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(Slate)   Turns out that selling marijuana in Colorado isn't quite the profitable business everyone assumed it would be   (slate.com) divider line 98
    More: Obvious, Colorado, traders  
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5143 clicks; posted to Business » on 17 Jan 2014 at 11:52 AM (31 weeks ago)   |  Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»



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2014-01-17 10:53:55 AM
Well the risk is lower so it would stand to reason the rewards would lessen as well.


Also something about the free market and lowering prices. The free market?! HOW DOES THAT WORK?!
 
2014-01-17 10:55:07 AM
Also: TFA: the world's first legal pot shops opened for business.


haha wut?!
 
2014-01-17 10:56:47 AM

The Stealth Hippopotamus: haha wut?!


Well, in Amsterdam they're legal, but they ain't 100% legal.
 
2014-01-17 11:03:51 AM
So they interviewed a pot shop owner who is a really terrible grower and businessman and a black market dealer who is threatened by the prospect of legal weed, and came to the conclusion that it won't be a profitable business in Colorado.

Well done, Slate.

What does the American Family Association think? And what about the author's grandmother?
 
2014-01-17 11:04:33 AM

factoryconnection: The Stealth Hippopotamus: haha wut?!

Well, in Amsterdam they're legal, but they ain't 100% legal.


It's kind of like the difference between "innocent" and "found not guilty."
 
2014-01-17 11:10:15 AM
I hope it succeeds, despite the additional challenges of running it as a legitimate business.
 
2014-01-17 11:22:33 AM

sigdiamond2000: So they interviewed a pot shop owner who is a really terrible grower and businessman and a black market dealer who is threatened by the prospect of legal weed, and came to the conclusion that it won't be a profitable business in Colorado.

Well done, Slate.


Not only that, but it's been legal for a little over two weeks. Two weeks! I think that maybe, just maybe, we can wait a little bit while this fledgling industry figures out product, marketing, distribution and management before we make any sweeping predictions. Here, I'll make my predictions for the first week of 2015, when the "Marijuana's been legal for a year now--what has changed?" articles crop up:

- Most companies made enough to stay in business, but haven't been reactive enough to stay highly profitable as the industry changes like legislative adjustments have occurred. Several companies have gone bust. A few, however, have adjusted faster than most, either with better product, better distribution, better marketing, and/or better management.

- There will have been a few high-profile cases of marijuana ending up in the hands of people that shouldn't have it. Every time a driver is pulled over and busted for DUI-weed, some people will blame the availability of it because of the emerging pot shop industry. Others will then point out that the number of these cases will be statistically level with the traditional incidence of people busted while driving under the influence of weed. Any unusual trend in Colorado that can possibly be tied to marijuana will lead to headlines like: "Unemployment Climbs 1.5% in Northern Colorado. Is Legal Marijuana Suppressing Job Seeker's Motivation?" which will contain exactly one quote from some crackpot who points out that long-term marijuana use has a correlation with decreased motivation.

- 4/20 will be a huge event in 2014, nearly double the size of previous years. Funyuns sales skyrocket, Frito-Lay files impressive first-quarter earnings 5% above analyst expectations.

- Every single news story from Colorado about some idiot being an idiot will either include information about, or speculate on, whether the person had smoked pot prior to whatever he's being arrested for, or was found to be in possession of pot when arrested.

- Nothing will really be that different. People that always smoked pot will continue to do so, people that never smoked pot probably won't bother, and about 1% of people that were on the fence about whether or not to try it will be swayed by its legality.
 
2014-01-17 11:22:57 AM

Diogenes: factoryconnection: The Stealth Hippopotamus: haha wut?!

Well, in Amsterdam they're legal, but they ain't 100% legal.

It's kind of like the difference between "innocent" and "found not guilty."


Or "the ruling on the field stands" vs. "the ruling on the field is confirmed."
 
2014-01-17 11:46:00 AM

factoryconnection: Diogenes: factoryconnection: The Stealth Hippopotamus: haha wut?!

Well, in Amsterdam they're legal, but they ain't 100% legal.

It's kind of like the difference between "innocent" and "found not guilty."

Or "the ruling on the field stands" vs. "the ruling on the field is confirmed."


Also CO isn't 100% legal. There is that whole federal thing and all.

Since we are splitting hairs, lets split all the hairs.


Frankly I'm for legalizing weed. Still won't matter to me personally since I'm under DOT regulations.
 
2014-01-17 11:59:42 AM
From what I understand all of Colorado instantly turned into mad max territory on Jan 1. Lord humongous is governor now. So...yeah. Must be difficult to to make money in the wasteland like that.
 
