What is the Safest Place to Enter the Industry?
It sounds like owning a grow is expensive, with a lot of risks and longterm forecasting. If you were to look at any part of the industry that someone who has a lot of money wants to get into, what’s the safest place for them to enter?
Manufacturing and dispensaries make the most money. Grows are heavily volatile and they cost a ton of money to start up. The manufacturing process is very procedural, and the machinery is expensive. You're probably going to drop at least a half a million just on machinery. However, you also have guaranteed sales.
If you're going to make CO2 oil or distillate, all the dispensaries are going to buy your product in a new state. If you're in an existing state like California trying to sell oil or distillate, good luck. It's very, very different world because the market is already heavily saturated. From a dispensary, you're selling the products to the end users. So really to have a good dispensary, it's more about location than anything else. A grow is definitely the riskiest. I would say manufacturing has the highest volume with good margins and then the dispensaries have the highest margins overall.
Would you say that having a grow independently without any vertical integration (such as having a dispensary attached to it) it is more a labor of love than it is a smart business decision?
My gut reaction is to say absolutely. In my opinion, growers are the only people I would say are making a good business decision by having just a grow with no vertical integration. If you’re a grower, and you know what you're doing and you have that love and that passion, you can absolutely make money. You can make money as a grow without a doubt.
Now, if you're a doctor, a lawyer or someone else that's just going to dump money into it because you want to be in the cannabis industry, a grow will not work for you. It's going to be a loss. It's going to be a money pit and you're going to be frustrated the entire time. In that case, when you’re not a grower by trade, the only way it makes sense for you to own a grow is if you’re vertical in some way. That means you have a dispensary or a manufacturing facility that you're supplying from your own grow, because then you make up your margins that way.
I own a grow, but the only reason myself and my partner even got into a grow was to supply our dispensaries. And we even have growing experience, my partner more than myself. But I'm in the dispensary game, I opened a grow specifically so I would not have to rely on any third party for my product to be able to sell. Also, I wanted to make sure that I could have product that no one else has.
On a small island like Puerto Rico, every dispensary is selling the exact same product, the exact same flower, the exact same everything. It’s just a price war. Whoever sells it, the cheapest wins and that's why the bottom dropped out and it went down to $8 a gram. That’s your average price per gram in Puerto Rico right now, $8.
We have our own genetics and our own strains that no one else carries, so we charge $15-$18 a gram and we get it all day long because we have the best genetics on the island. We don't sell to anybody else, you can only get that at our dispensaries. Plus we have over 60 strains that we offer, whereas everyone else grows five to twenty strains. We knew what we were doing going into it, but it was strictly because we were playing the dispensary game.
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Cheers!
.: Adam
CEO