Have you Ever Wondered What was the Actual Cost to Get a Cannabis License?
How Much Is a Weed License In California?
We know all cannabis business owners want to know how much is a weed license in California. In this article, we’ll break it down for you drawing upon our experience in acquiring cannabis licenses in 2 states and participating in over 23 successful cannabis licenses. Over this time, we identified the 6 main barriers to entry. Of course, the primary concern for everyone is:
California Cultivation License Cost
You may also be wondering what is the California cultivation License cost. Did you know the Type S License allows you to buy cannabis flower from thousands of cultivators and package it as your own? As a cannabis manufacturer, you can source flower from thousands of farms in California without the headache of having to grow from scratch. This is what most businesses do today. Unless your goal is to be a farmer, we would recommend getting a Type S License as you’ll have better variety, pricing, and flexibility to create your flower brand.
How Much Does it Actually Cost to Start a Cannabis Business?
We hope our experiences can help people take knowledgeable steps so they aren’t wasting their own, investors, or other people’s resources and time. We intend this to be a mini walk through of how much it costs to start a small facility 3000 square foot manufacturing facility in California. However, most of this is easily swappable/transmutable to all other legal/quasi-legal cannabis states. So, let’s get started.
The Average Cost to Open a Cannabis Business is $750,000+
This amount is a combination of a LOT of steps which no one says anything about, mostly because everyone is trying to get ahead of everyone else, attorneys have an overwhelmingly new area to learn and navigate through so they charge a ton, and everyone puts a premium on “cannabis” because well – it’s the future holy money-making grail.
First Step – Property Identification
First and foremost is identifying property. Cannabis is vastly different from any other industry in the world. This is because unlike alcohol, pharmaceuticals, cigarettes, or just purely illegal drugs – cannabis is a quasi-legal product which is not legal under federal law.
Green Zone Properties
In California, the cities and states have all the power in deciding zoning for cannabis properties. Commonly known as “Green Zone” properties, these properties automatically 2x to 5x in value if they are in the legal “Green Zone” for a city. So your first hurdle is making sure that the property you selected is even the Green Zone.
A cannabis consultant could charge anywhere between $1,000 to $10,000 or even equity depending on the length of time to go look for properties, check their zoning, then verify its location with the city. For us, it took us 16 cities and 43 different properties before we found one. Let’s just average it at $5,000 which is relatively cheap.
Leasing or Purchasing Green Zone Properties
As a result of the state vs federal law conflicts: No federal bank will give loans for cannabis properties.
That’s right. This means you have two choices as a cannabis business – (1) own a property outright with NO loans or (2) Rent from a landlord who owns a property outright with no bank loans. With a 2x to 5x in value for no reason other than it’s Green Zone, this means that your property costs shoot up vastly.
Let’s average the cost for purchase at $300.00/Sqft and leasing at $3.00/Sqft. With a 3000 sqft facility, we’re looking at $900,000 (purchase) or $9,000 a month (Lease).
Second Step – City Application
The second opening cost of any cannabis application is the city or county fees. We break this down to two types of city fees: (1) Explicit Fees & (2) “Discretionary” Fees.
The explicit fees are what are publicly stated and the discretionary fees are while you are on the process – what a city a can charge you for any reason at any rate at their discretion.
The express fees usually range from at a minimum, $5,000 to up to $25,000+ in some outlier cities. Most will charge between $5,000 – $15,000 For example, the city of Long Beach charges $5,925.45 in fees for 1 owner. If you have multiple owners – they add $145.00 for each additional owner. In Los Angeles, each license requires $8,059 per activity type. We’ll average it at $15,000.
The discretionary fees are more interesting, in order to ensure that your premises meets the code, you’ll need to make sure your property is up to code from the local fire, police, architectural, and engineering departments – or however many departments the cities decides are necessary. Los Angeles Fire Department charges $918 + $216 for inspections exceeding 4 hours. However, they say nothing about any other departments. Basically, if a city likes you, they can charge you as little as a couple thousand and if they dislike you or think you have deep pockets – they can charge tens of thousands.
It’s also incredibly common for a city to point out an issue and ask you make a modification so that they can come back in for another inspection, or simply put down a random number of how many hours it will take them. Most cities will also charge you a security deposit, legal fees, consulting fees, and operating agreements with the city, etc. In all of our licenses, we have never paid less than $35,000 for these discretionary fees. As a result, we’ll average these out at $30,000 to be really nice and overly optimistic.
