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Inflation Finally Comes to Cannabis

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1 In 4 Cannabis Retailers Are Raising Prices To Combat Rising Inflation Costs

Inflation is hitting major sectors of the economy, and the cannabis market isn’t left out.

 

In the following weeks or months, there could be a major shift in the purchase habits of cannabis users all over the country. Inflation is ruining not only summer plans but also regular budgets. Many people are feeling the impacts of high-rising costs, and the majority are beginning to voice their pains because it’s hitting them where it hurts.

 

So far, cannabis and its derived products are yet to reach a double-digit increase, as seen in food items like chicken and avocados. It wasn’t until recently that the prices began inching upward; in the past, they fell. Between January 2021 and January 2022, it was reported that the costs of cannabis edibles, flowers, and vaping items fell by 11.8%, 16.75%, and 12.40%, respectively.

 

The predicted rise in cannabis products due to inflation can be linked to various reasons, from insufficient production materials to the apparent disruption in the supply chain distribution. Prices of most things, even necessities, are at their all-time high for four decades. Word on the street is that if your favorite item is yet to increase in price, it’s only a matter of time. The rising cost of packaging materials is at its highest, so no industry would be left out of this.

 

Cannabis Price Survey

In June, GreenGrowth CPAs conducted a month-long survey in which they questioned operators about the impact of price volatility on their pot business. The poll looked at more than 700 businesses in jurisdictions where cannabis usage is permitted for either medical or recreational purposes. Both small multi-state operations and big ones fall under this category.

 

In response to growing inflation expenses, 1 in 4 operators said they intended to hike prices in the near or immediate future. More than 50% of the survey participants say that during the past year, the global cannabis economy has deteriorated.

 

Derek Davis, founder, and CEO of GreenGrowth, noted that the cannabis industry is constantly evolving. He said that his firm took into account many variables affecting the financial performance of cannabis enterprises to give accurate financial statistics, as well as the economic effects of growing inflation expenses. “By polling our clients and cannabis business owners in general, we can gather enough information to have a thorough analysis of how the current economic climate is affecting weed business owners,” Davis continued.

 

Laying Blames

Volunteers of the GreenGrowth survey suggested that the current inflation plaguing the U.S. cannabis business space can be blamed on the petroleum industry and the Biden Administration.

40% of survey participants blamed the Biden Administration for general inflation problems, 30% blamed residual effects from the Trump Admin, 20% faulted outside influences like the war in Ukraine, and several other participants decried supply chain problems and petroleum companies.

 

The result of the survey, released on Monday, revealed at least 25% of legal cannabis dispensary operators are on the verge of raising the prices of their stock to battle the rising costs of operations in the immediate future. Compared to 2021 and 2021, 70 percent of a similar study were optimistic about steady improvements in the industry. Today, not so much. Financial operators in the industry now find themselves tackling a number of fresh difficulties and commercial barriers every other day.

 

During the pandemic, an increase in demand was advantageous for many operators, who leveraged this newfound wealth to implement ambitious growth strategies. Now, minorities perceive a decelerating business climate and are increasing prices to offset growing inflation costs, which has an adverse effect on their profits and operational performance.

 

GreenGrowth noted that it’s not all bad news. About 70% of operators revealed that they’d try their best to bear the increased costs connected with inflation before raising client prices. According to reports from GreenGrowth, operators that anticipate increased costs may raise prices by as much as 10% for consumers.

 

Why did it take this long?

The weed industry escaped inflation for a long time. Mainly because there was too much weed in circulation. Weed shops were forced to keep their prices at the same rates to stay above the competition. Raising cannabis prices at such a time would have been more or less a death sentence.

 

Seattle-based Ganja Goddess general manager, Jason McKee, pointed out that it is very risky to raise prices when customers know they have multiple options. As of the time McKee gave this interview, cannabis stores had begun to see a slight decline in sales. She had mentioned that their store’s sales strategy involved keeping the customer interested in their products and willing to come back.

 

It is not only retailers that are stuck at the same pricing levels. Growers also compete with fellow growers to supply dispensaries. Like consumers, dispensaries also go for growers with lower prices, despite knowing that production expenses are on the rise.

 

About GreenGrowth Firm

GreenGrowth is an accounting and advisory firm with Certified Public Accountants (CPAs). Founded in 2016, the company’s objective is to assist budding cannabis firms with business and tax strategies that would keep them in the green. To learn more about the company, you can visit its YouTube Channel, which currently has about 14,000 active subscribers. This channel provides useful business knowledge that would profit operators in the cannabis market.

