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Lessons Learned from a Year in the Oregon Cannabis Market

We’ve spent a lot of time in Oregon since our Wholesale platform went live there late last year, getting every buyer and seller familiar with our technology and putting it to the test for themselves. Oregon was an important first step for us, but now we are ready to move on to meet the other great people working in American cannabis.

 

We create solutions to the problems you face in the supply chain, which means we end up learning a lot each week about the changing dynamics of the market. We see every corner of the supply chain, and get instant feedback when growers get more money per pound for their flower, or when extractors buy up thousands of pounds of B-buds to extract (and sit on) barrels of oil.

 

We collected a list of Lessons Learned in Oregon that we think you’ll find useful in the markets you operate. In it you can glean some sense of how to avoid the pitfalls seen in Oregon’s market, while also leveraging various operations that you can start within your market segment.

 

  1. It looks like the worst of the oversupply problems and low prices are behind the Oregon market as they turn an important corner.

 

In general, there’s an optimistic vibe among operators. The last year was rough for everyone, so naturally no one is in much of a party mood. Sadly, many operators went out of business in 2018, yet current operators feel stronger and better positioned than they have in a long time.

 

The lesson here is that in a market where oversupply is a long-term dynamic, there will be a number of operators that lose. Those with the capital, or consumer demand, may be able to weather the stormfacing less competition on the other side.

 

  1. In only a few months, Oregon went from having 6 years of oversupply to drastic supply shortages in certain segments.

 

Outdoor flower is now virtually out of stock, reported by almost every buyer. The growing demand for pre-rolls and manufactured products created a supply shortage of low-cost biomass for processing (like Trim, B-buds, and bulk outdoor). Additionally, many outdoor farms cut back production for last year’s harvest. Others shifted to planting hemp strains, also leading to less supply on the outdoor front.

 

Here we learn that in times of hardship, a cannabis operator has the option to try different streams of revenue by altering their product focus / process to address current demands. This can be a tough pill to swallow for craft producers, and may not be the right move in all cases. Some may prioritize their operation towards biomass processing, saving their craft grows for a special-reserve or a turnaround in the market.

 

  1. When your market produces more cannabis than it can sell in the state, it’s time to start selling to other states

 

Once Oregon legalized, its status as an export state ceased. Cannabis once sent to other states and countries is now locked inside the state’s borders; and the growers that used to be exporting are mostly licensed now, leaving nowhere for all their cannabis to go.

 

The One Fix Campaign championed by the Craft Cannabis Alliance is having success forwarding the cause to help Oregon partner with other legal states on export agreements. This is required for Oregon’s market to bounce back; and progress is already moving along with a bill that passed the Senate.

 

Within the next 2 years, they hope to have unilateral agreements with other states to export Oregon cannabis to those markets. You might even be in one of those states that can import Oregon cannabis. Your market might also be slipping down the path of Oregon-level oversupply, making this an effort that must start now for everyone’s success.

 

Many wonder what led Oregon into this predicament. There are a number of factors suggested by the operators there, which may be things to keep in the back of your mind:

 

  1. Licensing was extremely easy to obtain, with no cap on production licenses

  2. Oregon was an export state during prohibition, and now has too few consumers to sell it all in-state (California, will this be you?)

  3. Operators didn’t have real-time data to plan their yields for market dynamics accordingly

 

Use all the information at your disposal to be proactive! Don’t forget that a buyer’s market will always switch to a seller’s market at some point. We’ll share information whenever we can as we obtain it in real-time, so you can make the right decisions in your market.

 

Until next time,