Third Step – Premises Diagram
Almost all cities have a multiple-phase application process. At some point, you must have a premises diagram that meets all state and local cannabis codes, and specifically for cannabis. Unless you’re a cannabis architect yourself – you’ll need someone who can do this. Cannabis Architects charge a premium as they have to consider a lot of factors that most regular architects do not. Expect to pay about double to triple for cannabis architects.
Our cannabis architect states “While normally an architect would charge $1.50-5 for a commercial project – expect to pay closer to $8-$10 per square foot for a cannabis facility for a good cannabis architect.” Taking the low range of this, let’s tack on another $24,000 for premises diagrams.
Fourth Step – Engineering Plans
Once you have this set up, now you’ll need to get all your electrical, plumbing, and other items in order. Also known as MEP, these engineers are crucial in ensuring you have sufficient utilities coming in to operate your cannabis business. The average cost of this is probably around $2.00 – $4.00 per square foot. Taking the low range of this, another $6,000 for MEP.
Fifth Step – Interior Design
Now comes whether you want your place to look nice or not. This really is aggressive for retail but for other parts of the cannabis chain – the interior design really isn’t taken into account. So while normally it would be about $4.00 a square foot for retail, for our facilities only minimal costs were put into design costing about $1.00 square foot. We’ll tack on $3,000 for this.
Sixth Step – Construction & Equipment
Now comes the REALLY expensive part, how much is your equipment and construction? A CO2 extraction machine goes from about $135,000 for small ones to $500,000 for larger ones. Then there is rotary evaporators, centrifuges, and much more depending on the needs of your engineer or scientist. Ultimately, the equipment probably averages around $250,000 for a small 3,000 sqft operation.
Then let’s also tack on general contractor costs (unless you are one yourself). General contractors get paid by taking a percentage of the overall cost of the completed project. Some will charge a flat fee, but in most cases, a general contractor will charge between 10 and 20 percent of the total cost of the job. This includes the cost of all materials, permits and subcontractors. The average cost per square foot for a commercial cannabis property goes from about $80 to $200.00 per square foot or more with most settling around $100 per square foot. This includes all the material, subcontractors, and labor. So let’s tack on another $300,000.
Seventh Step – State Licensing
Now that you’ve finished building out everything. Let’s assume that everything went PERFECT, and that you only need to do the final checkups. You can apply for your state licenses.
A 3,000 square foot facility with anticipated revenue of less than $500,000 – you are looking at a $1,000 application fee + $2,500 licensing fee. When you’ve received this and passed all inspection – now you can finally start operating. However, there’s a few more costs here that most people don’t account for.
Eighth Step – Legal Consultation
Hiring a cannabis consultant or attorney is expensive. The average cannabis attorney rate is around $750/hour being able to charge a premium as it’s a really exclusive field right now. This is coming from one of our founders who also runs a law firm specializing in cannabis contracts.
For example, the city of Los Angeles requires public notices, community meetings, pre licensing inspection etc. This includes having someone stand in front of the public population of a city at city council hearings, meet and greets with city officials, negotiations and more.
If you want to have a specialized, knowledgeable cannabis attorney – expect easily about 50 – 150 hours of legal work. Let’s take the mid area at about 100 hours.
Ninth Step – Burn Rate
Here’s a super fun one for everybody. If you are leasing property – keep in mind that while you are struggling – this doesn’t mean your landlord lets you off the hook. We’ve spoken to a lot of people about the pain they have during this time frame – some are hitting about 14 months of processing time with over $30,000/month in just rental fees.
Everything above takes a long time to complete. Let’s estimate a “short” time frame of 12 months * the rent = $108,000. Let’s also add in the security deposit which is usually 3x normal rates. $108,000+$27,000 = $135,000. TOTAL COST FOR 3,000 SQFT FACILITY BEFORE OPERATIONS BEGIN WITH GOAL OF $500,000 REVENUE
NON-REFUNDABLE AT ALL STAGES
Now comes the really fun part for us
Let’s compare the opening costs for you to start with us in making your own manufactured cannabis products versus the opening costs that everyone else has had to suffer.
