It may be correlation, and it may be causation. I do not know yet … but sales in Washington’s regulated cannabis market appear to be plunging down.
Yesterday, the LCB released monthly license-level sales data for the entire spreadsheet-based contingency reporting period (Nov-Jan) which bridged the old BiotrackTHC Seed-to-Sale Traceability System days into today’s dysfunctional LEAF compliance-reporting app days.
As these data show a stunning decline since the LCB began flying blind to product volumes, weights, locations and, to an increased degree, existence — I thought they should be made available quickly. Remember that there are only just over 3 more weeks left in the contingency reporting period — and only forever until the LCB will be able to reconcile data in the market.
Two charts are included.
The first shows monthly retail and wholesale (producer-based and processor-based) sales – not counting any excise or sales taxes.
The other zooms into the 3 months before and after the change from a functional traceability system to a system that involved submitting hundreds of thousands of semi-structured spreadsheets to the LCB in deference to RCW requirements. It shows the change (vs the same month in the prior year) in sales for each of those 6 months (Aug’17 minus Aug’16, etc). While interpreting this, remember that the market, overall, has grown in volume over the past year (more stores, more farms, more transactions). Remember, also, that I have previously estimated that the recent fall harvest was likely to be 60% larger than that of the previous year.
There are no detailed data available for the state after Oct 31, so I can’t diagnose this situation the way I would like to. However, with help from folks commenting on Facebook (Crystal, Shango, Dominic, John, & others), here are some things to consider when assessing my assertion that this reflects and/or suggests diversion is happening big-time:
- Prices have likely declined and may well have plunged
- Data compilation by the LCB for wholesale may not be as good or complete as compilation for retail (taxes are at retail and they are required to report daily).
- Data submission may have lagged (even though the LCB data file was created 5+ weeks after the end of January)
- Massive crop failures may have occurred throughout the state
- Inventory at wholesale may be dramatically increased
- There WAS a very large spike in reported wholesale sales in October. This may have been in anticipation of the end of the BiotrackTHC traceability contract (and, perhaps, reflective of an industry-wide perception that the LCB might mess up that transition).
- ???
I’d love to hear your thoughts.
Jim-
Thanks as always for your continued work. This traceability nightmare is unbelievable. Who is responsible for this failure? Does anyone think the state will provide recompense for the fallen? I have heard rumblings about law suits being filed against the LCB. That’s nothing new.
People went out of business because of this system failure in addition to other cohorts. (e.g. over taxation). Heck of a “lottery” huh?
We have seen multiple times that passing lab data entered into leaf results in a “FAIL” being posted in the system. Pass = Fail? What? We must be at the nexus of the universe! Imagine what this failure has done to labs, producers, and retailers. How do you get this commodity to market when accurate results can’t be retrieved from the system?
What a joke.
Did someone say DUHversion?
Jason – As usual, I appreciate your perspective.
Given that everyone in the market now appears to be able to manually-override QA (and, presumably, potency) levels in LEAF …. and my supposition (I may be wrong, as I’m not a 3rd-party-integrator-type-expert) is that the LCB is not yet able to accurately link things together in whatever view(s) they might have into LEAF’s underlying stored data, the marketplace seems ripe now for a new flavor of Friendliness (let’s call it self beFriending).
The self-beFriending world seems like a world where, overnight, everyone has the opportunity to be more Friendly to themselves than any Friendly lab was ever able to achieve.
Good thing that honesty, decency, integrity and a strong appreciation for PRAGUE lab results runs rampant throughout the industry.
