The Great Vanishing
r/CannabisThailand Newsletter - Issue #101
Sawadee Everyone,
The political and legal developments surrounding cannabis legalization in Thailand have been eerily quiet the last few weeks. Maybe those responsible were channeling some Halloween spirit.
That said, some things have happened recently that could have an impact so I thought I would mention them here.
First up is the avalanche of petitions to dissolve the Pheu Thai Party under the umbrella of Thaksin having too much influence over the party. While a few serial petition filers were expected to make complaints, even more petitions have landed on the government’s doorstep and they’ve agreed to look into whether or not Thaksin has an illegal level of influence over the Pheu Thai political party.
While, at the moment, the main smoking gun petitioners have cited is the fact that the party leaders met immediately with Thaksin after Srettha was booted as PM, expect more drama to follow.
This is worth watching because if Pheu Thai does get dissolved, Bhumjaithai would likely be given the reigns to form a new government as the third largest party, with both larger parties unable to submit a PM candidate without a new election (Pheu Thai has one more candidate but they already didn’t put him forward previously due to concerns he wouldn’t pass the ethics scrutiny).
Speaking of Bhumjaithai a few media sources have talked about the Blue Wall in the senate. Many procedural and other measures like amending the charter have to go through the senate and Bhumjaithai has enough of their people in the Senate that they are essentially a blue wall against anything they don’t agree with.
They likely won’t be able to parlay that into cannabis related issues because most cannabis laws won’t go through the senate but they can use it as a bargaining chip on cannabis related issues in the house with parties that have issues that do need to go through the senate.
Before I move on from Thai politics, it’s been becoming increasingly apparent that Future Forward Move Forward People’s Party owes a lot of its popularity to people like Thanathorn Juangroongruangkit and Pita Limjaroenrat, both of whom are unable to lead the party anytime soon. They’ve lost two smaller elections, with one of those being a supposed easy win for People’s Party that they somehow managed to lose.
The party’s new leader Natthaphong Ruengpanyawut seems to lack the charisma and popularity of his predecessors and it’s showing in how motivated voters are at the polls.
When there is a new election, either called early due to politics or at the end of the normal term, it will be interesting to see where People’s Party shakes out.
Lastly, in news type coverage, there was an excellent article in The Diplomat which was discussing investigations that have been happening in the Philippines over former Philippine President Rodrigo Duterte’s infamous drug war. Some human rights groups estimate that as many as 30,000 people were killed extrajudicially under Duterte’s war.
For those who may have forgotten, Thaksin was the OG of giving the police free rein to murder anyone they suspected was involved in illegal drugs. Under his war or drugs, it was estimated that 3,000 people were killed.
Now, on to some recent observations about the cannabis industry.
I was having a conversation with a dispensary owner the other day and he informed me that a fellow dispensary owner we both knew had died in a motorcycle accident earlier this year.
His dispensary was one of the ones listed in the Dank Deals offer in the CannabisThailand sub. In fact, he may have been the very first person to reach out to me about offering a promotion for sub members.
I had visited his shop a few times and my wife and I hung out with him and his wife on several occasions. A really great guy who will be missed in the cannabis industry.
With the news of his death I decided to update Dank Deals to remove his shop as it no longer exists.
However, I also checked on the rest of the Dank Deal vendors and most of them no longer exist either.
Over the last few months several of the sites that I regularly check for cannabis retail pricing information have also disappeared. Some have simply taken their menus offline while others have vanished entirely.
I see similar carnage on social media with Instagram, Facebook, etc pages gone. Ditto with dispensary listing websites.
I can attribute some of the cannabis rapture to the fact that many sites are beginning to make peace with the fact that all online advertising will become illegal once the new cannabis bill passes. Technically, it’s already illegal but the new cannabis bill means people can be fined and thrown in jail so suddenly the government has dispensary owner’s attention.
Many of the dead social media accounts I’ve been running across are no more because they couldn’t refrain from violating the platform’s rules. Even we got erased by Discord when they decided to delete the channel we had for licensed dispensaries and growers to connect. Many sites don’t play around when it comes to weed.
But, most of these disappearing dispensaries are simply gone. Domains are popping up expired on my watchlist almost daily which means they’re not even keeping the brand in the hopes of selling it.