If you’re ready to enter the United States' largest edibles market (now and in the future) and want to reduce your weed license cost: Contact us to secure your spot today!
If you haven’t read them yet, we recommend to read more about other ways cannapreneurs enter the industry:
Recently, we had the chance to catch up with one of our newest cannabis contract manufacturing partners, En-Tranced, that was co-founded by John Masis and Laura Stevens,
En-Tranced’s success is a prime example of how aspiring entrepreneurs can use cannabis contract manufacturers to their advantage for high-quality results, seamless market entry, and streamlined retail placement.
Hear more about where the co-founders started, how the brand came to be, and the way in which they were able to scale to multiple states in just a matter of years. Tune into the audio version of our interview below, or keep reading to find out!
MGN: Before starting En-Tranced, what was your professional background or experience? Were you already in the industry or just a spectator consumer or admirer?
John Masis: So actually, my background is in the pharmaceutical industry and specifically working with alternative ways to get active drugs actually into the body without going through the stomach. In addition, I've been a big admirer of Eastern medicine, specifically herbal medicine because that's where it all started. Initially, when the Farm Bill in 2018 passed, I was approached by my co-founder, Laura Stevens, to take a look at how we could utilize some of our intellectual property and get cannabis created in formulas that would actually be much more efficient and much more helpful to people than smoking or vaping.
So, we formed a company that actually focused on the hemp space with CBD that was actually launched as Herb Tech Pharmaceuticals. And those formulations and science then formed the basis for us, with En-tranced, to then look at the THC cannabis industry. With that mindset we realized the different business models needed between, let's say a federally legal product like hemp and a product that's legal at the state level like THC.
The business strategies are very different. But I've always been a big admirer of the cannabis plant, you know, the NIH has identified over 100 plus pharmaceutically active ingredients in it and we're just starting to learn and scratch the surface about what they do... so I'm a big admirer of the plant.
MGN: Yeah, well, that kind of answered my next question to you know, why choose cannabis as the industry to enter. But I love that angle, you know, looking at it as medicine and trying to increase the delivery to the consumers. So, you're really like consumer-focused versus you know, “people over profits” is a common saying now, but really getting that delivery of the medicine to the consumer. So that's interesting.
Masis: Yeah, exactly. I think one of the things that is really interesting when we looked at the industry, what we realized is that this is a tremendous opportunity for people to really treat themselves to take an active role in their health care or recreation for that matter, as well. But the issue we saw was that the methods employed to get the cannabis gets into the body were not healthy or efficient. Smoking or vaping can be harmful to the lungs.
With edibles, there's a tremendously poor onset of action. And topicals have limited success traditionally. So our focus in forming En-tranced and using pharmaceutical technology for alternative delivery was to create products that would be beneficial to the body. In addition, we wanted to give consumers control over their experience both in the dosage amount and in the speed of onset of action. If we look at the liquor industry as an example, everyone understands the effects of a glass of wine, a beer or a cocktail and can self-dose. We want to bring that control to cannabis.
MGN: Yeah, like advancing the industry from just flower to actual dosages and definitive information. That's great.
Masis: Yeah, when cannabis first become accessible, cannabis itself was the most advanced. Now the next evolution is how do you make cannabis controllable by the individual consumer and utilize cannabis much more efficiently, safer, etc. And that's what we're about.
MGN: I know En-Tranced is in multiple states, which you can get into more in-depth - But what was the first one that you entered in with the THC products and how did you scale so quickly?
Masis: Yeah, so basically, Maine was the first for us to enter to answer your question. It's a state that’s close to us with a little bit more of an emphasis on the medical side than on the recreational side, although there is recreational as well. And that gave us a chance in a very vibrant market to really begin to work on the efficiencies that we needed to be able to scale. A part of that process was to create the formulation bases for our oral misting technology and transdermal technology that could be readily and consistently blended by different contract manufacturers in different states with uniformity.
So that gave us a chance to really perfect the system of creating the basis in sufficient quantity and variation to then supply to our contract partner. So, Maine was a great state for that. But that then allowed us to really begin to move into multiple states almost simultaneously. California was really the next one, but we're now launching in a number of different states. I mean, most of the major states in fact across the United States.
