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Your Million-Dollar Cannabis Business May Soon Be Worthless, And That Is Just the Beginning of the Bad News

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A great, and devasting article, by legendary journalist Deb Borchardt at Green Market Report, points out that cannabis retail locations in California are seeing a massive drop in valuations. If the weed revolution is the way to make riches, how are retail locations in the California going down in a value?  As California goes, being an early pioneer is weed and having a population of almost the size of Canada, will other states soon see the same discount prices on cannabis businesses?

The worst news may not even be baked, no pun intended, into the equation yet, either!  If full legalization is enacted, how would interstate commerence and the fact cannabis is no longer an illegal substance effect current models with high overhead and startup costs?

Could million-dollar cannabis dispensaries soon be worthless? Well, according to Green Life Business CEO Drew Mathews, the answer is yes. Mathews believes that the shift in the California market from valuing dispensaries based on top-line revenue to EBITDA (earnings before interest, taxes, depreciation, and amortization) and net income could lead to a significant decrease in dispensary valuations.

 

The Rise of the Cannabis Industry

The cannabis industry has grown exponentially since its legalization, with sales projected to reach $40 billion by 2025. Dispensaries, once small, niche businesses, have transformed into multimillion-dollar enterprises. However, this rapid growth has also led to increased competition, regulation, and scrutiny.

 

Changing Valuation Metrics

Historically, dispensaries were valued based on gross sales, often leading to inflated prices. As the market matures, investors are now prioritizing profitability. This shift means that dispensaries with high revenues but low net income may see their valuations plummet. For instance, dispensaries in California have experienced valuation drops of up to 75%, with some businesses that once sold for $2 million now listed at $500,000.

This has created a scenario where dispensaries that generate significant sales but operate at a loss are becoming increasingly undesirable in the marketplace.

  • Dispensaries are now being valued based on profitability rather than gross sales

  • Buyers are prioritizing a dispensary’s ability to generate profit over its revenue

  • Dispensaries with high sales but low profits are becoming less attractive to buyers

 

Implications for Dispensaries

1.Oversaturation of the Market:

The rapid growth of dispensaries has led to an oversaturated market, creating fierce competition that threatens profitability. Many entrepreneurs have entered the industry, drawn by the promise of lucrative returns, often without a clear understanding of market dynamics. As competition intensifies, dispensaries are compelled to differentiate themselves, frequently resorting to price wars and deep discounts to attract customers, which drives overall prices down and impacts their margins.To succeed in this challenging environment, dispensaries must adapt their strategies by focusing on unique value propositions, diversifying product offerings, and enhancing customer service. Effective cost management and operational optimization are essential for maintaining profitability amidst this fierce competition. Ultimately, while the oversaturation of the cannabis market presents significant challenges, it also offers opportunities for those willing to innovate and adapt.

 

2. High Taxation and Regulatory Costs:

Dispensaries in the cannabis industry face substantial taxation and regulatory fees that significantly impact their profitability and sustainability. Many states impose high excise taxes on cannabis sales, ranging from 10% to 37%. For example, California has a 15% excise tax, while Washington can reach 37% at the retail level. Local taxes can further compound this burden.

Additionally, dispensaries must navigate various regulatory fees, such as Canada’s 2.3% fee on cannabis companies, alongside the constraints of IRS Section 280E, which prevents cannabis businesses from deducting ordinary expenses. This combination of high taxes and regulatory costs can make operations unsustainable, with less than 25% of cannabis businesses achieving profitability. Ultimately, these financial pressures can drive consumers back to the black market, undermining the objectives of legalization.