 

Bottom Line

The pandemic has left the entire supply chain in a disarray, and transportation is being curtailed everywhere. Long lines and a backlog at the dock make it difficult to import items, which drives up the cost of even the most basic materials—even those used for cannabis cultivation and retail sales.

 

The cannabis industry is currently feeling the squeeze of inflation on the supply chain. Like Matt Gaboury of House of Cultivar said some months back, everyone will continue a rambling to switch vendors for things like packaging materials, especially the 70 percent that has chosen to bear the incurred costs themselves.

 

A general price increase is unavoidable in the long run, as the abundance of weed in the market will even out at a point. There’s only so much anyone can do to match inflation.

 

WEED AND INFLATION, READ ON..

STONER INFLATION GUIDE

THE STONER’S GUIDE TO RIDING OUT INFLATION, READ HERE!



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New York’s Social Equity Fund Limited Partnership Agreement

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During a little advertised Cannabis Control Board (CCB) meeting, the CCB announced and approved a Limited Partnership Agreement for New York’s Social Equity Fund. As a brief refresher, the Social Equity Fund was mandated by the Marijuana Regulation and Taxation Act (MRTA). On January 5, 2022, Governor Kathy Hochul announced that the fund would be, well, funded with $200 million of investments funds, $50 million of which would be invested by New York State from revenue deposited in the Cannabis Revenue Fund (from tax revenue).

As we detailed in our post on the Social Equity Fund, its purpose and mechanics, the Social Equity Fund will finance the Conditional Adult-Use Retail Dispensaries for which the Office of Cannabis Management (OCM) is currently accepting applications.

As was announced in June 2022, the Social Equity Fund will be managed by Social Equity Impact Ventures. So what is the purpose of the Limited Partnership Agreement? It formalizes the legal relationship between the Dormitory Authority of the State of New York (DASNY), which has been responsible for the government portion of the Social Equity Fund, and Social Equity Impact Ventures GP I, LLC.

A few interesting tidbits from the resolution approving the limited partnership agreement:

  • The resolution specifically references New York’s $50m “investment in a private debt or equity fund,” which only highlights New York’s target goal of itself committing $50m towards funding CAURD licensees.
  • Social Equity Impact Ventures GP I, LLC is identified as the general partner, which means that Social Equity Impact Ventures GP I, LLC will have operation control over the Social Equity Fund (presumably subject to numerous checks and balances; and
  • The resolution specifically addresses that the purpose of the Social Equity Fund is to “fund the capital costs associated with establishing” CAURD licenses.

The approval of a limited partnership agreement is noteworthy only in that it is a clear indication that the OCM intends to move quickly upon the CAURD application window closing on September 26, 2022.



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Is The Cannabis Industry Really Dead? 10 Industry Experts Weigh In on the Current State of Affairs in the Marijuana Industry

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(Click here to watch the full show, now!)

Join Jimmy Young of Pro Cannabis Media as he delves into the name viral series of articles by Curt Dalton of Cannabis.net entitled, “The Marijuana Industry is Dead”.  While a comparison to Prince’s statement “the internet is dead” back in 2006, the foreboding warning is now ringing true to many in the cannabis industry.  Curt Dalton, former co-host of Weed Talk News, comes back and joins Jimmy and a slew of cannabis industry professionals to discuss the current turmoil in the marijuana industry.

 

Current financial issues are well known in the cannabis industry from higher inflation and costs, to a oversaturation of supply, to labor issues, to a lack of funding and loan options, but what about the emergence of Delta-8 and Delta-9 THC derived from hemp?  Due to a loophole in the 2018 Farm Act, Delta-8 and Delta-9 THC derived from hemp are Federally legal, and due to the wording of “0.03% THC by weight”, the floodgates were open for “hemp that gets your really high” due to liquid forms of Delta-8 and 9.  Because liquids are so much more dense than dry flower and weigh so much more per square inch, a large amount of hemp-derived THC could be packaged into seltzers and sodas, and still be well under the federal legal limits established in the 2018 Farm Act.

 

While some large-scale cannabis states like California and Colorado have banned Delta-8 in a war known as “D8 vs. D9” within the industry, many feel the health concerns around hemp derived Delta-8 are being overblown in order for states to protect their heavily taxed marijuana industries.  The question remains is, how much are hemp-derived Delta-8 and 9 contributing to the margin compression and slowing sales in the cannabis industry? 

 

Join cannabis industry heavyweights like Moran Fox, Political Director for NORML, Michal Correia, Director of Government Relations at the NCIA, Scott Moskol, Partner at Burns and Levinson, Jeff Finkle, CEO of the Arcview Group, Chris Walsh, CEO of MJ BIZ, Carl Giannone, Co-Founder Trade Roots, David Rabinovitz, Cannabis Consultant, and Jackie Bryant, managing editor of San Diego Magazine as we discuss the current trouble trends in the cannabis industry and what the future looks like going forward.