MGN: So, we kind of touched upon this too, but can we go into how you decided on producing oral Canna-mizer versus other products, and I think you have edibles too, so can you tell us more about your product collection and how those came to be?
Masis: So, our focus is always to have a product or technology platform that's a substantial advantage over what currently exists in the marketplace. So, if we can't create something that is very different, or much more efficient then we don't really want to be part of it. We looked at the Oral Canna-mizer as, and I'll use a technical word, a transmucosal delivery system where we could actually with a mist, create a penetrating technology that would penetrate right through the tissue of the mouth into the bloodstream. And the desire for that was to have an immediate onset or immediate impact on the consumer so that it would allow a person to understand how much cannabis is in their system.
So, with the Canna-mizer, you can create a pre-measured dose so everyone knows exactly how much cannabis you're getting in and you feel the effects. With edibles, there has traditionally been a significant lag between the consumption and the impact. Our edible contains formulation technology that speeds up the absorption significantly and predictably so the consumer is never left wondering if it is going to work.
Working with molecules, specifically cannabis molecules, whether it's CBD or THC, they have a peculiar problem. They're very lipophilic, they’re very fat-loving. So, they have a tendency of getting sequestered in the adipose tissue within the body. So as a consequence, you really need to create a product with technology that can access the blood supply pretty quickly or it’s just going to get sequestered someplace and that’s just going to be it. It won’t be effective. So, our focus, in technology development, was on how do we create that efficiency of delivery into the bloodstream? How do we create the speed and ability to precisely dose, that again, puts the consumer in control of their experience. And that’s the Canna-mizer piece.
On the transdermal piece, we have a system that we can actually push the cannabis molecules very quickly through the skin to target very specific areas of the body, like muscles or joints. Our transdermal is not really designed to be a cerebral product. It’s designed to be a product that the consumer can utilize to treat very specific things, different pains, site-specific, etc. our transdermal produce what we call “a full body high” as it doesn’t really have a cerebral impact.
To follow up on the edibles, what people don't really typically realize is that in the pharmaceutical industry, pectin which comprises most of the gummies available is actually used to delay the onset of action of an active agent. This is because pectin is dissolved not by the stomach it’s dissolved by the intestines. So, with our edibles, our focus was to create oral products, which will be dissolved by the stomach and absorbed very, very quickly and predictably. So, it's not as fast as the Canna-mizer but It's very predictable from that standpoint.
MGN: Yeah, for sure. And consumers are becoming more and more aware and educated on how things work.
Masis: Well, that’s it I mean, people want to be able to incorporate their experience into their daily life. They also want to have discretion with it. So, it's hard to be discreet when you're exhaling a ton of smoke or vapor, so our focus is to create something where someone can comfortably use our products discreetly in a lot of different settings.
MGN: I love that. That's very cool. And even on the health side of it, too, people are becoming more health conscious of what they put in their bodies, the smoking you mentioned. So that's avoiding those, too.
Masis: Yeah, and if I can add something to that as well. This becomes very important on the medical side. You know, there are a lot of people that utilize THC cannabis to treat pain, cancer, pain, self-treat their cancer, pain, etc. And it's very difficult to smoke or get the benefit from smoking or vaping if you're a person, in a hospital bed suffering from cancer, you need something that's much more efficient and isn't gonna be harmful to the lungs. While edibles are often used, their delayed onset of action can be a problem. Further, they may have a negative gastrointestinal impact, especially with chemo…so they may not be as helpful as a smokeless fast-acting delivery system
MGN: Right, right. So, we’ve covered a lot of technical terms, and a lot of science behind your process. What was the research and development process, did you involve consumers? How did you get to the science behind the product?
Yeah, so the research and development process were quite extensive for all of our technology platforms and products. For example, to test the penetration capability of our technology we use what is called a Franz Cell System. In this system, we use skin-replicating membranes to test the speed and quantity of cannabis that we can penetrate through the dermal or mucosal membrane into the bloodstream. The Franz cell testing is analyzed by our HPLC (High Pressure Liquid Chromatography) systems and technology that can create computer penetration models on how the cannabis molecules move through tissue and throughout the body.
Once we get this dialed into our formulation technology, it is then ready for prime time and we get consumer feedback…which then can lead us back into the research and development process. This continues until we get a product that we like …and more importantly, our consumers like. So, it is an expensive and time-consuming development process for each product, but this means that a consumer can really on the fact that they will experience something truly unique.