 

3. Limited Access to Financing

Limited access to financing poses a significant challenge for cannabis dispensaries, hindering their growth and operational stability. Traditional financial institutions, including banks and credit unions, often remain reluctant to lend to cannabis businesses due to the federal illegality of marijuana in the United States. This reluctance restricts dispensaries’ ability to secure loans, lines of credit, and other essential funding sources, forcing many to rely on personal savings or high-interest private loans, which can exacerbate financial strain. Without adequate funding, dispensaries may struggle to invest in critical areas such as inventory, marketing, and technology, limiting their ability to compete effectively in a rapidly evolving market. This lack of investment can stifle growth and innovation, making it difficult for businesses to adapt to changing consumer preferences and regulatory requirements. As a result, many dispensaries face operational instability, which can lead to cash flow issues and, ultimately, jeopardize their long-term viability in the industry. The challenges surrounding access to financing not only impact individual businesses but also hinder the overall growth of the cannabis sector, preventing it from reaching its full potential.

 

4.Changing Consumer Preferences:

As the cannabis market matures, consumer demand is evolving, with a shift towards innovative products like edibles, beverages, and concentrates. Generational differences also influence preferences, with younger consumers favoring products that align with their lifestyle choices. Dispensaries must adapt their offerings to meet these changing needs, or risk losing market share to competitors.

The rise of health-conscious consumers has led to increased demand for organic and sustainably sourced products. Dispensaries that prioritize transparency and quality will be better positioned to succeed in the competitive cannabis market. Staying attuned to evolving consumer preferences is crucial for dispensaries to maintain profitability and long-term success.

 

The worst of the doom and gloom may still be coming as well. If cannabis is moved to a schedule 3 drug or legalized outright, there will be reguations in place for interstate commerece at some point.  When consumers have access to an efficient market, say buying buying products online, pricing shopping, and having them shipped to their door, it tends to lower margins and decrease prices for the whole industry. That is not yet baked into the equation as millions of dollars are being poured into states like Florida and Michigan.

 

If marijuana is legalized by a new Trump or Harris administration it may not even need a license to grow or sell.  A completely legal product would mean that at worst you would need a state-license inorder to sell and ship cannabis across a state line or in the mail. UPS and the USPS would not have any reason to stop shipments of completely legal products.  That means any website or app with traffic could become an online dispensary or store. Would Shopify protest if weed is 100% legal? Would they have any legal grounds to stop large retailers already on their platform from adding a “Cannabis/Wellness” section of products?

 

While Deb’s article points out that buyers come in at a bottom and some people will think this is a bottom in valuations, there are many reasons and unknowns out there that could be aruged that we are not even close to a bottom in the cannabis industry on prices or margins. 

 

Opportunities Amidst Challenges

Despite these challenges, the evolving market landscape presents several opportunities:

 

Decreased valuations can attract new investors looking to enter the market at lower prices. As million-dollar dispensaries become less valuable, savvy investors can acquire businesses more affordably, injecting capital that fuels growth and innovation.

 

A focus on profitability encourages dispensaries to adopt sustainable business practices. By optimizing operations and reducing costs, they can build more stable companies that are better equipped to handle market fluctuations, ultimately leading to long-term success.

 

The need for efficiency may drive innovation, prompting dispensaries to explore new business models, such as subscription services or loyalty programs. Additionally, stronger dispensaries may acquire weaker competitors, resulting in a more robust industry with fewer but more profitable businesses.

 

As dispensaries demonstrate consistent profitability, they may attract institutional investors and venture capitalists, further fueling growth and innovation. In summary, while challenges exist, the shift towards profitability in the cannabis industry offers significant opportunities for those willing to adapt and innovate.

 

Conclusion

The cannabis industry’s shift towards valuing dispensaries based on profitability rather than sales marks a critical juncture. While this change may render many million-dollar dispensaries worthless, it also opens the door for sustainable growth, innovation, and new market entrants. Dispensaries must adapt to these evolving dynamics to thrive in the increasingly competitive landscape.

 

READ THE GMR REPORT AND DEB’S ARTICLE, CLICK BELOW…

GMR REPORT ON CANNABIS VALUATIONS

YOUR CANNABIS DISPENSARY COULD SOON BE WORTHLESS!



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Federal Cannabis Roundup: Nixon, DEA, Tobacco-Hemp . . . and the DOOBIE Act (*sigh*)

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Last week, I wrote a round-up post on Oregon cannabis. This week, I thought I’d drop a line on the federal happenings. Which are quite a few.

