r/CannabisThailand Newsletter - Issue #50
Discover more from r/CannabisThailand Newsletter
r/CannabisThailand Newsletter - Issue #50
Low Season in Slow Season
Sawadee Everyone,
It was a bit of a slow news week this week. It seems like everyone is moving their chess pieces around the board and setting up their end-game strategy.
Instead, let’s do a broad overview of where the Thai cannabis market is at the moment.
While everyone is talking about how big the Thai cannabis market might become, the part they keep leaving out is that there will be winners and losers.
Right now it is the low season for Thailand’s tourism industry. It’s actually the first low season the industry has experienced and it’s likely that many cannabis related businesses may not last long enough to see the next high season.
Based on feedback I’m hearing, growers (or their sales reps) are going door to door trying to sell their last harvest and wholesale prices are cratering.
One person told me that he’s had two growers walk into her dispensary trying to sell all of their lights and growing equipment.
Many dispensaries are simply trying to hold on and pay rent and payroll.
Some dispensary owners I have spoke with have mentioned that they’ve been approached by other dispensaries asking if they want to buy their business from them.
Investopedia lists the following reasons for why 50% of all businesses fail within the first five years.
Financing
Inadequate Management
Ineffective Business Planning
Marketing Mishaps
Given the ban on advertising, even when dispensaries get booted from the social platforms for advertising cannabis, it’s probably not that big of a deal.
The real culprits seem to be Financing, Business Planning, and Management.
Unsurprisingly, those three are all interconnected. If you have inexperienced management, they are unlikely to put together a business plan, which leads to cash flow problems which can take down a business.
Many people rushed into the cannabis gold rush with blinders on and shiny new Lambos in their dreams.
Not that they should be to blamed, with dispensaries able to charge 800 - 1,000 baht a gram for weed and wholesale prices of 300,000 - 400,000 baht a kg, it looked like people might get rich.
But, Econ 101 says that if there’s a profitable market, especially one with a relatively low barrier to entry, people will flood it until prices come to an equilibrium.
With low season upon us, many of these businesses that didn’t plan properly will be prone to running into cash flow issues. Whether its dispensaries that locked themselves into expensive leases and hiring bud tenders at 30,0000+ baht salaries (plus commissions), if there’s not enough cash to tide them over until high season, they may be forced to fold.
The same holds true for growers. Many of them saw the crazy prices and started growing without much analysis.
With a glut of indoor and outdoor weed, (illegal) imports coming in from overseas, and dispensaries slowing down buying (both due to low season as well as cash flow issues) most of the profit of anything hitting the market today is nearly gone.
But the good news is that for those businesses that can make it through the low season, there should be less competition. That means that per store sales should increase.
Similar story on the growing side, every grower that leaves the cannabis industry this low season will be one less competitor out there selling buds to dispensaries when the high season comes which means each grower will end up servicing a larger number of dispensaries.
Overall, competition is good for the market even if it means that there will be some losers in the process.
A failed business is usually an inefficient business and the cost of that inefficiency is usually paid by the consumer via higher prices.
Eventually you want to get to a point where growers can make a profit, dispensaries can make a profit, and the consumer receives a quality product at a fair price.
Of course, once you reach that point the primary way for dispensaries and growers to make additional revenue is to either expand the market with new products or customers, or they need consolidate the competition (eliminating competitors, acquisitions, etc).
But that’s a whole other problem and we’re not even close to being there yet.
If the news cycle stays light we can dive deeper into various sectors. Until then . . .
Cheers,
u/CannabisThailandMod
Don’t forget that we’ve partnered with some dispensaries for exclusive deals available to members of this newsletter and the r/CannabisThailand sub on Reddit. Just type “Dank Deal” into the comments of any post and the AutoMod will send you the current discounts being offered.
Meme of the Week
Polls
The Week in Review
Thanisorn “Phet” Boonsoong on Thailand's Burgeoning Cannabis Industry
Mother, son create 'reverse edible' chocolate for 'soft landing' from marijuana high
YouTuber shatters Thailand's cannabis stigma with weed wisdom