A new era of online cannabis delivery services was born back in 1996 when California legalized medical marijuana. Entrepreneurs were quick to seize the new…
2017 is here, and it seems to have come with somehow discouraging news for the business people who were warming up for big deals following the legalization of marijuana last year. Though we expected this, no one saw it coming this early. While sellers, dispensaries, clinics and other players in the industry are not happy with the decline in prices, the users seem to be cheering and happy about it. Of course, that’s what we always expect from consumers whenever there are reductions in prices of commodities especially the consumables. With all these happenings in the industry, what’s likely to come next? Are we going to see some stakeholders shifting to other enterprises that seem profitable? What about those who have been preparing to get into the business because it seemed profitable and worth testing? Well, with time, we’ll see how the situation will progress.
The happenings in states that have legalized marijuana indicate a point that other states especially those in the process of legalization should know. In California for instance, prices spiked briefly because of the increases in demand following the move to legalize the drug for medical use. As the industry started widening and receiving new entrants who were attracted by the seemingly profitable venture, the prices began going down thus explaining the trend. But one would ask if the declining trend will continue, or it’s just a passing wave that won’t even last for months. Well, as at now, the industry is not mature, and the state has not also finished setting up all the agencies required to oversee activities in the industry. We can, therefore, hope that once things are okay, we’ll begin to see some changes and increase in the market prices of medical cannabis.
In Culver City, CA, many clinics and dispensaries had projected increase in customer base that would, in turn, translate into higher earnings. While the number of those registering to use medical cannabis has been increasing by the day, the prices have shown a downward trend. But since these are just the first few months, there’s nothing we need to worry about because the passed marijuana law is not yet fully implemented. Besides that, some dispensaries might also decide to close their businesses if they have no hope of breaking even in their operations. Aside from that, those who were interested in joining the industry might decide to slow down to see how things will go. All these happenings will happen automatically, and in no time, we might see prices getting better by the day.
For clinics and dispensaries already in the industry, the only way out is to put tough budgetary plans into place to avoid making losses. In fact, for some of them especially the new ones, these might be their toughest times. Some could even be having headaches because the venture seemed profitable but is now turning out to be something that requires some planning. Indeed without a sound financial plan, some new clinics might have to shut down their doors until when things are a little bit better than now. The best way for new entrants to survive at the moment is to endure the hard times and ensure that costs are reduced to the minimum possible levels. Analysts argue that the decline is normal and should attempt to correct market failure and distortions that might have been caused by the passing of the law to remove the prohibitions on cannabis use.
To the state, the decline in price means a decline in the expected revenues. Remember that there was a projection that the state would collect millions of dollars in terms of tax revenue, following the move to legalize the drug last year. But regardless of how low the pieces fall, California expects to see a huge collection of tax revenue. In the past, it was somehow hard to collect taxes in the industry that had no legal law to govern operations. With the passing of the law that made it legal to cultivate, sell and manufacture cannabis products, the state has the power now to ensure that all those who participate in those activities pay taxes. It’s expected that within one year, the marijuana industry will be bringing in a lot of revenue to the state. Will that be the case? Let’s give it time, and we’ll have the answer.
Falling prices might not seem to be a big issue at the moment to the various stakeholders in the marijuana industry, but to careful analysts who want to remain and reap from the legalization of the drug, this trend cannot just be ignored. It’s a call to re-evaluate one’s strategies and goals. Prices determine whether you make it or lose. With the right budgetary plans, one can sail through the tough economic times brought about by the falling prices. Sinking prices mean sinking earnings both to businesses and the state.