The Nixon tapes

This was a fun piece of news, unearthed by Minnesota cannabis lobbyist Kurtis Hanna. Ernesto Londoño then broke the story on September 14th for the New York Times, which you can read here. In short, Nixon conceded that marijuana “is not particularly dangerous,” despite calling the plant “public enemy No. 1” only two years prior. And he opined that punishments ought not be so serious for possession of the plant.

I say this news is “fun” because it’s more interesting than surprising and I doubt it will have much impact. Nixon was a mean old liar, and one with an animus toward certain groups of people. I also don’t think this revelation will persuade the vocal, diminishing minority of prohibitionists to change their minds. I like it anyway, especially as cannabis history nerd. We were right!

DEA embraces two-step review for marijuana rescheduling

This one is important, in my opinion. It relates to the method of analysis DEA must undertake when determining whether a drug, including marijuana (and psilocybin, and any other verboten substance), has a “currently accepted medical use.” In April, the Department of Justice’s Office of Legal Counsel (OLC) put DEA in a box on this one, explaining that the old, five-part test was “impermissibly narrow.” OLC thus endorsed the two-part test. On September 17th, DEA assented to the test for Schedule I review.

The two-part test bodes well for DEA’s rulemaking, now underway, to move marijuana from Schedule I to Schedule III of the federal Controlled Substances Act. How do we know? Well, the Schedule I stans don’t like it, for starters. This is because, under two-part review, a drug can have currently accepted medical use: a) even if that drug hasn’t been approved by FDA, and b) even if the drug wouldn’t pass DEA’s scrapped five-part test. So, more runway.

DOOBIE Act on the way?

I’m embarrassed even having to type that. But yes, some Congressperson named a federal cannabis bill the “DOOBIE Act,” unfortunately. With a press release and everything.

This proposal would prohibit federal agencies from denying security clearance and employment to people simply because they have used marijuana. In my reading of the actual bill, these agencies could still ding an applicant for past marijuana use, but they couldn’t “base a suitability determination . . . solely on the past use of marijuana by the individual.” The word “solely” needs to go.

Because this bill applies only to “Executive agencies” under 5 U.S. Code § 105, it also wouldn’t have prohibited, say, Joe Biden from doing his “doobie” staffers dirty, which he definitely did.

FDA gets the nod on tobacco-hemp

I like the Congressional Research Service (CRS) and often send people thataway. On September 16th, CRS published a new report titled “Legal Effect of Marijuana Rescheduling on FDA’s Regulation of Cannabis.” Here are my extremely condensed takeaways:

  1. FDA can authorize tobacco products containing hemp-derived cannabinoids (although it hasn’t yet). This is because hemp is not a controlled substance.
  2. Marijuana, even at Schedule III, would still be banned as a tobacco additive (and probably always will be). This is because FDA would need to approve specific cannabis medicines first, and it never does that for botanical drugs.

Here we have one of those cognitively dissonant outcomes often seen with the cannabis plant. As a reading of law it makes sense, but as to policy it’s nonsense. You can thank Richard Nixon and other cannabis heels for that.



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Does Hemp Have Cancer-Fighting Properties?

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Does Hemp Have Cancer-Fighting Properties?

Hemp, Weed’s Cousin, May Have More Therapeutic Value Than We Thought

 

While both hemp and cannabis come from the same plant, they possess significant differences.

 

Hemp, in particular, has become the less popular cousin of weed because more people were interested in the psychoactive properties of tetrahydrocannabinol (THC). And since hemp only contains less 0.3% or less of THC, recreational consumers weren’t keen on it.

 

Historically speaking, hemp has been famous for thousands of years across ancient civilizations around the world. It was cultivated for its reliable fibers, used in textiles, rope, clothing, and paper. Even back then, hemp’s nutritious properties were known. People ate its seeds and extracted oil, while it was used for treating many conditions in ancient China and ancient India.

