For current cannabis operators, it should come as no shock that licensees are having a problem turning a profit or maintaining manageable margins. In the industry’s early stages of infancy, start-ups and established brands alike know the struggle of navigating uncharted territory and keeping up with regulatory fees, state taxes, and, of course, outdated codes like the infamous IRS code 280-e.
However, in 2022, these profit problems are made even worse by the current state of the economy. The cannabis industry, like so many others, is experiencing a shocking (and somewhat unexpected) rise in operating costs, supplies, and wages due to inflation without increasing product prices. A fact that has many cannabis owners looking towards 2023, asking questions like -
“How can we increase sales?" “How can we cut costs?” “How can we secure stability for future growth (without spending a lot up-front)?”
Looking at the trends, it appears that cultivators, processors, manufacturers, and distributors are all on the same page - as many of these groups are starting an edible business in California to gain market growth. So how can you join the likes of brands like Cann, Sonder, and Garden Society in offering more than just one cannabis good?
Keep reading to answer the question - how to sell edibles to dispensaries in California? And, to learn the top 3 reasons why cannabis brands already are.
Top 3 Reasons for Starting an Edible Business in California
Because the struggles that affect cannabis profitability are often hard to adjust internally, the market is forcing cannabis owners across the US and world to look externally for scaleability. This thinking outside of the box mantra is what’s helped propel the trend of current brands starting an edible business in California.
If you’re currently brainstorming ways to boost profits for your own cannabis (or even non-cannabis!) brand, here are the top three reasons to consider getting into the California edibles business.
#1 - There’s money to be made.
In February 2022, Seattle-based data-analytics firm Headset published sales data reporting that edible sales grew more than sales of all other cannabis products combined in six recreational markets. Including, California, Colorado, Michigan, Nevada, Oregon, and Washington state. In fact, gummies alone accounted for 70% of the category’s share and $1 billion in retail sales overall.
#2 - Increases your target markets.
Obviously, entering a new product category will increase your brand’s target market. But edibles are a market that experts agree will continue to increase in use, themselves. Why? Edibles have become the preferred entry-level consumption method due to their ability to accurately dose and avoid smoking or inhaling, for those who are opposed.
Consequently, each year, the percentage of ‘entry level’ users trying cannabis for the first time increases, rising to 49% in 2022 from 40% in 2015, according to a recent Gallup Report. Edibles are also preferred by younger generations, meaning new consumers reaching the age of 21 will enter the market annually.
#3 - It’s cost-effective.
In comparison to cultivation, or extraction, edibles manufacturing is by far the most cost-effective product category for operational costs and licensing, too. For instance, the cost of securing a license and setting up shop for most traditional licenses in California is over $1 million. When edible production or white-label edibles in California typically costs less than a ¼ of that cost.
How to Start an Edibles Business in California
Now that you know the why, let’s get to how to start an edible business in California. The state of California uniquely offers what’s known as a Type-S license that allows for cannabis kitchens, or commercial kitchen shared spaces. The Type-S licenses are available for in-state, out-of-state, and even out-of-the-country applicants and give manufacturers the ability to operate in ‘shared-use’ facilities and, more specifically -
- Extract cannabis using butter or cooking oils
- Make cannabis products through infusion
- Package and label cannabis
In shared-use facilities, Type-S manufacturers can usually either reserve their own suites or maintain a membership to use the common areas and equipment on a rotating schedule. This type of license not only cuts initial start-up costs but also saves on ongoing operating costs, wages, and equipment repair budget line-items, too.
Even more, advanced Type-S facilities can help you with licensing and learning how to sell edibles to a dispensary in California. Some, like My Green Network located in Santa Ana, also offer distribution and transportation, taking care of that part of the equation, too.
Outside of crafting your own edible product line in a Type-S facility or under a different license type, white-label cannabis edibles are another popular route for current licensees to explore. White labeling gives you the opportunity to quickly put a quality product on the shelves with fewer start-up costs and you own control over branding.
Starting an Edible Business in California - The Bottom Line
Without any forecast for higher product prices or lower wages or costs - it’s time to get serious about how to scale growth, increase profits, and leverage your brand over competitors. As you’ve learned here, one way to do so for a growing number of cannabis brands is starting an edibles business in California.
Whether you’re from out of state, out of the country, or already licensed in California, getting licensed to produce or white label cannabis products is simpler and more cost-effective with California’s Type-S license. So, now that you’ve learned how to start an edibles business in California and the reasons why make now the time you begin exploring the options to do so seamlessly.
Start by contacting My Green Network to schedule a tour of our Type-S shared-use licensed facility and cannabis kitchen for your future edibles brand. Or, browse our pricing page to learn more about how our licensing and membership process works.
Want a step-by-step guide to learning how to sell edibles to a dispensary in California? Download our complimentary guide for industry statistics, the most cost-effective ways to do so, and actionable tips you can take now to get started.