Much ink has been spilled over the glut of cannabis in the state of New York. The state has granted licenses to grow cannabis to ~280 farms, but so far only 23 cannabis retail stores have opened in the state. And as a result, the pot runneth over:
- Growers in New York collectively have an oversupply of an estimated 250,000 pounds of cannabis, with more crops growing in their fields.
- That’s the equivalent of about 378 million joints (a joint contains roughly 0.3 grams of cannabis).
Now New York’s Office of Cannabis Management (OCM) has approved what are commonly called farmers’ markets for the growers, but what it’s calling Cannabis Growers’ Showcases.
So dope: The first market took place in New Paltz on Aug. 10, in a parking lot behind the village hall, and they’ll continue on Thursdays, Fridays, and Saturdays.
The Business of Cannabis called the effort a “first-in-the-nation initiative,” and Anne Forkutza, head of market expansion and industry relations at Dutchie, which specializes in payment systems for cannabis businesses across the country, agreed.
While Dutchie has helped some cannabis retailers in California open pop-up shops at events like concerts and festivals, a marketplace that features multiple growers and is an event unto itself is “definitely unique,” Forkutza told Retail Brew.
As more of the markets open throughout New York, it may appear to the naked (and perhaps slightly bloodshot) eye that the farmers are selling directly to consumers. And in a sense, they are, since the farmers themselves are staffing the booths and singing the praises of their strains.
But are the markets DTC in the way that truly warms the cockles of retail executives’ hearts, namely, giving the farmers a boost over the wholesale price they usually fetch for their products since they’re cutting out the middleman?
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Nope.
Joint operation: It will come as no surprise that cannabis, which remains illegal under federal law, is more complicated to sell than an heirloom tomato. As Retail Brew highlighted in our recent series, Spliff & Mortar, everything is significantly more complicated when it comes to operating a cannabis retail business, from finding a bank to setting up a POS system to building out a store.
As OCM spells out in a FAQ about the events, farmers have to partner with licensed cannabis retailers, who are well-versed in the heightened standards for selling it, including age verification and limits on how much THC can be sold in a single transaction.
But that also means that while farmers are offloading surplus, they’re not getting that DTC higher margin bump, because the retailers are making the transaction (and a margin), while the farmers are still selling to them wholesale.
Forkutza explained that what may be a boon to farmers, however, is that OCM spells out that at the markets, the products can be marked up no more than 50% above wholesale prices, while many retailers mark up closer to 100%. (Processed products like cannabis edibles and beverages do not have mark-up limits.) That means shoppers might see this as a truly budding opportunity to score a bargain, helping farmers clear their inventory before it’s passed its sell-by date.
“These distressed farmers—they’re sitting on product that’s nearly a year old,” Forkutza said. “This Cannabis Growers’ Showcase is intended to be another temporary outlet that they can wholesale and move their product.”