MGN: That’s what we hear from a lot of cannabis brands, right? So, for those aspiring entrepreneurs, who are thinking of just getting into the industry - in the initial stages of planning and licensing, what were your biggest hurdles? How did you overcome them and what would your advice be to those that are just starting?
Masis: Since Cannabis with THC can’t cross state lines, En-tranced needed to find contract partners in each state that we could blend our bases with the cannabis accurately, precisely and uniformly… - our biggest challenge was finding the right individual groups that were licensed and were capable of producing our product to our specifications in whatever states we're launching the product into. There are a lot of groups out there that claim that they can do that but the reality is far different.
Most contract manufacturers don't have the scientific expertise or precision to assemble our products. So that was the biggest hurdle, finding great contract packers to partner with. This means that we had an extensive interview process that looked at technical capabilities, regulatory compliance and procedures, and market access. Regulatory compliance was an area that became important as each state has its own regulatory scheme and compliance is critical. It's a detail-oriented business, but critical to being successful here was being able to find appropriate contract partners, contract manufacturing partners, that could handle the science, make sure you're in full compliance to the highest level possible.
MGN: So are the established states like California, and Colorado, are you finding more vendors applicable there?
Masis: That's exactly right. As a state matures and multi-state brands move in, companies begin to realize that becoming a contract manufacturer is a viable business without a lot of the risks of brand development. These companies develop expertise at formulating products and compliance issues that make them important to multi-state brands. The more mature states like California. Colorado and Massachusetts are at this level. Other states are moving in that direction.
MGN: Yeah, definitely. So you kind of answered the next question, which was how and why did you decide to go with co-manufacturing and white labeling? But what kind of benefits have you achieved by going this route, business-wise, profit-wise, you know, on the side of not being plant touching? How have you benefited from that?
Masis: Well, it allows you to scale very quickly from that standpoint. I mean, we know what we do very well, which is to create pharmaceutical emulsion systems that can be employed through various delivery technologies. By contrast, we don't grow or extract and we will probably never grow or extract. We want to focus on what we do well and partner with companies that are experts at what they do. In this way, our business model is to source whatever distillate or extract that we feel is the best and combine that with our technology.
It also makes our business model very flexible so if there's a strain that becomes a super-premium strain that someone is developing and it's unique - we don't have to go back and recreate it which can take time to do - we can select the best strains, extracts or distillates possible and work with our contract manufacturer to incorporate them into our products. This way we can ensure that our products are state-of-the-art/cutting-edge and the best on the market.
Rather than trying to be a jack of all trades and a master of none in this industry, we know what we do very well, and we can combine that with what others who do exceptionally well and really create a great synergistic relationship that allows us to - grow quickly, innovate quickly, and provide the consumer with the best product.
MGN: Yeah, kind of lets everyone do their best and then serve the consumer the best in the end.
Masis: Absolutely. That's the key. You know, no company can do everything for every part of this process. If you can create a company that does what it does best then can pick and choose and combine the best of other things - yes, you end up with the best possible product for the consumer.
MGN: Right. So, how has the white label system supported retail placement? I know a lot of growers and extractors get the product and then they struggle to make those connections with the dispensaries or the retail store. So with white labeling and cannabis contract manufacturers, how have they helped you get into the retail stores?
Masis: Yeah, that's big, that's a great question. And that's a big part of a brand launch. Starting from scratch takes a long time. Since we are usually dealing with the best, most efficient, market-established contract manufacturers, they often already have embedded relationships. This gives us a step up where we can begin to look at branding awareness on the state level as well as at the local dispensary level like working on getting budtender training in place to drive local awareness and ultimately sales.
Contract manufacturers provide an indispensable part of our launch strategy and they give us a leg up in the sales and marketing cycle. I think the mistake that a lot of entrepreneurs make, especially in this space, is that they think “well I got a great product. And so, everyone's gonna flock to it” Unfortunately, having a great product is just the start. That's the beginning of the race. You have to work as hard at marketing the product as you did creating that product.
MGN: That's great. So what's the biggest advantage you've gained by working with My Green Network or how does their team support you in the California market, which is well known for being saturated?
