I think we may have entered the cannabis twilight zone. Just two weeks after recreational cannabis began to be sold legally in Nevada, Governor Brian Sandoval has declared a state of emergency because of a shortage of marijuana. There are two big problems that led to this emergency, and they both stem from lack of preparation. The first is not having enough cultivators, and the second is a problem in the way distribution is set up.
As for the first problem, Joel Milton, CEO of the cannabis consulting firm Baker, says “In Colorado, we have more than two-and-a-half times as many cultivators as dispensaries, and in Washington, there are one-and-a-half more. In Nevada, there is a lower ratio, it is about one to one. Based on these numbers, it will put a big strain on supply because demand is about to grow tremendously.”
And of course, when supply dwindles and demand increases, prices go through the roof. Mikel Alvarez, spokesman for Blum dispensaries in Reno and Las Vegas says that a pound of wholesale marijuana currently costs about $2,600, an approximate $1,000 increase just in the past month.
The second problem is distribution, and it’s ultimately why the Governor declared a state of emergency. The declaration allows the Nevada Tax Commission to vote on an emergency marijuana regulation. That would open up the applicant pool for distribution licenses – licenses that permit the transportation of recreational marijuana from cultivation and packaging facilities to the dispensaries.
“Based on reports of adult-use marijuana sales already far exceeding the industry’s expectations at the state’s 47 licensed retail marijuana stores and the reality that many stores are running out of inventory, the Department must address the lack of distributors immediately,” Dept. of Taxation representative Stephanie Klapstein said. “Some establishments report the need for delivery within the next several days.”
But was there really a need to declare a state of emergency? The state of Nevada says yes. And it all comes down to money. The Nevada Dispensary Association has estimated that dispensaries made about $3 million in the first weekend of recreational sales. That means the state made about $1 million in tax revenue.
“The business owners in this industry have invested hundreds of millions of dollars to build facilities across the state,” Klapstein said. “They have hired and trained thousands of additional employees to meet the demands of the market. Unless the issue with distributor licensing is resolved quickly, the inability to deliver product to retail stores will result in many of these people losing their jobs and will bring this nascent market to a grinding halt. A halt in this market will lead to a hole in the state’s school budget.”
Sorry, Nevada. The Green Solution® wishes we could help you out, but those pesky federal laws prevent us from coming to your rescue!