Page 34 - BusinessWest February 6, 2023

“This is still a young market, and consumers are still developing their preferences.
It’s only been a couple of years, and people
will develop brand loyalty and particular consumption methods, and they will spend their money
to get those particular brands or products.”
Sanders said the businesses that survive, both those cur- rently operating and those just setting up shop, will be those that “hunker down a little bit and are super thoughtful with every dollar.”
“This is a business that has zero deductibility, except the cost of goods,” she added. “We have to be way more careful than any other business going through this recession. Those regular businesses still get normal deductions, but we can’t deduct anything except the cost of goods. That creates a real challenge for overall profitability and cash flow.”
Without examples from other states to consult, Sanders recalled, Colorado was immediately saturated, prices cratered, and the market became what she called “a race to the bot-
tom,” with price trumping everything. “But as things got more sophisticated in Colorado, a lot of good operators started telling compelling stories about why you should spend money with this dispensary rather than that dispensary.”
That’s why she focuses on the stories behind Canna’s prod- ucts and also on giving back to the communities in which she operates.
“Businesses need to be as lean as possible and as thought- ful as possible, and make sure you’re telling a compelling story about why people should buy your brand.”
Legitimate Concerns
In their recent column, Nash and Bidwell argued that public- safety and public-health concerns that motivated discussion about a cap on dispensaries in Northampton five years ago have not come to pass.
“There is, and always will be, an underground market for unregulated, uninspected marijuana. This black market is fraught with crime and suspect product,” they wrote. “The avail- ability of legal marijuana puts a dent in this market, tilting the share of sales toward legal purchase rather than black-market ones. To the extent the market allows, additional regulated can- nabis retail outlets will further reduce the use of unregulated, dangerous cannabis.”
And falling prices in legal shops may entice many long-time black-market customers to try different types of strains and products, Kusek said. “As prices come down, people will try and buy more. This is great for consumers; in some circumstances, it costs half of what it did. For consumers, that’s great.”
That’s even more true for medical users, he added, as they tend to be more price-sensitive than recreational users, since they often have to maintain regular usage with finite resources, since insurance won’t cover the product.
Kusek agreed with Sanders that product quality is impor- tant, especially as consumers are still discovering what they like.
“This is still a young market, and consumers are still devel- oping their preferences,” he told BusinessWest. “It’s only been a couple of years, and people will develop brand loyalty and par- ticular consumption methods, and they will spend their money to get those particular brands or products. That will come over time.”
Kusek also believes the consumer base has room to broaden.
“People become cannabis consumers for a wide variety of reasons. We have a medical market and people for whom can- nabis is a significant part of their medical treatment, and you have more people coming into the market and exploring can- nabis for treating pain and sleeplessness. Those people are always going to be coming into the market, as well as people who are curious about it.
“I think one of the challenges in cannabis is connecting and finding consumers; with each new market that comes online, you get the people who are curious, or who are coming back to cannabis after not using it for a long time, people whose
life circumstances have changed. There will always be new consumers.”
In other words, it may be a tougher business to navigate than when there were only a few dozen shops open in Massa- chusetts, but it’s still a dynamic field.
As Kusek put it, “it’s never dull, that’s for sure.” BW
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