Sawadee Everyone,Another wet week in Thailand. Hope everyone is okay. While most people, myself included, believed that the high prices in Thailand for bud would come down once Thai growers began catching up with market demand, we're still not there yet. In speaking to both dispensary owners and growers, it's still confusing as to why Thailand has some of the highest, if not the highest, weed prices in the world. If you look at a place like California where the average price per single gram of mid-grade cannabis is $14 USD (532 baht) it's difficult to see how Thailand's average price per gram is 686 baht. Let's examine this a bit. Your fixed costs for growing cannabis are, cost of the cultivation site, employee labor costs, and taxes. Then you have variable prices that are tied to the amount of product you're producing. Variable costs would be the cost of utilities (water, electric, etc), nutrients, soil, etc. The gap in just labor costs alone should make Thailand the cheaper place to grow marijuana. For instance, the minimum wage for a company with less than 25 employees is $14 (532 baht) an hour in California. The minimum wage in Thailand is 353 baht PER DAY! A grower in California only making minimum wage (unlikely) would make about 4,256 baht per day compared with 353 baht per day in Thailand (assuming growers employ people at minimum wage). Labor in Thailand is 12x cheaper. And we're not even digging into the details of how much benefits, social security taxes, etc add to the overall additional costs of labor. The average price of electricity in California is $0.31/kilowatt-hour (kWh) which is 11.78 baht per kWh. In Thailand, if you're using over 400 kWh (and you will be using that much if you're growing indoors) the price is 4.4217 baht per kWh. So, energy prices in Thailand are almost 1/3 of what they are in California. Nutrients and soil can be more expensive in Thailand, but not by much, and that is if they growers import US nutrients or other growing supplies. There are plenty of locally produced nutrients available in Thailand without brand names like General Hydroponics and organically grown weed would not need to import anything. And let's not forget that in California, someone is paying the cost of the regulatory oversight of the industry. The licensing process can be grueling and expensive. A dispensary license in Los Angeles County can run between $2 million and $10 million as virtually the only licenses available are via transfer of a business with a license to a new owner. And it doesn't stop there. in California every plant is tracked from seed to the point of sale to make sure people aren't overproducing and selling product illegally. Product has to be lab tested to verify that it's fit for human consumption and to verify THC/CBD levels. Thailand has none of those costs. Yet, somehow, Thai grown weed is more expensive. Are the prices higher because of supply-side issues? It's possible but seems unlikely given feedback I've heard. Is it demand-side issues? Possibly, but then how does one explain all of the empty dispensaries and dispensaries with low social media followers. I won't name names but one fairly well-known, and often mentioned in the press, dispensary has less than 1,500 followers on LINE, the main platform for dispensaries to sell online. That's one of the bigger ones. Most have only a few hundred followers. And while that may be enough business to sustain a mom and pop level operation, it's not what one would expect from an industry with demand-side problems. So why is weed more expensive in Thailand than California? Some of it is greed. In almost every market that has gone legal, everyone has misjudged the profitability of growing or selling weed. There's always a mad rush to get in at the beginning and everyone that gets a license starts imagining Lambos and yachts in their future. I think there's some of that happening at the moment. People feel like they deserve to make large profits because everyone knows drug dealers make lots of money. But, there's also an element of bad business planning. Someone that goes out and spends 1 million baht on setting up a grow operation wants to recover their costs quickly. Same for a dispensary owner that plows millions into renting and renovating a storefront in a high traffic area. Those costs have to be amortized over their useful life. You're not supposed to make your money back in a few months. So, perhaps the most likely explanation for higher prices in Thailand is simply that a large part of the cannabis industry in Thailand is still in the hands of smaller, inexperienced business people. In the US, Canada, and elsewhere VC and large investor backed cannabis ventures are more common. Dispensaries and growers have access to capital that may not be available to small Thai businesses. Thai businesses operate on cash flow while a well financed business can think about longer-term ROI. Currently, many larger investors are sitting on the sidelines waiting for the cannabis law to pass so the industry is dominated with lots of mom and pop level businesses. Perhaps it's not the supply/demand problem that needs to be solved in order to get prices down to the sub-300 baht level but more capital so that more mature business operations can be introduced. I guess we'll see over the coming months how this plays out but hopefully prices begin trending downward over the coming months. Cheers,u/CannabisThailandMod
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r/CannabisThailand Newsletter - Issue #15