Masis: Yeah. So basically, I discussed earlier that we did a lot of research into finding the best possible contract partner in each of the States in which we are launching a product. California is the largest state market in the United States so it was important that we partnered with the best organization capable of handling our business. In our selection process, My Green Network quickly emerged as the best possible choice for us. This decision was made on a number of factors.
MyGN had “best in class” blending capability with incredible precision. My Green Network quickly set the standard for us by which all other contract manufacturers are measured…even in other states. In working with MyGN, we also discovered that their response time to our needs and their ability to turn projects around without drama reinforced our belief that we had found the best possible partner for the California market. So, all of this means that our partnership with MyGN has allowed us to focus on establishing our brand knowing that our products in the dispensaries are the best possible.
MGN: So, can describe the retail part of it more in-depth, and have you gone to sale yet in California?
Yes. Our products are being sold in California. With the help of My Green Network, we started the launch in Tropicana which is one of the premier dispensaries in California. We have a number of others that were spooling up pretty aggressively. There's obviously an education process you need to put in place in order to get the budtenders behind your product so that they, understand what it is they are selling. This is especially important with a product that is unique with unique technology.
But I also think that while you need an education component in launching a unique product, having a unique product is an advantage in a saturated market…it is not the same old… I would not want to be launching a new flower strain …but a product that is patent pending and offers something that is discreet, predictable, with a fast onset of action and long duration…that is new to the marketplace and I believe can inject excitement into a crowded market. But education and market awareness become important and the right contract manufacturer lets you remain market-focused.
MGN: So what does the future hold for En-Tranced as a brand and product line, are there any new things that you're planning on adding or new states you’re entering?
Masis: Basically we want to continue to add states in addition to the ones we are already in…I think that New Jersey and Florida, and Michigan, would be great. In addition, we are looking to continue to add different product offerings as well. Different flavors, different experiences. Without giving away too much of the future, we are working on a concept that we pioneered called the macro entourage effect…. that involves a lot of plant extraction chemistry…so stay tuned.
MGN: Right, right. That's awesome. So all right, the last question here. For somebody that has an idea, like the Canna-mizer or something new and fresh, why work with a co-manufacturer like, My Green Network?
For a couple of reasons. First of all, if you're an aspiring entrepreneur, and you're looking to get into the market, you have to understand this is a complex market. Back when the cannabis industry first started, the thought was “hey, I’ll grow something and I'll go sell it.” Right now, it’s a very, very different, and very sophisticated market. The regulations are confusing and constantly changing. Any entrepreneur that tries to do it all alone has very little chance for success.
By partnering with a company like My Green Network you are instantly accessing a wealth of knowledge and the real-world experiences of a team that focuses on making you successful. Second, their industry/dispensary contacts can help ease the market launch process with great introductions and accurate advice critical for a new product.
And finally, if the product is fresh and new, and innovative, the services, advice, and market wisdom that My Green Network can provide are even more invaluable as the market further needs to be educated as to the difference between your product offerings. My Green Network has been an important partner in our market launch in California.
MGN: To finish, I know compliance can be a huge factor for brands just starting off. Have you experienced any fines or violations or warnings or do you see that the contract manufacturing you don't get as much interaction with those regulatory agencies?
Masis: Yeah, exactly. Regulations in this industry are critical. Unfortunately, as a new industry, the regulatory framework of many states can be confusing and conflicting. En-tranced takes its responsibility for compliance very seriously which is why we have legal expertise on staff. That said, it is often the insights and expertise of our contract manufacturers in general and My Green Network specifically that help us operate efficiently and legally within the state.
Their day-to-day experience can show the way a specific function…like distribution… needs to work. To date, En-tranced has an exemplary compliance record and I believe that one factor to this is the advice and knowledge that we tap into with our contract packers… again My Green Network is top-notch in this area.
MGN: Right, it's a whole other wheelhouse that you would have to be an expert in, or staff somebody to be an expert in. So it takes that complication from the whole business structure, right?
Masis: Yes, and a lot of these regulations are nuanced. The states are trying to do their best. They're trying to learn as much as they can about the industries. But they have a learning process as well with regard to the regulations they promulgate and how the industry is evolving within their state under that set of regulations. There can be a lot of details about the regulations that you may miss unless you're working with them on a daily basis. Since the contract manufacturers like My Green Network are doing that, they typically are up to speed relative to compliance. Again, that gets you up that learning curve as a company very, very quickly.