Jim,
Interesting findings there, I personally know very few people who acquire their cannabis through the recreational market any more, because they no longer trust its safety and they feel that its quality has suffered greatly in the past year. I’m sure some of the cannabis that people are acquiring instead of purchasing it through retail, was actually made in the 502 system. It is quite possible that some growers are promoting folks they know to buy directly from them so that they can actually receive a decent price for their product. The failure of the LEAF system to be anything other than a pain in the ass has undoubtedly caused some growers to back door a portion of their harvests product even more than they did previously, in order to not deal with the headaches from that system. Some medical growers who are concerned about the health of their friends are trying to supply their friends out of their own stash to help them obtain safe cannabis. I have even heard from a couple budtenders online who told me that they have decided to start growing their own because they are concerned about the safety of the product that their store carries. Those budtenders also told me that they think the quality of the product that their stores carry has really tanked as well. If there is a drop in sales in the industry, it could be a very good thing as long as it results in growers and processors having to boost the quality and the cleanliness of their product in order to win back those who lost faith in them and left the market.
I appreciate your observations, Bjorn — and I would like to think that things are not as uniformly bleak as you paint for the regulated market.
There is no question that a “race to the bottom”, be it on price paid to farmers or average product quality or average consumer trust of product quality, is damaging to the broader market and most participants within it.
I would argue that it is also damaging to consumers. It almost sets up a negative feedback loop for consumer trust and for product quality.
Again … I’m sure that, while it is clearly bad in some areas, everything cannot all be so bad.
There is good product from good farmers being sold in good stores (presumably to good people). Never forget that.
Some of it is even for good prices (or so I hear … now that the state no longer supplies those data).
Jim,
There are certainly some good growers/processors out there on the market, but I think they are the minority. Many of these growers have discussed how much they are struggling with me and that they believe that there is only a small portion of the public that is truly concerned about anything other than low price point. There was a recent meeting of concerned growers about where the market is right now, where it seems to going and how to fix it. I receive a bit of info from employees in the rec market about the business practices they have seen on the job and some of them are truly vile, treating product with ammonia, bleach, doing drywall/painting work in flower rooms while plants are present, being given things to spray on plants that the business owner won’t tell them what it is and being offered no protective gear, turning floor sweepings to concentrate. So, you can see why it is hard for me to have a very positive view of how things are being run, especially when the state is willfully turning a blind eye to it. I have spoken with several folks who documented criminal activity in the business and tried to give their evidence to the state, only to be told that the state wasn’t interested, a reporter at The Stranger told me that is standard state procedure. To top it off, if you look into basically every other big business, you will find criminal behavior and activities being done which have the potential to negatively effect the environment and consumer, that doesn’t help one have faith that recreational cannabis will be any different. Did you hear that Stephen Hawking recently downgraded the amount of time he expects humans to be able to live on this planet from 1000 years to 100, because of human greed for the most part? At least I have some good company in doom sayer land! Lets hope people start caring about doing the right thing even if it is less comfortable for them, or the recreational cannabis market will be the least of our concern.
Have a happy day,
-Bjorn
May you also have a happy day, Bjorn!
It is my firm belief that there are many good players in this industry today.
Let us all hope that those who fit the description you paint come around to doing things that are better for their employees, business partners, and consumers.
Let us also hope that those who regulate this industry begin doing so with a much larger focus on quality assurance and consumer protection.
It is fortunate that the plant on which this market focuses seems so intrinsically safe. It gives this market a huge leg up on eventually competing with recreational poisons such as nicotine and alcohol (indeed, there are indications in WA today that beer and wine are potentially being impacted by increasing cannabis consumption).
Let us further hope that the legislators spend some time during next year’s session passing some laws relating to this industry that achieve the following:
-increase consumer access to needed products (with a particular focus on fixing how horribly they have messed up medical cannabis in WA)
-increase consumer safety and consumer ability to trust regulated product
-increase the ability of the “cottage industry” portion of this industry – which represents the majority of players and the minority of revenue in the market today – to function and survive (much of the way in which regulations have been implemented and much of the change in legislative language that has occurred since the original language implementing I-502 passed have differentially favored “big players”).
Finally, let us hope that consumers increasingly begin differentiating between “good and bad” players in the market and begin channeling their cannabis-purchasing funds in directions that encourages “good” and discourages “bad”.
