While many people, including Rex Bohn and Richard Salzman, have lobbied Humboldt County to become a “Napa Valley” type marijuana business model in the future post-federal decriminalization, I tend to agree with that with one minor exception. Wine vintners are running a legitimate (there’s that word again) business.
If you’re gonna open a “bud and breakfast” any idea of how many government permits and inspections one has to jump through?
I enjoy California wines and spend a lot of time in the Sonoma and Napa Valleys. The typical bottle of California red sells for around $20 and the average California white wine for around $10. That’s average. You can find many good tasting wines for under $5 (Cosentino’s Old Red $3.99 at Grocery Outlet or Trader Joe’s Charles Shaw “Two Buck Chuck” Chardonany now $2.49) or you can pay $100 plus for a bottle of California killer Cab.
But here’s the kicker … California Cabernet Sauvignon grapes sell for an average of $4,500 — a ton. Divide that by 2,000 and you get $2.25 a pound. It is just a matter of time before corporations like Phillip Morris, Altria, Reynolds American, Brown & Williamson, Lorillard, Liggett Group, Archer Daniels Midland, Cargill, Du Pont, Monsanto, Pepsi, Coca-Cola, Dole, General Mills, Nestle, Kraft and Costco get into the cannabis business.
Marijuana is an agriculture commodity that can grow anywhere under the proper conditions. Corporations will have economies of scale and consumers won’t care if it comes from Stockton, Fresno, Modesto, Fairfield, Vallejo, Bakersfield or San Fernando. Do we know of a local business in McKinleyville that produce an agriculture commodity, that has acres of greenhouses, a workforce in place, ships around the globe? The only reason we have an abundance of marijuana grows here in Humboldt County is the remoteness of the region making it difficult for law and code enforcement officials to enforce the laws.
With any commodity including beer, wine and cigarettes, the real money is in the processing, packaging and marketing of the final product, not the commodity itself. Can anyone tell me where the R.J. Reynolds, the makers of Camel cigarettes gets their tobacco leafs? Does any Camel smoker care?
Recently the country of Uruguay announced they would be selling marijuana for $1 per gram. At 494 grams per pound, that works out to $494 per pound — retail price. Uruguay isn’t doing this to be progressive, but rather to take the product away from the drug dealers. That would make the wholesale price down around $250 per pound.
Here’s my near future prediction: marijuana wholesale prices will drop precipitately from the current $1,500-$2,000 a pound down to around $500 a pound. Once the corporations take root and join the cannabis commodity industry expect the prices to free fall down to around $25 a pound or less. Tell me what that does to your business model here in Humboldt County.
Take the typical “mom and pop” SoHum grower in near future producing 300 pounds at $500 per pound wholesale, that comes out to $150,000. Subtract out their cost of goods sold, marketing and transportation, say 30% ($45,000) and their net is $105,000. Not bad income, considering they are no taxes paid. Should prices fall to $25 per pound, then these growers might be really eligible for the PG&E CARE program.
This is Economics 101. Once the corporations join the cannabis industry the supply will explode. Remember corporations are making a profit selling carrots, an agriculture commodity, at $0.46 a pound retail, which makes the wholesale price at least 20% less. Would you plant a crop that yields $0.35 per pound or $25.00 per pound? Larger supply, growing demand – what happens to prices? Are you starting to get an idea where marijuana prices are headed?
A pack of cigarettes costs about $3. What do you think a pack of rolled marijuana joints will cost that you will be able purchase at any 7-11 or your local convenience/grocery store?
How many of our local growers scientifically test the THC content of every batch grown? How many of our local growers can put a label on their ingredients? ‘Cuz judging by the recent arrest photos on LoCo from local grow sites, there’s no way in hell I’d want to ingest a product that uses rat poison or diesel spill.
My nephew recently graduated from U.C. Davis with a degree in chemistry (with honors). He was working in Mumms in Napa where it was all about quality. Budweiser came along and offered to double his pay. He worked there a short while but couldn’t wrap his head around their corporate philosophy of quantity, not quality. The Fairfield Budweiser plant produces a billion (with a “B”) cans of beer each year and it was a small plant. He soon quit and went back to Mumms.
I personally don’t drink Budweiser. Give me a Lost Coast or Mad River beer any day. However Budweiser sells billions upon billions of cans and bottles of beer each year because the average consumer just wants “beer” and doesn’t want to pay the premium price for the better quality product.
For every bottle of Screaming Eagle, Harlan Estate, or Bryant Families Cabernet Sauvignon that retails for $400 plus (if you can find one), the reality is the vast majority of wines are sold at a fraction of that price. The same consumer mindset will apply to marijuana once it’s legal. Most consumers will want the cheap stuff, and not pay the premium price for the perceived better quality.
When the average price per pound of marijuana drops down to $25 or less, the best our Humboldt growers can hope for is Humboldt Made name-brand varietal strains such as Humboldt Homegrown, Garberville Ganja Gold, Redcrest Killer Kush, Redway Rush, Hydesville Hydro, Miranda Mountain High, Meyers Flat Head, Benbow Brutus Bud, Shelter Cove Voodoo Daddy, Honeydew Da Bomb, Willow Creek Wacky Tabacky, Cutten Chronic, Lost Coast Loco Weed and Petrolia Purple Haze.
Otherwise you’re just selling a commodity.
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