MGN: Yeah, for sure. Especially knowing California is just as complex as the other state, even though they're established. So, that was the end of my questions - did you have anything that you wanted to add?
Masis: You know, the industry is very comparable if you look at it economically to the post-prohibition liquor industry. At that time the fledgling industry had a lot of confusing regulations with a lot of boom-bust. While the cannabis industry shares that dynamic it also is different in the sense that with the internet, media, social media etc… these cycles have been accelerated. What this means is that flexibility is also key in this industry as it gyrates to accommodate new market entrants and market regulations. We found that My Green network provides us with that flexibility to prosper in the California market.
Increase Your California Co-Manufacturing for Cannapreneurs - The Final Word
As you can tell from our conversation with one of MGN’s Green Leaders - cannabis manufacturing companies in California are giving brands the opportunity to scale growth seamlessly while freeing up capital to help promote consumer awareness.
By partnering with an established cannabis contract manufacturer, like My Green Network, you gain the advantage of compliant facilities, technical expertise, and retail placement while tapping into our network’s collection of vast resources in the growing California cannabis market.
Think you have an idea for the next best thing when it comes to consumption? Want to combine your professional skills with your personal passion for cannabis, with a product you’ve always dreamt of? What’s holding you back?
Consider cannabis contract manufacturing, cannabis white label, or private label goods, and put the best of the best in California to work for you. Get in touch with My Green Network to schedule a discovery call or in-person tour of our facility, today.
If you’ve learned anything about the cannabis industry so far, it’s likely the fact that the market is ever-evolving.
From regulations to sales to consumer preferences, nothing stays the same for too long. As the cottage industry experiences massive growth due to advancements in technology, operational improvements, expanded accessibility, and beyond.
Simply put - as legalization grows, so do market factors that affect cannabis retailers, retail delivery, manufacturers, distributors, processors, and cultivators alike.
So, what are the latest US and California cannabis business trends to gain momentum?
Cannabis shared manufacturing facilities, white label cannabis brand expansions, cannabis contract manufacturer partnerships, and infused product manufacturer collaborations.
Which are all terms that are just a fancy way of saying - diversifying your product collection or consumer offerings through unique market entry methods and various California cannabis license types.
How can your retail dispensary, retail delivery business, or current cannabis operation capitalize on the latest trend for scalability and growth?
Keep reading our ultimate guide on cannabis shared manufacturing in California to learn more, including the why behind developing your own dispensary or delivery house brand and how to use unique Calcannabis license types to your advantage.
The Current State of California Cannabis Retail
Recently, a slew of California retailers reported to MJBizDaily that they’re struggling to make ends meet. This is because depressed wholesale prices haven’t rebounded as expected, and many retailers are forced to keep product prices low to compete.
Even more? POLITICO conducted an analysis of financial filings from two dozen of the largest publicly traded U.S. operators that showed the companies collectively lost more than $550 million in the first six months of this year on revenues of nearly $4.5 billion.
For retailers, there’s more competition than ever before, and more is coming.
In the first quarter of 2022, California’s Department of Cannabis Control issued 80 dispensary, 50 delivery, and 16 microbusiness licenses. That means that in less than one year, the DCC increased California’s retail footprint by more than 20%.
As we look towards November, if cannabis tax ballot measures pass as expected, some of the state’s most populous counties will see even more retail growth -
25 cannabis retail stores could be approved in Los Angeles County
10-20 cannabis retail stores could be approved in Sacramento County
20-40 cannabis retailer stores could be approved in San Diego country.
For cannabis stores already in business, these changes mean it’s time to look at how you can stand apart from the competition or reduce your costs to distributors and brands supplying you with products in order to raise your bottom line. So next, let’s look at how other innovative and big-time brands are already revolutionizing the retail space with product collections and collaborations.
Cannabis Retail + Shared Manufacturing IRL
Recently, we’ve seen an influx of shared manufacturing partnerships and white-label cannabis goods that are being launched to increase sales and profits for the brands involved. For the real-life application of the trends we’re talking about today, here are the most notable products and brands to hit the shelves with new offerings.
