As the recreational marijuana industry slowly rolls out throughout Washington state, retailers here are reporting modest initial sales.
However, several challenges remain.
As of Oct. 21, Spokane County has 55 approved marijuana producers, 39 approved processors, and six approved and licensed retail marijuana stores, out of its allotted 18 retail licenses. While only a third of the allotted stores have received licenses and opened, Mikhail Carpenter, a spokesman from the Washington State Liquor Control Board, says this number is actually fairly high compared to other counties.
“Six is actually pretty substantial, as far as big cities go,” he says.
There are a number of factors that could be holding up the remaining licenses, Carpenter says.
“We’ve had people who wanted to switch locations, some are working stuff out with their local governments, or were never planning to open a store,” he says.
Carpenter says some applicants were planning to obtain a license and then sell it, which is prohibited. Others have decided to wait and see how the market goes before entering into it. In these cases, the liquor board moves on to the next applicant in the lottery.
Carpenter says the liquor control board has issued about 60 retail location licenses total so far. In Spokane, the current licensed retailers are Green Star Cannabis at 1403 N. Division, near downtown; Satori at 9301 N. Division, on the North Side; Spokane Green Leaf at 9107 Country Homes Blvd. on the North Side; Spokane’s Green Depot at 71 N. Ralph in the East Central neighborhood; and GreenLight at 10309 E. Trent and Sativa Sisters at 10525 E. Trent, both in Millwood.
Green Star Cannabis LLC, located in 2,250 square feet of space, opened on Aug. 6 and has been experiencing good sales since then, says owner Sam Calvert.
“It could be better, but that’s a function of pricing,” Calvert says. He declined to disclose specific sales figures.
Calculating prices for different strains of marijuana can be an intensive process for retailers, Calvert says. Prices are dictated by a number of factors, including a particular marijuana strain’s percentage of total tetrahydrocannabinol, or THC, the mind-altering chemical in cannabis. The higher the percentage of THC, the higher the price, Calvert says.
Calvert says that, depending on the retailer, the average price for marijuana in Spokane ranges from $30 to $35 a gram, depending on the THC level.
Calvert built a spreadsheet that allows him to view the price of each strain from the producer and processor, the excise tax that will be extracted, his business overhead, and whatever margin he may be able to make from the sale.
“I plug in a purchase price to where it covers what I pay for it and I how much I need to pay for more,” he says.
Calvert says that another issue with pricing is the 25 percent excise tax, which is taken out at each step of the recreational marijuana process: producer, processor, and retailer.
“The excise tax structure is not sustainable, which is why I only work with producers and processors who have both licenses,” he says.
Those who produce marijuana can also be licensed to process; however, a retailer isn’t allowed to hold any other license.
Calvert says the fact that the recreational marijuana market is so new means that things like pricing are constantly changing.
“It’s an emerging market, so every week is the future,” he says. “Also, in an emerging market, I have to move quickly. As prices drop with the next outdoor harvest, I’ll have to move fast.”
Calvert says he expects that prices will stabilize in the future, but he isn’t sure when.
“Where we’re at now is so different from two weeks ago or two months ago, in terms of pricing, production, availability, and functional business contracts,” he says. “I imagine next month will be very different as well.”
Millwood marijuana retailer GreenLight, which operates under the entity Northwest Organix LLC, experienced slower sales in the beginning, says co-owner Brandon Olson. The store opened about a month ago.
“It felt really slow the first week, then we started doing more advertising and getting more stuff in,” Olson says. “Business has been slowly picking up ever since.”
Olson says the store has also been experiencing some difficulties in pricing, but for different reasons than Calvert claims.
“The only reason pricing is so difficult is we’re not able to compete with the black market or the medical market,” he says.
Olson also says he believes that prices are currently be dictated by growers, who are trying to recoup their startup costs.
“Right now, we’re not pressing them so hard,” he says. “Once these guys start to recoup some of their losses we’ll see a price break.”
Olson says he also predicts prices will start to drop in the future.
“Not in the next couple of months; just the way the grower’s cycles are, that’s not going to do much for us,” he says. “In the next eight months, we will probably see prices drop dramatically.”
Another issue that remains for retailers is access to banks; Calvert says that he currently isn’t using one. Processors and producers have had better luck getting into banking, Calvert claims, but financial institutions are still leery of retailers, even after the U.S. Department of Justice released a memo in February detailing the guidelines for banks to interact with state-licensed marijuana businesses.
“It’s not enough to create comfort for the banks,” he says.
Carpenter, from the liquor control board, says that statewide it appears that some recreational businesses are gaining access to banking.
“We are getting quite a few checks (for tax payments),” he says. “In the first tax period, we had almost 82 percent pay by check.”
Another issue that was foreseen at the start of the summer was that demand for recreational marijuana would far outpace supply. However, that doesn’t seem to be a problem here. For example, Calvert says, that supply has caught back up with demand as the growing cycles continue.
“We spend a great deal of time making sure our relationship with our producers and processors is sound,” he says. “Functional pricing is very important to the customer; most producers and processors understand that.”
Olson says that his store hasn’t had difficulties with supply either.
“I think more of the growers are getting into their cycle,” he says. “Us, in particular, we’ve locked down the growers we’re going to use for our store.”
Calvert says that he currently isn’t selling edibles or concentrates.
“When it comes to edibles and concentrates, I’m being very careful,” he says. “It’s a very highly-regulated portion of the industry.”
Calvert says about 40 percent of the customers who come into the store want edibles; the rest are there strictly for cannabis.
Olson says he has lined up a local edibles producer and will be stocking them starting next week, including a line of cookies.
Meanwhile, the medical marijuana industry, whose fate continues to hang in the Legislative balance, has seen some patients turn to retail operations. However, medical users have to pay the full retail price in a retail store, which is higher than what they’d pay at a collective, Olson says, because collectives aren’t subject to excise taxes.
“We do get quite a few, but once they check out the prices, they walk out and go right to a medical dispensary,” he says.
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