close to home, even though it’s hundreds of miles away.”
For more insight into these industry issues and other hot cannabis topics, check out this episode of the High-Rise podcast!