 

However, hemp plants do contain a much higher amount of cannabidiol (CBD), and due to the sheer demand for CBD products lately for their medicinal benefits, hemp became better-known. Now, the global CBD market is estimated to be worth a cool US $7.71 billion, and it’s only expected to grow more. After all, the CBD in hemp has been found to be tremendously powerful especially for treating a wide range of diseases and afflictions, from anxiety to insomnia, and much more.

 

However, CBD isn’t the only therapeutic value found in hemp.

 

Can Hemp Help Fight Cancer?

A recent study by the Rowett Institute took a look into the potential value of specific fibers added to the diet of patients with prostate cancer, and its effect, if any, on tumors. The NHS Grampian Charity has invested £90,000 into this research, which has been led by Professor Anne Kiltie, who is a member of Friends of ANCHOR Clinical Chair in Oncology, at the University of Aberdeen.

The new study, which was conducted by Dr. Aliu Moomin, Dr. Sylvia Duncan, and Dr. Madi Neascu, focused on hemp fibers such as hemp hull, inulin, and pectin. They analyzed how these fibers affect gut bacteria in animal models, and its overall impact on tumor cells.

 

According to Professor Kiltie: “This funding will allow us to build on our previous work demonstrating a benefit to dietary fibre supplementation in terms of improved tumor control and protection of the bowel from radiotherapy damage, by looking at other types of fiber and how these interact with the gut microbiota,” she said. The idea is that if they notice improvements when cancer patients supplement with fiber, and it actually helps delay the progression of cancer, this would be instrumental improving patient outcomes.


We have long known that diet plays a critical role in cancer development and prevention, so it only makes sense to take advantage of the healing power of gut microbiome for cancer patients. There are several studies that show a strong link between gut microbiome and one’s cancer risk. One study in particular found that patients with melanoma, who possessed healthy gut bacteria, had much better responses to immunotherapy treatments compared to patients who had poorer gut bacteria.

 

“We hope that this work would lead to a large randomized clinical trial in the UK in men on active surveillance for prostate cancer. If the fiber supplementation is found to delay progression of the disease and prevent the need for active treatments, this would significantly improve outcomes for these patients and their quality of life,” she added, shared by a release published by the University of Aberdeen.

According to Dr. Simon Dunmore, the NHS Grampian Charity research officer: “The importance of intestinal microbiome in a wide range of health areas, including the development of cancer, is becoming increasingly highlighted by numerous scientific studies,” he said. “This study will provide important evidence of the role of a beneficial gut microbiome composition in reducing the aggressiveness and development of prostate cancer and the positive effect of dietary fibre on the microbiome,” he added.

 

Studies On Hemp Oil For Cancer


There are other studies supporting the viability and potential of hemp compounds for treating cancer. In another recent study out of Shanghai in China, researchers found that hemp oil extracts which contain the terpenes humulene and caryophyllene were found to be effective in treating pain and fighting cancer.

 

For the study, Chinese researchers analyzed the tumor-fighting and painkilling properties of hemp oil on mice. They found that after administering the hemp oil extracts, it was found to significantly reduce tumor growth. “Thes results reveal that HEO [hemp essential oil] plays a role not only in tumor chemotherapy induced peripheral neuropathy treatment, but also in anti-tumor treatment which offers key information for new strategies in cancer treatment and provides reference for the medicinal development of hemp,” they said.


Additionally, since hemp contains abundant levels of cannabidiol (CBD), it can be used for alleviating the symptoms of cancer treatment. Studies have shown that CBD is effective for helping relieve pain, stimulate the appetite, and minimize nausea and vomiting – all of which are tremendously valuable for cancer patients undergoing chemotherapy. CBD can also be integrated into one’s lifestyle to reduce chronic inflammation and stress, which, when left untreated, can contribute to cancer progression.

 

Conclusion


These studies are promising: hemp is clearly not just important for its industrial benefits, but it can also help save lives. The compounds found in hemp plants may help fight and treat cancer, shrink tumors, and even enhance the effectiveness of traditional cancer therapies. If you or a loved one want to explore using hemp for wellness and cancer prevention, you may consult with healthcare professionals for tailored medical advice.

