Ebb and Flow of Market Dynamics

Budding Industry

The Ebb and Flow of Market Dynamics

Words / Whitney Branshaw

The cost of legal marijuana in Alaska is a sore subject for some. What makes this topic controversial is the high cost to the consumer. While I agree that the cost to the consumer is high, we also need to look at the cost of what it took to get that product on the shelves. We’re seeing wholesale pounds on the legal market go for anywhere between $3,500 and $5,000, give or take a few hundred dollars either way. Black market product is going for $2,500 on the low end and $3,200 on the high end.

So, what goes into producing that pound of weed and how does that reflect on the price the consumer pays at a retail location? I reached out to several businesses to talk with them about their thoughts on the current legal cannabis market and what goes into setting a price at the wholesale level, and how that translates for the consumer in the retail setting.

Green Rush Gardens, LLC (Sterling-Limited Cultivation)

Green Rush Gardens, LLC is a limited cultivation in Sterling that is owned by Janna Karvonen and Ryan Geller. They’ve been on the legal scene since day one, sharing opening day at Herbal Outfitters with Greatland Ganja in Valdez back in October. Janna and Ryan both tell me that, “keeping our wholesale price low is a way to benefit all of us.” Janna and Ryan were able to start their cultivation with savings and did not have investor debt. There have been many challenges. According to Ryan, one of their most difficult challenges has been being “business naïve.” “I had no idea what it was going to be like to run a business, that’s been a huge learning curve for us. We knew how to grow and we had an idea of what we wanted to charge when we first hit the market, and we had the idea that we wanted to keep costs low. We knew that once we got a few harvests under our belt we would be able to fine-tune the process and lower costs even more, which the consumer would then benefit from.”

They now have two employees outside of themselves, one full-time and one part-time. They’re looking to add another part-time employee as summer nears and are looking at transitioning to a Standard Cultivation in the next year. Janna is active in the campaign to keep cannabis legal on the Kenai Peninsula, as they are facing a ban vote in October. “To be honest, all my time has been either on the grow, the campaign and my family,” Janna says. “We are in this for the long run, which is why it’s been so important for us to figure out our process in a commercial setting, so we can dial back our expenses and continue to provide a variety of quality product for the consumer.”

Green Rush product can be found at High Bush Buds, Alaska Buds and Herbal Outfitters.

Alaska Fireweed, Anchorage (Retail Location)

General Manager of Alaska Fireweed Will Ingram tells me that he doesn’t hear many customers complain about the cost of legal marijuana. “In the beginning, we heard people complain because the price was something they weren’t used to. It’s rare to hear any grief about price when people come into the store now. A majority of our customers are professionals, the over 40 crowd that’s happy with a consistent product. You also have people that are just happy to support the legal market and understand that pricing will go down as the market levels out.” Will also sheds some light on the high cost of concentrates. “A majority of the contracts we have with other businesses have very strict terms in regards to the Manufacturers Suggested Retail Price (MSRP). That shows us that cultivators and manufacturers actually have a vested interest in keeping the price as low as they can for the consumer. We won’t ever go against those MSRPs because we want a good business relationship with those that are providing the product we sell in the store. That’s our lifeline: we aren’t aiming to fuck that up.”

Alaska Fireweed is gearing up for tourist season, and will undoubtedly be inundated with customers as we begin seeing our state fill up with people from across the world.

Alaskan Leaf, Anchorage (Retail and Cultivation)

Loren Dreyer is the proud owner of a retail and cultivation site in Anchorage that goes by the name of Alaskan Leaf. He also is the founder of AK CANNEX, a wholesale exchange website that is offered to marijuana licensees in Alaska. The site is intended to connect a cultivator to a retail location, cultivation to manufacturing, manufacturing to retail and so on. Loren built this part of his business to make transparency a regular part of sales.

“I think that the free market is a beautiful thing,” he says. “What we need most right now is transparency so we can learn from each other. This will lead to a more efficient market, which will lead to lower prices. When you know your competition, you are a more efficient operator, which drives down operating costs, which ends with a lower price for the consumer. Through AK CANNEX, we have added technology to the equation, which saves all of us time. Time is everything right now. Every minute costs us all money.”

Loren hasn’t seen any transactions happen through AK CANNEX yet and he suspects that’s because we have such a small amount of product available in the state. “We really need more folks to come online. I know the process is difficult to get through, but the strength of our industry is going to lean heavily on supply and demand. A majority of the legal marijuana product is already promised to another business before the plants are even mature. So you essentially don’t know what you’re going to get. That’s a huge risk to take for the buyer. I bet, as we see more businesses get up and running, you won’t see that happening. I’m hoping my business will be helpful in connecting people and that we can learn something from each other and work together more efficiently to benefit the consumer.”

Loren is about to have his final inspection and is ready to start growing his first crop. He plans to open his retail shop later this spring.

Red Run Cannabis Company, Kenai (Retail and Cultivation)

Red Run Cannabis Company is a cultivation and retail location headed up by Marc Theiler on the Kenai. Marc tells me that having good relationships with other business owners has been an integral part of running his business. “The relationship we all have cultivated is what’s ruling the roost. The people we are seeing have success have good relationships and always bring their A-game to the table. They don’t create drama and they don’t bring any bullshit. We have this idea that it’s the little people against the goliaths, and the stratifications of the haves and have-nots. That’s not how we want this industry to be. We want to strive for inclusion and support the other people getting into the legal industry. We can’t pretend that we are in a position to help the people that really need it (the patients), that will come down the road when we are more established. Right now we have to take care of our families and our businesses and that’s what comes into play when we’re talking about cost.”

Going back to the reality of business naïve, Marc says, “as a business owner you are always looking for ways to keep cost down. But as a new start up business going into a brand new unknown industry, it’s virtually impossible as you are constantly hemorrhaging money. A lot of what drives our wholesale cost is our payroll and other high expenses such as utilities. I’m learning as I go and am working on executing the best strategy. I expect things to be like this for the next one to two years. When we can control our own supply and production we will see the cost lower for the consumer. Until then, we just want to stay afloat and stay in business.”

High Bush Buds, Soldotna (Retail Location)

Patricia Patterson owns the retail location High Bush Buds in Soldotna. She has had a retail business for over the last decade and sees that as something that has helped her keep costs as low as possible. “In retail there are a lot of factors that drive up price. I have tried to avoid that as much as possible. I want to spend money on things I can write off, especially with the 280 E tax structure. I didn’t have a business phone up until a few weeks ago. I don’t have business cards. There is no rent payment for me, as I owned this building already. I can’t write any of those costs off. The only things I can write off have to do with cost of goods. So, whatever goes over the counter. If I can’t apply it to that, there’s a big chance we will do without it.” There is one thing she won’t do without though. “One thing I don’t skimp on is my payroll. I am all about my local neighborhood and how much I pay my employees reflects that.”

Patricia has been able to offer some of the lower prices Alaska has seen for legal product—anywhere from $14 to $19.50 a gram. She tells me that has to do with what she’s willing to pay for wholesale product. “I just refuse to buy product that has an unreasonable price. I won’t buy pre-packaged product either because I can cut cost by packaging it myself here at the store during the purchase. Anything I can do to keep the cost lower for the consumer and to provide them with a consistent, quality product. That’s how I am operating my business.”

Whitney can be reached at whitneybranshaw@hotmail.com.