2014-01-17 12:01:28 PM
That's odd... My boss at this time last year went and saw his family for Xmas. When he got back, he reported that his sister and her husband were now pot growers as part of a co-op. He had been an architect that usually only worked on mansions, and she had been some kind of high end corporate lawyer. Both had quit their jobs and were make more money as legal pot growers than their previously lucrative professions, I wouldn't expect the sellers to be much more regulated and stifled than the growers...
 
2014-01-17 12:02:26 PM

SmackLT: but it's been legal for a little over two weeks. Two weeks!


This.

How many PC's did IBM sell in the first 2 weeks?
How many are sold today?
What is the air-speed velocity of an unladen swallow?
 
2014-01-17 12:08:20 PM

The Stealth Hippopotamus: Also CO isn't 100% legal. There is that whole federal thing and all.


Obviously.  I just wanted to make the Pulp Fiction reference.
 
2014-01-17 12:12:01 PM
Can we wait about 6 months without these stories?  It's only been legal for 17 days!
 
2014-01-17 12:13:16 PM
Something about this makes me think Sarah Palin has to be president now.
 
2014-01-17 12:15:10 PM
So just like any other new business?
 
2014-01-17 12:15:27 PM
says Brandon, the 29-year-old-proprietor of a midsize Denver operation, which has been in business since 2009. (We're not revealing his real name or that of his dispensary; although he's in compliance with state law, he didn't want his competition knowing the ins and outs of his business.) In truth, business is going well for him. Located in a stylish downtown building filled with loft-like workspace

No way they'll be able to identify him from that little bit of info.
 
2014-01-17 12:16:33 PM

slayer199: Can we wait about 6 months without these stories?  It's only been legal for 17 days!


The drug war narrative demands that all drugs must always be seen in the worst possible light. Legal cannabis has to be proven not to work. If Colorado pulls this off, existence of life in this entire galaxy will come to an end! Tyrannids will consume us all, chaos will resign and...and...REALLY BAD STUFF will happen!
 
2014-01-17 12:17:42 PM
Even if the net profit margin is only 5%, it's still better than running the risk of a drug conviction.  Period.  No comparison.
 
2014-01-17 12:19:42 PM
So a start-up business that has to invest a bunch of cash up-front to build up infrastructure and inventory, meet licensing and regulatory requirements, and experiment a bit to find a stable and reliable business/production model is going to have high initial costs and may not be insanely profitable from day 1? And clandestine, illegal operations who provide the same product but do not have to deal with any of the regulatory hassle or overhead costs (but run the risk of being arrested and prosecuted) have higher profit margins? Shocking revelations, Slate! I'm clearly better off trying to illegally grow a bunch of pot in my basement and then sell it at the local elementary school. Thanks for the great business advice!
 
2014-01-17 12:20:26 PM
Well, if CO is smart, they can always adjust the tax rates if recreational cannabis is not selling well, or if the black market won't go away.

Legalize and "tax the hell out of it," but you have to be reasonable. It seems like CO didn't think this all the way through. I can't fault them tho; it's difficult to be the first to grapple with this.

A much freer market would help solve this problem, even with high taxes. Also, edibles might be a good solution for the business owners, but I don't know how dickish CO is about those. WA seems to be on the stupid side about edibles right now, wanting to regulate them by weight.
 
2014-01-17 12:26:09 PM
I wasn't stupid enough to assume that.
 
2014-01-17 12:29:30 PM

Weaver95: If Colorado pulls this off, existence of life in this entire galaxy will come to an end!


Future mayor of Denver?

images18.fotki.com
 
2014-01-17 12:32:16 PM

sigdiamond2000: So they interviewed a pot shop owner who is a really terrible grower and businessman and a black market dealer who is threatened by the prospect of legal weed, and came to the conclusion that it won't be a profitable business in Colorado.

Well done, Slate.

What does the American Family Association think? And what about the author's grandmother?


They didn't say it wouldn't be profitable, they said it likely won't be as profitable as people assumed. And what evidence are you using to say that the guy is "a really terrible grower and businessman"? Do you have a better example of one?
 
2014-01-17 12:33:17 PM

SmackLT: sigdiamond2000: So they interviewed a pot shop owner who is a really terrible grower and businessman and a black market dealer who is threatened by the prospect of legal weed, and came to the conclusion that it won't be a profitable business in Colorado.

Well done, Slate.

Not only that, but it's been legal for a little over two weeks. Two weeks! I think that maybe, just maybe, we can wait a little bit while this fledgling industry figures out product, marketing, distribution and management before we make any sweeping predictions. Here, I'll make my predictions for the first week of 2015, when the "Marijuana's been legal for a year now--what has changed?" articles crop up:

- Most companies made enough to stay in business, but haven't been reactive enough to stay highly profitable as the industry changes like legislative adjustments have occurred. Several companies have gone bust. A few, however, have adjusted faster than most, either with better product, better distribution, better marketing, and/or better management.

