July 1st – California industry insider update

Are you prepared for July 1?  With companies navigating the emergency regulations, every business in the supply chain is feeling the impact.  Kush Marketplace asked industry insiders how this is impacting their business, and what to expect in the coming months.

The two biggest changes are the testing requirements and packaging requirements.  Starting on July 1st, all products being sold through licensed retailers will need to be fully tested as dictated by the State of California.  These tests are expensive, between $500 and $1000 which raises the cost of goods sold, and reducing the available supply on the market.  Tyler from Seven Leaves says, “the market supply for compliant material is already shrinking.  We expect to see the wholesale prices spike in the near future.”

This is due to the clear shortage of compliant product lines.  This shortage will be exacerbated by bottlenecks at the testing labs, of which only 50% are up and running as they navigate ISO accreditation.  Make sure to ask your testing facilities what their backlog is, turnaround time affects your cash flow and ability to pre-sell to retailers.  Consider reaching out to multiple labs.

Unfortunately for retailers, non-compliant material left on July 1st must be destroyed.  Although this is a great time for consumers to take advantage of a FIRE SALE, the wholesale market will experience volatility through the roof.

“The retailers are begging for compliant product – in the bay area, there is widespread panic about not having enough product, and I think they’re right to be worried.  100% of licensed storefronts and delivery services and will be impacted to varying degrees,” says Margot Wampler of Lifted Networks, a business which represents Cannabis brands to a large network of retailers.  Margot offered a warning, “If I could make a headline for this, The California Cannabis Market Implodes.”

Companies with compliant material began transitioning months ago.  The well prepared will garner coveted shelf space, and wish they had more product to sell.  This head start will be met with challenges to scale up, and white label opportunities will become common as companies struggle to meet demand. Michael Gordon CEO of Kush Marketplace says, “California is going to face the same challenges we saw in Oregon and Washington.  The same bottlenecks exist, supply and demand indicate that the market pricing patterns will rise and then fall with harvest.”

Currently the distributors are set to make big money.  Their access and control over supply during a shortage provides negotiating leverage that is hard to ignore.  This power will gradually shift to the retailers over time, the big question, is how long this process will take?   Will it be this harvest season, or next?

In the meantime, farms & distributors needs to connect with a network of businesses that has the capacity to scale sales over the next 6 months. Ideally their distribution partner will be near their production facility to reduce the time of shipping and processing.

Our Kush Marketplace team is building this network by helping distributors and processors locate supply to meet their retailer demand of compliant product. We have started serving this exact need with the Kush Marketplace Platform, connecting buyers and sellers via a streamlined procurement process.

Currently we have open orders from distributors for 7,500lbs/mo to fill. They’re looking for everything from trim to popcorn to flower. If you have supply that could be a good fit, please send an email to cali@kushmarketplace.com or post it directly on the marketplace!

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