MedMen recently dropped its prices at its New York flagship dispensary in midtown Manhattan. This was no ordinary discount. The decline was sudden and steep.
MedMen dropped its price from $86 to $54 for a 400 mg vape cartridge, and from $53 to $37 for a 30-capsule bottle. Those are dramatic, double-digit declines of 37% and 30%.
At first, patients might have assumed it was the vape crisis, but that couldn’t be it, because capsules got a price cut, too. Why was MedMen lowering its prices? This happened shortly before the company announced it was laying off 190 workers, or about 20% of its staff, and more recently reported a quarterly loss, even as revenue doubled.
The New York flagship dispensary is a boutique retail space on Fifth Avenue. It looks rec, in typical MedMen fashion, even though New York is a medical-only state. The dispensary looks like the sort of place that would sell thousand-dollar stilettos, but there are no high-end shoes there—just MedMen T-shirts and yoga mats and other scarlet merch, with the cannabis hidden away in the back. It’s a cannabis retail centerpiece at the absolute nucleus of New York, just a short stroll between Grand Central and the Empire State Building, and within the shadow of Trump Tower.
It doesn’t seem to get a lot of traffic, as far as retail spaces go. It can’t cater to the international tourists who roam midtown with their credit cards, because only those with New York state-issued medical marijuana cards may enter those doors. The friendly staffers in their red MedMen shirts typically outnumber the patients at this so-called Apple store of cannabis.
A retailer explained to a patient recently (the only patient in the dispensary) that MedMen was unloading its PharmaCann products at a discount, after severing its business arrangement with that company in October. But the discounts continued over the next couple weeks, even after the PharmaCann product was sold out. The retailer then explained that the company was lowering its prices to better serve its customers, a statement that was later confirmed in an email from a MedMen spokesman.
Prices have been slumping in other parts of the country, as well, and it’s been going on for a while. In the most recent figures from the BDS Analytics’ Cannabis Price Index, prices dropped 4% from August to September, and they dropped 2% in the 12-month period ended September 2019. The oft-quoted CPI tracks markets in Arizona, California, Colorado, Nevada and Oregon.
Meanwhile, a block away from the MedMen’s midtown store, groups of cannabis aficionados gather every day in the ornate public space in front of the New York Public Library, lighting up cigar-sized blunts within a cloud’s breath of its famous stone lions. Midtown is rich with the smell of weed, not just in front of the library, but beneath the scaffolds where the delivery men gather to smoke, and around the endless construction sites for the ever-rising skyscrapers where the hardhats show their affinity for the forbidden flower.
New York has legalized medical cannabis but that’s not what you’re smelling. The flower is forbidden in New York, which has legalized medical cannabis, but only in its processed forms of vape oil, capsules or tincture. This makes it easy to spot the illicit market, with its pungent clouds, because no one in New York is allowed to smoke pot, not even the medical marijuana patients. As Gov. Andrew Cuomo is fond of pointing out, smoking is bad for you.
Cuomo is pro-legalization, but he hasn’t been able to go all the way, and convince Albany to legalize recreational cannabis. Beth Stavola, Chief Strategy Officer for the New York-based multi-state cannabis firm iAnthus, believes that Cuomo’s policy of “decriminalizing without recreationalizing” may have had the unintentional effect of boldening the illicit market.
“Beside California, I think New York has the biggest black market in the country, and it’s very difficult for the legal businesses to compete,” said Stavola, listing off the state’s hurdles like its regulatory process, attorney fees, expensive high tech cultivation facilities, and of course taxes. “While every state in the country has a black market, it’s outrageously difficult to compete with them in New York.”
New York is also a relatively small medical market of about 100,000 patients, but it sure seems like a lot more New Yorkers are smoking weed, just in the city itself.
“In Colorado there’s no demand for black market weed, but in New York there’s a smaller market,” said Christian Hageseth, CEO of One Cannabis Group, a cannabis company based in Denver, where he said the firmly-established rec market doesn’t face the sort of illicit competition happening in New York.
“A lot of people in New York are getting the Emerald Triangle harvest, the Croptober,” he said. “The legal market in New York is 100,000 patients, and you’ve got 20 million residents, so that black market has a much bigger impact. “
The illicit competition is just about everywhere, in some form or another. Steve Hockert, COO of Redbird Biosciences, a dispensary company in Oklahoma, has not experienced price declines or felt the effects of illicit competition. But he acknowledges that his state is the fastest growing cannabis market in the country, with 7,300 cannabis business licenses approved in its first year of legalization in September, with 222,000 patients in a state of less than 4 million people.
When asked about competing with the illicit market, he said, “Honestly, I believe that’s unavoidable,” though he didn’t have to lower prices.
Back in New York, the legal market’s best chance to compete is by offering quality and safety, according to Cynthia Cleveland, president of Vertical Companies, an ancillary company focused on cannabis manufacturing, extraction and packaging. Vertical Brands is based in California, another state with a gigantic legal market competing with a substantial illicit one.
Cleveland said that illicit users got a wake up call with the recent vape crisis, which could end up benefiting the legal market, in the long run, with a consumer flight to safety. She thinks that people will pay more for vape cartridges that have passed a state inspection process.
“I think that people became more aware of products being tested,” she said, referring to the impact of the vape crisis on consumer behavior. “There are people who are willing to pay for organic vegetables versus inorganic vegetables. I don’t think there’s any difference. You’re putting this in your body.”
The post New York is a Tough Market for Legal Weed. Is That Why MedMen Dropped its Prices? appeared first on High Times.
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