- There will have been a few high-profile cases of marijuana ending up in the hands of people that shouldn't have it. Every time a driver is pulled over and busted for DUI-weed, some people will blame the availability of it because of the emerging pot shop industry. Others will then point out that the number of these cases will be statistically level with the traditional incidence of people busted while driving under the influence of weed. Any unusual trend in Colorado that can possibly be tied to marijuana will lead to headlines like: "Unemployment Climbs 1.5% in Northern Colorado. Is Legal Marijuana Suppressing Job Seeker's Motivation?" which will contain exactly one quote from some crackpot who points out that long-term marijuana use has a correlation with decreased motivation.

- 4/20 will be a huge event in 2014, nearly double the size of previous years. Funyuns sales skyrocket, Frito-Lay files impressive first-quarter earnings 5% above analyst expectations.

- Every single news story from Colorado about some idiot being an idiot will either include information about, or speculate on, whether the person had smoked pot prior to whatever he's being arrested for, or was found to be in possession of pot when arrested.

- Nothing will really be that different. People that always smoked pot will continue to do so, people that never smoked pot probably won't bother, and about 1% of people that were on the fence about whether or not to try it will be swayed by its legality.


Applications for enrolllment at Colorado universities up dramatically.

And I would be shocked if there wasn't some surge of heavy handed federal busts, because the DEA needs to protect a major funding steam.
 
2014-01-17 12:33:59 PM
Because all businesses are profitable in the first two weeks of operation.
 
2014-01-17 12:37:19 PM

Omnivorous: Because all businesses are profitable in the first two weeks of operation.


Selling weed on the street = yes, legit businesses = no. The article is comparing illegal dealing to the new system. I was kind of hoping they would slip the cost of Obamacare in there just for the LULZ.
 
2014-01-17 12:37:43 PM
I can't wait for the whole issue to stabilize and let Philip Morris mass-grow acceptable pot for the masses, and the small guy artisan-grow weird shiat for the connoisseur.  It eventually worked with beer.
 
2014-01-17 12:39:41 PM
What a stupid article
 
2014-01-17 12:41:11 PM
jjorsett:

They didn't say it wouldn't be profitable, they said it likely won't be as profitable as people assumed.

Actually, they just cracked open the books.  I'm not sure who these people that assumed are, but they're not mentioned in the article.
 
2014-01-17 12:41:26 PM
It's a relatively easy to grow plant that can be readily cultivated in most of the United States, it should be almost impossible to make a lot of money selling the stuff.
 
2014-01-17 12:43:53 PM

Target Builder: It's a relatively easy to grow plant that can be readily cultivated in most of the United States, it should be almost impossible to make a lot of money selling the stuff.


Making "beer" is trivial
Making beer that doesn't take like ass requires actual skill
 
2014-01-17 12:49:21 PM
FTFA:

"He's had to destroy an entire poorly produced crop yield that had been devastated by mold, mildew, and pests."

Can he apply for agricultural subsidies or crop insurance like farmers?
 
2014-01-17 12:55:58 PM
I liked how the illegal marijuana market was one guy called CT.
 
2014-01-17 01:04:02 PM
A 29-year-old dude is struggling to maximize profits at his independent small business!  Shut it all down!
 
2014-01-17 01:04:08 PM

fickenchucker: I can't wait for the whole issue to stabilize and let Philip Morris mass-grow acceptable pot for the masses, and the small guy artisan-grow weird shiat for the connoisseur.  It eventually worked with beer.


I personally am waiting for the day where I can treat it like I do beer. I can go out of my way to get some really nice stuff but if I'm lazy I can pick something up at 7-11.
 
2014-01-17 01:07:18 PM

cgraves67: FTFA:

"He's had to destroy an entire poorly produced crop yield that had been devastated by mold, mildew, and pests."

Can he apply for agricultural subsidies or crop insurance like farmers?


Maybe state ones but definitely not federal.
 
2014-01-17 01:07:21 PM

The Stealth Hippopotamus: Also something about the free market and lowering prices. The free market?! HOW DOES THAT WORK?!


Yeah, how does it work?  Legal pot is currently twice as much at retail as medicinal or illicit pot.  Is that what the free market was supposed to do?
 
2014-01-17 01:18:07 PM
Well like any business that is new you will have winners and losers and after a while the market will find a balance and people will get used to it. The people with an nose for business will last and the people with no sense will be flushed out.
 
2014-01-17 01:18:15 PM

factoryconnection: Obviously. I just wanted to make the Pulp Fiction reference.


sorry missed it.


Still missing it. It's been a couple of decades since I saw it.
 
2014-01-17 01:26:03 PM

midigod: Yeah, how does it work? Legal pot is currently twice as much at retail as medicinal or illicit pot. Is that what the free market was supposed to do?


Are you blaming the high taxation of legal recreational weed on the free market?
 
