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The Best Piece of Cannabis Advice I Could Give You Right Now For the Future

The real money will be made in the demand for cannabis not the supply

Posted by Thom Baccus on Sunday Mar 10, 2019
  1158 Views  /    6 Lights

The One Piece of Cannabis Advice You Need for the Next 5 Years

 

best cannabis advice

With Democrats taking the House in the US, the cannabis space is evolving now at a record pace. With new bills in Congress daily pushing for the legalization of cannabis, and with both Republicans and Democrats both looking to “get credit” for cannabis legalization in America, it is now only a matter of time until we see Federal changes to the schedule 1 status of cannabis.  Scott Gottlieb leaving the FDA?  No big deal.  The momentum is so strong for CBD now after the passage of the Farm Bill, that no matter who heads the FDA, CBD and eventually the entire cannabis will be legal, traded, taxed, and allowed to anyone over 21 years-old in the USA.

 

For those that missed my “4 Things that Suck About the Cannabis Industry Right Now”, you can read it by clicking on the link. (I still cringe at the title and using that word, fearing my Mom will see it and send me an angry text.)  I added a 5th item that I forgot to put in the original article, but the comments were great, and it inspired me to write this piece.

 

What is the one mistake I see people making right now in cannabis, or phrased differently, what is one piece of advice I would have people know now to save them money later? 

 

Cannabis will always be a demand issue in the future, not a supply issue.

 

Wait, what?

 

Right now, due to arcane laws that are about to change around the world, and strange licensing procedures, cannabis is a supply issue, but that will all change over time.  Cannabis is a plant that can grow in 12 weeks, 16 weeks for some Indica strains.  There will never be a shortage or issue with getting cannabis when it is a plant that can be produced anywhere in the world, in large batches, every 12 weeks.

 

Do you remember all the warnings that when California went legal on recreational, they may run out of supply? What happened? The state issued temporary licenses to growers to make sure supply was adequate during the first-year transition.  Once supply/demand numbers were known, the temporary license were removed and the supply chain figured out how much cannabis was needed for recreational and medical demand.

 

Remember when Nevada was going recreational and they worried about supply being disrupted or scarce?  Same thing, permits were issued for growers not licensed yet and grow area licenses were expanded to include more plants. If you have not seen our video below from the The Grove in Las Vegas, they have a state-of-the-art cannabis grow that uses two or three levels of plants growing in the same room.  Basically, robotic shelves that expand your grow area by 300% and it is all controlled by an app.

 

 

The moral of the story is that supply is never going to be an issue in the future.  Yes, there will be some hiccups and bottlenecks as areas first turn on recreational cannabis but overall, there is no worry about supply based on these reasons:

  • Governments can issue permits and licenses to allow more supply from already licensed producers and even non-licenses producers, when needed. They can allow licensed grows to increase capacity and bring more product online with temporary grow and retail licenses.
  • The plant itself can grow in 12 weeks, 16 weeks maximum.  How can you ever run out of a product that regenerates itself in 90 days.
  • With more and more legalization happening, more and more massive cannabis grow facilities are getting approved in Canada and the USA.  This is not even taking into account the booming black market worldwide, or the fact that many of these state laws allow for anywhere from 6 to 18 plants to be grown at home for personal use.  I am not saying EVERYONE is going to grow their own weed, but after watching a few YouTube videos, can we say maybe 10% will try and it and get the hang over it after a few grow cycles?

 

If you are looking at cannabis investments going forward, not looking back at what you should have done in say 2016, but from here on out, you have to be looking at cannabis as a commodity and that branding will now be key in separating your product from the other thousands of products out there.

 

Let me repeat, from here on out, minus a few supply issues as states and countries come online with cannabis, the market and value will be in the demand side, NOT the supply side.  Supply is easy.  Did you ever see a pizza shop run out of tomato sauce or mozzarella and not be able to get it?  Sure, prices may spike hirer when supply is running low, but you can always get it.  Pizza shop owners don’t worry about not being able to get flour or cheese, they worry about selling pizzas.  How do you sell more pizza each week, regardless of whether the price of tomato sauce is higher or lower this current cycle.

 

The same will hold true for cannabis, it will eventually be traded on the Chicago Board of Trade with things such as soybeans, coffee, pork bellies, and corn.  My guess is that there will be 3 contracts for cannabis traded daily on the commodities and futures exchanges: recreational, medical, and shwag (trimmings).

 

What does that mean for investing?

 

If you are investing in cannabis going forward, guys with big grows are nice, but look more at the numbers for market share and what brands are they focusing in on?  Can they grow a loyal customer base with a better product?  Who knows how to get orders online and who knows how to market in a world where marketing for cannabis is difficult?

 

Whoever can win the race for online orders, control traffic, rank well in Google, will control margins on orders.  As Jeff Bezos famously said, “Your margins are my opportunity.”  If a brand can generate an order for cannabis for $0.03 from online, organic traffic, and a competitor is paying $15 to acquire a customer through online marketing, guess who wins that war over time?

 

Even if Facebook and Google turn on cannabis ads, it will still be incredibly valuable to create organic traffic through blogs, videos, and social media.  Look at the hypothetical example below:

 

OrganaCannaStar – 10 orders came in online today to their online menu and ordering platform. 4 orders came from Google Adwords which cost $11 to get from Google. 4 Orders came from Facebook/Instagram at $6 each, and 2 came from organic traffic that costs you $0.05 based already published content or videos.  OrganaCannaStar paid $68.10 for 10 orders today, or $6.10 an order.

 

CannaLeafBuyerWire – 10 orders came in today to their online store, but they have so much organic traffic they only bought 2 leads from Google at $11 and 2 leads from Facebook at $6, and the other 6 came in from organic traffic to their sites at $0.05.  CannaLeafBuyerWire paid $34.20 today for 10 orders or $3.42 an order.

 

Company one is paying almost 100% more an order by having to use all paid traffic sources, if and when the time comes that avenue even is an option.  Organic traffic is still going to be worth gold, even if PPC and online advertising is allowed online.

 

When investing in the future, ask who controls the demand side and who can dictate pricing?  If you can create orders for any business, pizza, construction, lawyers leads, whatever, you are extremely valuable in the business chain.

 

At some point cannabis will be ordered just how Amazon taught us, two clicks with your thumb and depending on where you live, delivery within 90 minutes or up to two days as part of a Prime type ordering community.

 

Supply will become less and less relevant so be ready to be on the demand side and/or branding.

 

OTHER STORIES YOU WOULD LIKE..

CANNABIS PROBLEMS RIGHT NOW

4 THINGS THAT STINK ABOUT THE CANNABIS INDUSTRY, CLICK HERE.

OR..

DOES AMAZON SELL MARIJUANA

WILL AMAZON BE SELLING MARIJUANA SOON, CLICK HERE.


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