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Sawadee Everyone,Another wet week in Thailand. Hope everyone is okay. While most people, myself included, believed that the high prices in Thailand for bud would come down once Thai growers began catching up with market demand, we're still not there yet. In speaking to both dispensary owners and growers, it's still confusing as to why Thailand has some of the highest, if not the highest, weed prices in the world. If you look at a place like California where the average price per single gram of mid-grade cannabis is $14 USD (532 baht) it's difficult to see how Thailand's average price per gram is 686 baht. Let's examine this a bit. Your fixed costs for growing cannabis are, cost of the cultivation site, employee labor costs, and taxes. Then you have variable prices that are tied to the amount of product you're producing. Variable costs would be the cost of utilities (water, electric, etc), nutrients, soil, etc. The gap in just labor costs alone should make Thailand the cheaper place to grow marijuana. For instance, the minimum wage for a company with less than 25 employees is $14 (532 baht) an hour in California. The minimum wage in Thailand is 353 baht PER DAY! A grower in California only making minimum wage (unlikely) would make about 4,256 baht per day compared with 353 baht per day in Thailand (assuming growers employ people at minimum wage). Labor in Thailand is 12x cheaper. And we're not even digging into the details of how much benefits, social security taxes, etc add to the overall additional costs of labor. The average price of electricity in California is $0.31/kilowatt-hour (kWh) which is 11.78 baht per kWh. In Thailand, if you're using over 400 kWh (and you will be using that much if you're growing indoors) the price is 4.4217 baht per kWh. So, energy prices in Thailand are almost 1/3 of what they are in California. Nutrients and soil can be more expensive in Thailand, but not by much, and that is if they growers import US nutrients or other growing supplies. There are plenty of locally produced nutrients available in Thailand without brand names like General Hydroponics and organically grown weed would not need to import anything. And let's not forget that in California, someone is paying the cost of the regulatory oversight of the industry. The licensing process can be grueling and expensive. A dispensary license in Los Angeles County can run between $2 million and $10 million as virtually the only licenses available are via transfer of a business with a license to a new owner. And it doesn't stop there. in California every plant is tracked from seed to the point of sale to make sure people aren't overproducing and selling product illegally. Product has to be lab tested to verify that it's fit for human consumption and to verify THC/CBD levels. Thailand has none of those costs. Yet, somehow, Thai grown weed is more expensive. Are the prices higher because of supply-side issues? It's possible but seems unlikely given feedback I've heard. Is it demand-side issues? Possibly, but then how does one explain all of the empty dispensaries and dispensaries with low social media followers. I won't name names but one fairly well-known, and often mentioned in the press, dispensary has less than 1,500 followers on LINE, the main platform for dispensaries to sell online. That's one of the bigger ones. Most have only a few hundred followers. And while that may be enough business to sustain a mom and pop level operation, it's not what one would expect from an industry with demand-side problems. So why is weed more expensive in Thailand than California? Some of it is greed. In almost every market that has gone legal, everyone has misjudged the profitability of growing or selling weed. There's always a mad rush to get in at the beginning and everyone that gets a license starts imagining Lambos and yachts in their future. I think there's some of that happening at the moment. People feel like they deserve to make large profits because everyone knows drug dealers make lots of money. But, there's also an element of bad business planning. Someone that goes out and spends 1 million baht on setting up a grow operation wants to recover their costs quickly. Same for a dispensary owner that plows millions into renting and renovating a storefront in a high traffic area. Those costs have to be amortized over their useful life. You're not supposed to make your money back in a few months. So, perhaps the most likely explanation for higher prices in Thailand is simply that a large part of the cannabis industry in Thailand is still in the hands of smaller, inexperienced business people. In the US, Canada, and elsewhere VC and large investor backed cannabis ventures are more common. Dispensaries and growers have access to capital that may not be available to small Thai businesses. Thai businesses operate on cash flow while a well financed business can think about longer-term ROI. Currently, many larger investors are sitting on the sidelines waiting for the cannabis law to pass so the industry is dominated with lots of mom and pop level businesses. Perhaps it's not the supply/demand problem that needs to be solved in order to get prices down to the sub-300 baht level but more capital so that more mature business operations can be introduced. I guess we'll see over the coming months how this plays out but hopefully prices begin trending downward over the coming months. Cheers,u/CannabisThailandMod