2014-01-17 01:31:32 PM

jjorsett: And what evidence are you using to say that the guy is "a really terrible grower and businessman"?


FTFA:

He's had to destroy an entire poorly produced crop yield that had been devastated by mold, mildew, and pests.
 
2014-01-17 01:32:11 PM
30% tax, store overhead, paid employees, insurance...these things cost money. I have no doubt the businesses will turn profitable unless the legal system does a 180 shift.
 
2014-01-17 01:37:28 PM

midigod: The Stealth Hippopotamus: Also something about the free market and lowering prices. The free market?! HOW DOES THAT WORK?!

Yeah, how does it work?  Legal pot is currently twice as much at retail as medicinal or illicit pot.  Is that what the free market was supposed to do?


First off, [citation needed]. Not that I think you're intentionally misrepresenting anything, I just think 200% seems kinda *puts on sunglasses* high.

Also, I'd expect that medicinal "strains" (or even if they divide every oz into "medicinal" and "recreational") would be cheaper. If you're using it as medicine it damn well SHOULD be cheaper, and let the Rocky Mountain Surfing Club subsidize a bit of Grandma's Glaucoma-Fighting Club.

And I would be just pleased as punch if I could walk down to the corner store (say it with me: "bo-DAY-gas". Very nice) and pay 150% of what I pay now - convenience, legality (I don't have to risk spending hours in jail and upwards of 2 grand if I get caught buying Thai Stick from 7-11), known quality/quantity of product, and the potential to sue if I get ripped off make it a better deal.
 
2014-01-17 01:43:25 PM
What happened to all the stories about legal stores running out of supply and jacking prices way up to compensate?  Sounds like if there's a problem, its not due to lack of demand.
 
2014-01-17 01:48:17 PM

factoryconnection: The Stealth Hippopotamus: haha wut?!

Well, in Amsterdam they're legal, but they ain't 100% legal.


they're not 100% legal in colorado either.
 
2014-01-17 01:53:48 PM

thurstonxhowell: midigod: Yeah, how does it work? Legal pot is currently twice as much at retail as medicinal or illicit pot. Is that what the free market was supposed to do?

Are you blaming the high taxation of legal recreational weed on the free market?


And, the veracity of his numbers aside, he also seems to be claiming that illegal sales are not the free market.
 
2014-01-17 02:03:11 PM
Until such point that they bother to list estimated profit margins, this is meaningless.  "Not as profitable" doesn't necessarily mean much here.  What margins are they comparing?  "Oh, businesses aren't making 200% after expenses" type tripe, or "After expenses, businesses are pulling in 2%."  If they are maintaining margins in the low teens on physical products, welcome to the entire rest of the world since the economy tanked.
 
2014-01-17 02:15:23 PM

sigdiamond2000: jjorsett: And what evidence are you using to say that the guy is "a really terrible grower and businessman"?

FTFA:

He's had to destroy an entire poorly produced crop yield that had been devastated by mold, mildew, and pests.


And you know for a fact that that never happens to anyone else in the biz? You can't take an isolated fact and extrapolate that into an indictment of someone's business practices unless you have evidence that other, more competent business owners don't have the same difficulties. I hear of crop failures and pests experienced by farmers who have been farming for decades. If even experienced and successful farmers can hit those kinds of obstacles, I see no reason that a grower of another agricultural product like marijuana wouldn't experience the same from time to time.
 
2014-01-17 02:15:34 PM

Dr Dreidel: midigod: The Stealth Hippopotamus: Also something about the free market and lowering prices. The free market?! HOW DOES THAT WORK?!

Yeah, how does it work?  Legal pot is currently twice as much at retail as medicinal or illicit pot.  Is that what the free market was supposed to do?

First off, [citation needed]. Not that I think you're intentionally misrepresenting anything, I just think 200% seems kinda *puts on sunglasses* high.

Also, I'd expect that medicinal "strains" (or even if they divide every oz into "medicinal" and "recreational") would be cheaper. If you're using it as medicine it damn well SHOULD be cheaper, and let the Rocky Mountain Surfing Club subsidize a bit of Grandma's Glaucoma-Fighting Club.

And I would be just pleased as punch if I could walk down to the corner store (say it with me: "bo-DAY-gas". Very nice) and pay 150% of what I pay now - convenience, legality (I don't have to risk spending hours in jail and upwards of 2 grand if I get caught buying Thai Stick from 7-11), known quality/quantity of product, and the potential to sue if I get ripped off make it a better deal.


I always click profiles when I see a post like this, and usually find someone from East of the Rockies.

On the West Coast, 150% won't work, as there isn't any real risk from buying an ounce. The quality and convenience can't be beat by legal sources, but maybe they could match it.

If it was roughly the same price as my guy, I'd go retail. But the quality would have to be equal at least. I won't go to 7-11 for low grade when I can get highs delivered.
 
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