The nationwide Trulieve dispensary recently partnered with Wiz Khalifa in Florida to launch his own unique product line of ‘Khalifa Kush’. The Khalifa Kush brand offers a lineup of flower, pre-rolls, vapes, edibles, and concentrates, and is now available in over six states.
On the hemp CBD side of the industry, other businesses and brands like breweries, bars, and restaurants are equally cashing in on the cannabis-fueled trends. Like one Houston, TX brewery that recently launched a beverage with less than .3% THC to tap into the market.
The well-known brand, The Parent Company, recently partnered with FaZe Rain, the co-founder of esports powerhouse FaZe Clan, on a new brand called RCVRY. When it was launched, fans camped out starting at 4 a.m. for a chance to buy the Rainz Runtz strain that was released.
Elias Egozi, an amateur MMA fighter and medical dispensary owner of Alto in south Denver, recently launched his own line of solventless rosin, amid medical marijuana's lowest sales in the last decade.
Cannabis Shared Manufacturing in California
Interested in following suit and expanding in one of the most populous states and markets? You’re in luck. In 2018, California created the “Type-S Cannabis Manufacturing License,” which was designed to be a “shared-use” license. Simply put, a licensed cannabis contract manufacturer (a “Primary Type-S License”) can allow locally licensed “Type-S Licensees” to use their space.
That means the Type-S-Licensees can get their products on the shelves faster by using the Primary Type-S License’s facility, equipment, and space to produce their own brand or product.
Cannabis shared manufacturing through Type-s licensing also enables existing businesses like retailers, distributors, and cultivators to build their own teams, utilize already compliant spaces, and launch their personal cannabis brands without the hassle of traditional licensing and big-time capital raises to build a space, equip it, and employ it.
Another way to increase your brand’s portfolio or product collection is by sourcing trusted cannabis white-label California products or partnering with cannabis manufacturing companies that offer private label products, too.
With the white-label cannabis route, you can choose a quality product with consistent results and brand it yourself. With a private label product, you can choose a cannabis contract manufacturer and specially formulate your own blend for sale.
Expanding Product Collections with Reduced Costs
Last but not least, any and every cannabis brand looking to scale growth through expanded product collections will want to do so with reduced costs. Which cannabis white-label or private-label products, and My Green Network specifically, can also support. To help you better understand, let’s look at a typical scenario of how a cannabis product is priced, and sold.
Scenario A - Standard Market Entry
The manufacturer sells the branded products to retail at a wholesale price.
e.g. A cannabis brand sells a chocolate bar at $8 wholesale, while the retailer sells it at $16 for an $8 profit.
The distributor sells branded products to retail at wholesale price plus distributor markup.
e.g. A cannabis distributor sells the same chocolate bar for $8 + 10% markup for a total of $8.80, while retail sells at $16 for a lesser $7.20 profit.
Scenario B - MGN Value-Added Entry
On the other hand, MGN white label, and private label products are specifically branded for retail, which is equal to actual production costs + margin. Typically, the production costs + margin is less than a manufacturer's or distributor's wholesale price. This allows a retailer who white labels and private labels with the established cannabis contract manufacturer to capture extra margin compared to the standard market entry from above.
As seen by the comparative scenario below -
e.g MGN manufactures chocolate bar for $4 and charges a service fee of $2 (total $6), then retail sells for $16 ($10 profit)
Additionally, if a retail license holder decides to go the cannabis shared manufacturing route vs white or product labels with a Type-S license, they can increase their margins even more. That’s because Type-S licensees who work with MGN only pay for actual production costs and can sell at the full retail price.
e.g. A retail license with Type-S licensing manufactures chocolate for $4, but sells retail price at $16 ($12 profit)
Increase Your California Cannabis Business’ Profits with MGN
Back to our original message - as the industry evolves, so must you. And we all know that sometimes you have to spend money to make money. But the amount you spend doesn’t have to be so exorbitant that it takes years to make your money back.
By exploring California cannabis manufacturing license types, like the cannabis shared manufacturing type-s license or alternative routes like white or private labels - you can be creating, crafting, branding, and selling before you know it and for less.
Connect with southern California’s premier cannabis cloud kitchen and primary type-s licensed facility, My Green Network, to get started. Schedule a tour of our state-of-the-art facility, or learn more about our membership opportunities, here now.