Watch the exciting show on the Pro Cannabis Media’s YouTube channel below!

 

 

What do you think about the cannabis industry now?  Leave a comment!

 

THE MARIJUANA INDUSTRY IS DEAD, HEMP GETS YOU HIGH NOW, READ THIS…

MARIJUANA IS DEAD

THE MARIJUANA INDUSTRY IS DEAD, CLICK HERE!

OR..

LOOPHOLE IN FARM ACT

THE GREATEST LOOPHOLE IN DRUG LAW HISTORY? READ ON!

 



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Cannabis Litigation: Mediation Tips – Canna Law Blog™

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Our litigation team regularly attends mediations both before a lawsuit is filed and while a lawsuit is pending. We’ve covered mediation in the past, but for those who are unfamiliar, mediation is essentially a conference in which parties sit down together, generally with a neutral third party, to see if they can resolve cannabis litigation or a pre-litigation dispute outside of a court.

When reasonable minds prevail, an effective mediator (who is often a seasoned attorney or even a retired judge) can work with the parties to see the strengths and weaknesses of their cases, the cost vs. benefit analysis of filing or continuing a lawsuit, and what settlement options are available. Importantly, a mediator can NOT make the parties settle – it is truly up to the parties to put their best foots forward and participate in their mediation in good faith.

Mediations often take all day (sometimes, even multiple days) and our team has witnessed the gambit of model and no-no behaviors over the years. They are often filed well after cannabis litigation commences. Here are my general tips for how clients should prepare for and conduct themselves at a mediation:

  1. Be prepared. Most mediations begin well ahead of the actual day of – briefs breaking down the facts, legal arguments, and posture of the case are typically required to be submitted (so the mediator is familiar with what’s going on) and attorneys often engage in settlement negotiations beforehand as well. It’s important for clients to review and have knowledge of these things because they are just as much a participant in the mediation as their attorney. It’s also important for clients to make sure they and their attorney are on the same page in terms of what they expect to happen and what their goals are – we unfortunately have all had the situation come up where the client comes in the morning of and decides they want to take a “hard stance” and start by demanding millions of dollars more than what was discussed, or conversely, wanting to insist that they didn’t do anything wrong and shouldn’t have to pay a dime. The more a client is in tune with their legal team, the more efficient and effective a mediation typically will be.
  2. Tell the truth. This is a general rule in litigation (especially in cannabis litigation), but there is a fine line between “puffing” and lying. Of course, focusing on the strengths of a case is important and necessary – mediations are negotiations, after all! However, lying or stretching the truth too much can be counterproductive and cause the mediator to become skeptical of a client’s position. At the end of the day, mediators are humans and their ability to push one side or both sides of a dispute is absolutely affected by how they perceive the case themselves.
  3. Be receptive. It’s a guarantee that clients will hear things they don’t want to hear at mediations. Why? Because the mediator’s goal is to get both sides to a compromise – and they can’t do that unless they bring light to bad facts or weak arguments. This is not to say that clients should run away from any fight. Clients should not let themselves be bullied and question what they’re hearing, but it’s not helpful to anyone for a client to dig in their heels and stop listening to what they’re being told just because they don’t like that the mediator isn’t 100% on their side.
  4. Don’t give up too early. As I mentioned earlier, effective mediations often take all day or multiple days, and there can be several impasses during that time. Feelings of “this will never work” or “we will never reach a middle ground” will inevitably come up. It’s important to remember that negotiations take time and require mental breaks. Again, this is not to say that everyone who goes to mediation must settle – we’ve all attended mediations where everyone is putting their best efforts to settle and it just can’t happen. It’s more to say that mediation is a process (and sometimes, an uncomfortable process), and it’s important to remember that lulls and steps backward are pretty normal.
  5. If you are successful in settling your case, get a settlement document signed before everyone leaves. This is so important because everyone involved in a mediation is often fatigued by the time a settlement happens. I’ve personally had to stay up until 3:00 a.m. to ensure a settlement document was signed before everyone left. But, this is something that cannot be skipped – especially, when the settlement terms are numerous or more complex. Hashing out terms for another day, or leaving questions unanswered, can bring the parties right back to where they started (in a contentious position) and settlements can completely unravel because of it. It’s the worst case scenario to settle, leave, and find out the next day that the cannabis litigation will not end because nobody signed an agreement and the other side had a change of heart. Work with the mediator to hash out and write as much of the settlement as possible so the parties can walk away with closure and a sense of true resolution.

For additional posts on mediation, check out:



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