 

HEMP FOR FIGHTING CANCER, READ ON…

CBD FOR OVARIAN CANCER

CBD FROM HEMP HELPS FIGHT OVARIAN CANCER IN NEW STUDY?



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Why is Everyone But the Youth Smoking Weed?

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In recent years, the landscape of cannabis use has undergone a surprising transformation, defying long-held predictions and challenging conventional wisdom. For decades, opponents of marijuana legalization have wielded a powerful argument: legalizing cannabis would send the wrong message to youth, inevitably leading to increased consumption among teenagers and young adults. This fear has been a cornerstone of anti-legalization campaigns, painting a grim picture of a future where young minds are clouded by widespread drug use.

However, as more states and countries have embraced cannabis legalization, an unexpected trend has emerged. Contrary to dire predictions, youth cannabis use has not skyrocketed. In fact, in many places, it has remained stable or even declined. Meanwhile, it’s the older generations who are increasingly turning to cannabis, with one of the fastest-growing demographics of users being adults over 50.

This shift isn’t limited to cannabis alone. Across the board, today’s youth are showing less interest in various substances, including alcohol and tobacco. It’s a trend that has left researchers and social commentators puzzled. Are we witnessing the rise of a more health-conscious, drug-averse generation? Or, as some might cheekily suggest, are young people today simply less inclined towards experimentation and risk-taking than their predecessors?

The implications of this trend are far-reaching, challenging not only our assumptions about drug policy but also our understanding of generational behaviors and values. On one hand, we could interpret this as a positive development – a sign that education and awareness campaigns are working, producing a generation more informed about the risks of substance use. On the other hand, it raises questions about changing social dynamics and what drives young people’s choices in today’s world.

In this article, we’ll explore the factors behind this intriguing phenomenon. Why are fewer young people turning to cannabis and other substances, even as legal barriers fall? And what’s driving older adults, particularly those over 50, to embrace cannabis in growing numbers?

By examining these trends, we hope to gain insight into the complex interplay of social, legal, and cultural factors shaping attitudes towards substance use in our society.

 

As we delve into the statistics, a clear trend emerges: fewer young people are indulging in substances across the board. Whether it’s alcohol, tobacco, or cannabis, today’s youth are increasingly abstaining. This shift has left many scratching their heads, wondering what’s behind this sudden display of temperance among the younger generation.

At first glance, one might be tempted to chalk it up to the success of drug education programs. After all, today’s youth are bombarded with information about the risks and consequences of substance use from an early age. Gone are the days of simplistic “Just Say No” campaigns and exaggerated scare tactics. Modern drug education tends to be more nuanced, focusing on harm reduction and evidence-based information.

However, as someone who went through the gauntlet of ’90s drug education myself, I can attest that knowledge doesn’t always translate to abstinence. My generation was subjected to a barrage of anti-drug messaging, yet many of us still experimented with various substances in our youth. So while improved education may play a role, it’s unlikely to be the sole factor driving this trend.

Perhaps we need to look at what today’s youth are doing instead. Enter the elephant in the room: social media. In many ways, social platforms have become the drug of choice for the younger generation. The constant dopamine hits from likes, shares, and notifications create a neurological response eerily similar to that of traditional stimulants. As kids spend more time glued to their screens, they may be less inclined to seek out other forms of stimulation.

Moreover, the ubiquity of social media has changed the nature of rebellion. When I was young, smoking a joint or sneaking a beer felt like acts of defiance against adult authority. But in a world where parents and grandparents are posting selfies and sharing memes, how does one rebel? For some youth, abstaining from substances their parents use might be the ultimate act of generational differentiation.

The normalization and legalization of cannabis in many areas have also played a role. As weed becomes more mainstream and socially accepted, it loses its countercultural edge. The image of cannabis has shifted from a symbol of rebellion to something your cool aunt does to relax after work. This transformation may have inadvertently made it less appealing to youth seeking to establish their own identity.

