I kept a lot of details sparse when I recently published a case study around the idea of building a business for legally growing and selling cannabis in the same location. I’m going to write a lot about the details in subsequent blogs, but I also want to elaborate and build on the general idea.
The scarcity of cannabis products right now is definitely not a bad thing for us as a cultivation business. The business loses raw cash flow because of product scarcity but, in exchange, has the opportunity to produce the scarce resource and pick its final price. Regardless, this is not the point of the case or the long-term path to security. Sales during the initial time period of higher prices is less important to our overall success because it is out of our control and operating on an unknown time basis. We cannot change how/when/where competition comes to market, all we can do is prepare ourselves to produce the best product at the lowest price while still remaining profitable enough to make a living and stay in business.
The operational expertise gained during that same time period, however, will be a huge advantage in long-term success. Unless your pockets are extremely deep, you’re going to have to make sacrifices in your grow environments. Regardless of the depth of your pockets, you’re going to encounter challenges or bottlenecks or inefficiencies or equipment failures or whatever. Your team will be tested and your ability to assess, adapt, and learn in that environment will become operational expertise. Others are not afforded the ability to learn those lessons while you will be optimizing your processes. Time in that context is invaluable.
It's my opinion that the financial advantages of having your own grow will increase as supply stabilizes or even overruns. Why? Because almost all of the growers in the state will be required to pass through at least one other business before the product gets to the retail customer. A pass to a retailer through a transporter or to a manufacturer then retailer or from a tribal grower to a retailer. If you have your own grow, the expenses for the grow are easy to calculate. If you don’t have your own grow, the cost for product will be what the cost will be and your profit margin is…. fluctuating significantly.
I’m not ignoring mezzobusinesses, by the way. There’re just a couple things about them I know for sure: they already know all of this and they had to take part in a lottery. You do not have access to a mezzobusiness license anymore and, even if you did, you shouldn’t need my blog if you’re at that level. If anything, I’d hope you’re in a position to teach me a couple things. Sorry for that tangent.
Based on the conditions of the regulatory landscape, I think we have way more risk of long-term oversupply than undersupply. And I think, probably quickly, that leads to a race to the bottom. I doubt that really kicks in until maybe 2027, but it’ll happen. And, when you have your own grow and a retail store, the wholesale price literally does not matter. While others are racing to their bottom, you won’t be near yours. You are protected from low wholesale costs by nature of producing your own wholesale cost. When you need to move product, your price can sink significantly lower because the floor of your costs is the cost of your property, utilities, and supplies – your own wholesale cost. And that can be pretty dang low. Do the math yourself and consider what is the actual cost to produce a pound of cannabis flower. People have been growing and selling weed in their basements for a long time at prices a lot lower than you’re seeing right now. The math is going to tell you to get a grow and it’s not wrong.
You can steer this opportunity so many ways. You can find efficiencies to make the cheapest product or go all-out on top-of-the-line boutique or find some weird specialty and make the only one of it. Whatever; find your niche! For us, it’s going to give us room to be so creative and disruptive. At some point in 2026, we’re going to get our heads back above water and, at that point, we’re going to be standing there with the capacity to grow a lot of really good weed, do with it whatever we want, and charge for it a fair price that makes our team a fair living and gets our customers a product they can afford and feel good about.
On that note, I personally take a lot of pride in how we built this thing in the true spirit of the American dream in the way I was taught in public schools by members of my communities – the same ones we all live in now. There’s a lot of bullshit going around. A lot of really hateful opinions and raw anger and I’m anxious and frustrated. Our team at Aurora is made up of people who look different from each other and that’s intentional and it’s a huge part of what makes us a great team. We all have an awful lot in common and we need each other. All of us. Try to stand up for somebody who needs a voice when you can, and keep yourself safe in the process.
Have a great week!
Randy