While the first couple of years of legalization was a more or less a gold rush expansion, now it seems we’re entering a contraction phase.
https://www.britannica.com/money/stages-of-economic-cycle
This is quite normal. I’ve worked in several emerging industries in my previous life and there’s always the phase where people are throwing money in every direction trying to get big fast, followed by a painful contraction where the least viable businesses disappear.
I’m sure most people have seen this in other contexts as well. For instance, remember when travel vlogging first became a thing? Suddenly there were hundreds, perhaps even thousands, of Thailand travel vloggers who had spent 2 months in Thailand and felt qualified to educate people on Thai culture. Then most of them disappeared because they couldn’t turn their drone and endless B-roll footage into cash.
Travel vlogging didn’t cease to exist but it became obvious that the market was oversaturated and could only support so many channels producing content.
Similarly, there’s an optimal level of competition in retail and beyond that it actually becomes harmful to both the seller and buyer.
For example, let’s say that you own the only dispensary on your soi and the total potential revenue from local foot traffic is around 10,000 baht per day (just to keep the math simple). That’s not what you sell everyday, that’s the potential market size in your area.
Now, let’s say that another shop opens, and assuming you’re somewhat equal in nature, your potential gross sales just decreased to 5,000 baht per day because there aren’t more customers, just more choices for customers.
But a third shop just opened and now your potential gross sales just dropped to 3,333 baht per day.
See where this is going?
Most consumers probably think this is a good thing. All three dispensaries will be tripping over each other to get your business, right? Well, maybe not.
Those three dispensaries are paying rent at three locations and hiring staff at each location. In other words, their combined overhead is 3x what it would be for one shop.
If the total market size is 10,000 baht a day and one’s daily overhead (rent, utilities, payroll, taxes, etc) is 2,000 baht a day, that leaves a nice 8,000 baht margin (remember cost of goods sold is not part of daily overhead).
But with two shops, the market size remains static at 10,000 baht per day but now the overhead for two shops is 4,000 baht a day and that 8,000 is now 6,000.
With a third shop, overhead goes to 6,000 a day and market size remains static at 10,000 baht a day meaning there’s only 4,000 baht to be split between the three shops.
Guess which situation is better for consumers, the one where the shop is making a comfortable margin of 8,000 baht per day or one of the three shops barely staying afloat on a 1,333 baht a day.
The other thing to keep in mind is that now each individual dispensary is buying in smaller quantities and not able to command better pricing from suppliers. Again, that gets passed on to the consumer.
Ultimately, the goal would be an equilibrium where there are exactly enough dispensaries where everyone can survive but those who thrive will be the ones with the best business model.
Don’t worry, I’m not suggesting that the government should create a scheme to limit dispensaries or pick winners and losers. The market will do that part naturally. As they say, the cream rises to the top.
I am just trying to convey that this is happening and will continue to happen over the next few months, perhaps even the next year or two. It’s not a sign of a decline, rather a healthy contraction after a period of massive expansion.
And closures will likely accelerate once the new laws come into effect as already failed businesses use the new laws as an excuse to save face and close down.
The draft of the law I saw said that current license holders had 180-days to comply with the new licensing and is expected to come into effect Jan 1, 2025, which coincides with the three year anniversary of cannabis being legal and three years just happens to be the standard contract length for a commercial lease.
Many of those landlords that gave sweet deals to the early dispensaries due to the fact that tourism hadn’t recovered from Covid yet and many landlords hadn’t seen a rent check in several years. Now with all of the hoopla about how much money the weed business has been making, expect landlords to be jacking up rents to current market rates (or higher).
This is the part of the business cycle when operations becomes the most important aspect of success. The dispensaries that are able to efficiently use capital to grow marketshare while smaller competitors close shop will succeed. The dispensaries that know how to keep overhead costs low by systematizing processes and creating easy to replicate operating procedures will thrive.
So when we begin to see shops close and various businesses suddenly vanish, we need to keep in mind that this is as normal as rain during rainy season. That’s how the market is supposed to work.
The thing to keep an eye on is demand.
Stay lifted and enlightened,
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.
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