Lastly, we can’t ignore the practical aspects. As more adults turn to legal dispensaries for their cannabis, the street market that traditionally supplied curious teens has faced stiff competition. Legal establishments with strict ID checks have made it harder for underage users to access cannabis, potentially contributing to the decline in youth use.

In essence, today’s youth aren’t necessarily more virtuous or health-conscious than previous generations. They’re simply products of their environment – an environment that offers myriad digital distractions, blurs the lines of generational rebellion, and increasingly restricts access to substances. As we continue to navigate this shifting landscape, it’s crucial to remember that while reduced substance use among youth is generally positive, it doesn’t tell the whole story of their well-being. The challenges and pressures faced by today’s young people are unique, and our understanding and support should evolve accordingly.

 

As we turn our attention to the other end of the age spectrum, an intriguing trend emerges. While youth cannabis use is on the decline, adults over 50 are blazing up in record numbers. This demographic has become one of the fastest-growing segments of cannabis consumers, leaving many to wonder: why are the “olds” suddenly embracing their inner stoner?

To understand this phenomenon, we need to dive into the fascinating world of the endocannabinoid system. This complex network of receptors in our bodies doesn’t fully mature until around age 25. As we age, our natural endocannabinoid production tends to decline, leading to what some researchers call “endocannabinoid deficiency.” This can manifest in various ways, from mood disturbances to physical discomfort.

Enter cannabis. When older adults consume marijuana, they’re essentially giving their endocannabinoid system a much-needed boost. It’s like adding oil to a squeaky machine – suddenly, things start running more smoothly. Many report improvements in sleep, mood, and general well-being. It’s not just about getting high; for many, it’s about feeling balanced and functional.

Moreover, as we age, our bodies become less resilient to the effects of alcohol. A night of heavy drinking in your 20s might result in a manageable hangover, but the same indulgence in your 50s or 60s can knock you out for days. Cannabis, on the other hand, offers a gentler experience. You can enjoy an evening toke and still be ready to face the day come morning. For many older adults juggling work, family, and other responsibilities, this is a significant advantage.

Accessibility is another crucial factor. As more states legalize cannabis, it’s becoming increasingly easy for adults to walk into a dispensary and purchase high-quality, regulated products. Gone are the days of relying on sketchy dealers or questionable sources. This ease of access, combined with the normalization of cannabis use, has made it a more appealing option for older adults who might have been hesitant in the past.

Let’s not forget the economic aspect. In many cases, cannabis can be a more cost-effective option than alcohol, especially when consumed in moderation. A single joint can provide an evening’s worth of relaxation, often at a lower cost than a night out drinking. For retirees or those on fixed incomes, this economic advantage can be particularly appealing.

The health benefits of cannabis, especially when compared to alcohol, can’t be overstated. While excessive use of any substance can be harmful, moderate cannabis consumption doesn’t carry the same risks of liver damage, addiction, or long-term health consequences associated with alcohol abuse. For older adults looking to unwind without compromising their health, cannabis presents an attractive alternative.

In essence, the rising popularity of cannabis among older adults is a perfect storm of biological, practical, and social factors. It offers a way to potentially improve health and well-being, provides a gentler recreational experience, and aligns with changing social norms. As more research emerges on the potential benefits of cannabis for age-related issues, we may see this trend continue to grow.

Of course, it’s important to note that cannabis use, like any substance, should be approached responsibly and with an understanding of potential risks and interactions with medications. But for many in the over-50 crowd, it seems that cannabis is proving to be a welcome addition to their golden years.

Who would have thought that the “reefer madness” generation would end up being the ones to fully embrace the green revolution?

 

CANNABIS USE DROPS AMONG YOUTH, READ MORE..

WHY TEEN MARIJUANA USE DROPS AFTER LEGALIZATION

WHY CANNABIS USE DROPS 9% IN TEENS AFTER LEGALIZATION!

 

 



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