One of the behaviors that I personally consider “bad” is when wholesalers display patterns of behavior when sending out product for QA and potency testing that imply that they may be shopping across labs to see where they can get the best results. I have largely now quantified this behavior across all wholesalers in the market (through Sept of last year). Look for some posts on that soon.
I also just put out a solicitation using a brief SurveyGizmo survey to all licensees as of 2/27/2018 for whom the LCB was able to supply a valid e-mail address (about 5% have come back as undeliverable) that asked licensees to self-identify as to whether or not their business(es) support legalized adult homegrow in Washington. Those responding yes (the survey closes next Wed) will have that fact shared with the group of pro-homegrow activists that have been compiling a list of such businesses. That list will, no doubt, be publicized. I hope it makes a positive difference to the businesses that support the right of each and every adult consumer to (if they want) grow a limited number of plants. Most regulated business owners I have spoken to understand that very few people would grow their own and even fewer would do it regularly. They also, for the most part, understand that this is currently the only way in which a consumer or patient can be absolutely sure of what did and what did not go into their plants. They, further, for the most part, “get” the idea that homegrow would increase the diversity of product grown around the state, and would inhibit the decline in non-commercially-viable (under the current model) but useful strains.
Once again, Bjorn .. have a happy day.
I hope we all have an even happier future.
Jim,
Our 502 family farm may have shut down but we still have our license, so I know about your survey about home grows and completed it. We will be selling our producer/processor license shortly. I am very interested in seeing what the results to that survey are and any reasons folks could possibly give for saying no. Two of the best things the state could do to help out smaller growers are allow the farmer style markets where producers and processors can sell direct to the public and allow consumers to visit and purchase directly from farms. If both of those ideas were allowed, not only would growers and processors receive more of the money that they deserve for their hard work, money which could in part go to improving their business and product quality/cleanliness, but the consumer would have a chance to meet growers/processors in person and possibly their facilities, which could help instill confidence in the product they purchase.
I think folks are certainly right that if cannabis were legalized for everyone over 21 to grow in this state, it would effect the current market very little. I know plenty of folks who have had ample opportunity to grow it over the years and had no care about that being illegal, but they chose not too due to being too lazy or not having a good space to do so.
Thanks for always doing great work, I see your research referenced in articles on the industry frequently,
-Bjorn
Thank-you for submitting a response to the homegrow survey, Bjorn.
It’s not really a “survey”; it is more an opportunity for businesses to declare their support (or not).
I just have an account with a survey software provider, and thought this would be the most efficient way to collect the positions of businesses.
The only output I intend to have for the survey is a listing shared with the homegrow activists so that they can publicize regulated businesses that support homegrow.
Thank you for your continuing good work Jim. I look forward to your posting on the home grow survey.
My pleasure, Don … and thank-YOU for posting summaries of the LCB meetings. That effort is both helpful and appreciated.
The only thing I’m likely to post regarding the home grow “survey” is a count of how many businesses, by type, responded as being supportive of home grow legalization.
… and then I’ll forward that list onto the folks that have been putting together a listing of supportive businesses.
I am not likely going to be diving into it at all … I promised in the instructions that I would NOT be differentiating between responses that failed to be supportive of home grow (neutral or opposed) and businesses that fail to respond.
This isn’t really a scientific thing … I just thought using survey software (and a fresh LCB-supplied list of licensee e-mails) would make gathering the information much more efficient.
It’s funny … there are 6 mandatory questions, and only one relates to home grow. The other 5 identify the business and give me some information that I can use to address instances in which a license gets multiple conflicting responses. I am hoping that does not happen too frequently, as I will be biasing my decision-tree toward marking ambiguous entries as not having properly expressed support for home grow.
Again, thank-you.
The data answers the “what”. It will be interesting if the “why” can ever be discerned. I imagine it may consist of several factors, not the least of which is the “smooth” transition to the new tracking system. Nicely done Jim.