People often ask us “why Cannabis is so expensive to buy at the dispensary?”
Our answer is always the same, “there are many factors contributing to the failure of the program for patients.”
Early in the process of writing legislation some lawmakers saw the need for more supply. For example, the original House Bill 321 required, “Not less than twenty-six dispensary licenses shall be offered to qualified applicants in the State by January 1, 2019; “http://www.capitol.hawaii.gov/session2015/Bills/HB321_HD1_.PDF State agencies testified against having a Cannabis economy and shifted all aspects of the program to North American investors.
Cannabis supply and demand has been managed by law enforcement and the department of health for the last 5 years. Most recently they have take the money patients pay for the program and used it to create a new Cannabis control scheme with more the help of out of state regulators from the of the program. Unlike states where a patient protection program was created before the dispensary investment program, Hawaii never really recovered. Social equity does not exist in Hawaii.
Today our dispensaries are owned by multi-state operators and soon our small Cannabis farms will be owned by other multi-state operators. Our brands are being exported to North America and sales continue to rise for investors. We hear stories from patients that all sound similar, that something isn’t right. We suspect that things would feel better if our Cannabis industry was local. When the investors decided to hire an outsider to run their industry organization a report was created to reignite the drug war. Where the investors come from, every dollar has to be made by taking market share away from the home market where our small family farms rely on the economics of supply and demand.
About half of our Cannabis is supplied by licensed patients in our home market. These are our neighbors, friends, ohana and people we rely on for safe and affordable medicine. Unfortunately the drug war in Hawaii is targeted at patients. Earlier this month the Kauai County Council voted unanimously to fund DEA Operation Green Harvest missions. Under the guise of eradicating meth AND Cannabis they will fly helicopters to find the meth and Cannabis. More helicopter surveillance and raids at patient farms means more artificially price inflation. The price of Cannabis rises while other drugs like ICE and METH become more affordable. This protects the budgets and salaries of local law enforcement. Lawmakers often side with law enforcement on budgetary issues. Dispensary investors get higher prices while gaining market share. It works exactly the same in California post legalization. Licensed growers in that state were criminalized and shut down. California went from over 60,000 licenses to less than 10,000 licenses in two years. Only the investors are left. Organizations like ours that give away medicine to low income, licensed patients were also shut down due to distribution agreements with alcohol companies.
Working with the dispensary investor group, HCIA, law enforcement and some lawmakers continue to misrepresent facts. to make their case against patients being able to grow our own medicine. In many of our rural neighborhoods, multi-generational Cannabis growers do not have access to jobs an hour or two away. They have grown Cannabis to help support their families for several generations and they are targeted every day. Recently law enforcement have parked in our neighborhoods to surveil and stop drivers that look like growers. It’s been working and at least a dozen of our neighbors have been arrested and or served with a notice to appear in court for a DUI. The reason this is so effective is because Cannabis is in our bloodstream for 30 days after consumption. ICE, METH, alcohol etc. leaves the body in 24 hours. This affects supply and demand.
Hawaii dispensaries are not required to grow Cannabis. Because there is no competition between dispensaries, the supply is artificially decreased by simply growing less than lawmakers intended. In closed door meetings dispensaries told lawmakers they would need to grow more plants but did not grow more plants. By producing less the Cannabis produced becomes more expensive.
So What is an Example of Cannabis Supply and Demand?
Let’s look at a simple example of how Cannabis supply and demand works in Hawaii.
If a patient plants, grows, harvests, trims and packages 16 ounces (1lb) the SUPPLY is 16 ounces. If 16 patients each need one ounce, the DEMAND is 16 ounces. Accordingly, each patient would pay a retail price of $200. The grower gets $3200 minus their costs of about $100. This leaves the patient grower with a net revenue of $1,600 and they get to pay their bills. This is very achievable with a license since many patients have learned how to grow 10 plants. Costs are further reduced in cooperatives where production and testing costs are shared. This is the home market in a nutshell -small family farms making ends meet by growing and sharing medicine with other patients.
However, if a patient grower only grows 8 ounces the supply is reduced. Demand for the ounce is likely the same. So if 16 patients still need an ounce and the grower has the same costs and they need to pay their bills, the grower must charge more for the ounce. $300 instead of $200 for example.
Why Is Cannabis So Expensive in Hawaii Dispensaries?
The big picture works the same way. 35,000+ patients in Hawaii need that ounce every month. The home market produces about half of the supply and the dispensary market produces about half the supply. Like the example above, the supply is affected there’s not enough Cannabis being grown. Lowering the SUPPLY with the same DEMAND inflates prices. If the dispensary fails to grow enough SUPPLY they raise prices to make up for the difference. To be fair, dispensary investors have huge overhead costs like facilities, taxes and other regulations. Their North American investors expect profits. Their investment boards have fiduciary responsibilities, not to patients or employees but the board of investors.
Home growers have lower overhead costs but get raided by law enforcement. Entire crops are stolen. Assets like cash, cars, homes and land are confiscated. Long term prison sentencing has eased up in the last two years but is once again on the rise. Incarceration is always a threat. There are many times when a patient just can’t get all the work done. Exhaustion and acute symptoms flair up and shortcuts put patients in greater risk. For example, if harvesting is delayed a patient may harvest more than 4 ounces at a time. For this they face jail time or much worse considering Hawaii’s outdated a strict asset forfeiture laws. Ten plants is just not enough to ensure a steady supply to meet demand. For newly licensed patients, the learning curve is steep and failure of entire crops is not uncommon. Every year patients have had to fight for the rights of caregivers to grow and provide medicinal services to patients.
Lower prices are possible.
Recently dispensaries were granted more rights including the ability to expand their monopoly. Larger facilities, more plants, edibles will be enjoyed by all 8 dispensaries in Hawaii. Now that you know how Cannabis supply and demand works, would you expect Cannabis prices in Hawaii to come down? If there’s more SUPPLY and the same DEMAND, we should start seeing those $200 ounces in the dispensaries, soon, right?
There are dozens of factors affecting Cannabis supply and demand in Hawaii. In part two we’ll take a closer look at the investors and their businesses. We think you’ll be surprised what you learn next. Subscribe to get future Hawaii Cannabis updates in your inbox.