My Observations on WA Cannabis Market
As a resident of WA, a cannabis consumer, and an economist by training and profession, I'd like to provide a couple insights of mine into the WA cannabis market. These are purely my observations.
1) There's lots of debate on this board about 'over production' in WA. While I have seen cannabis prices overall downtrend as more competition comes in, this doesn't tell the whole story. Lower priced, lower quality cannabis (single digit to about 15% THC) has seen its price drop from the high teen's per gram to between $8-12 per gram retail (tax included) as producers look for volume. But middle tier and upper tier cannabis is a different story. Cannabis in this range (18% to 30%+ THC) is constantly out of stock. Prices range from $14-25 per gram. If you find a strain you like, stock up because you could go to the store the next day and it's gone for months.
2) More stores are opening all the time. The wholesale market for cannabis will continue to increase as there are more permits pending than stores open. Many areas still don't have terrific access to retail cannabis.
3) While stores are becoming more prolific, what isn't is growing operations. CGRA makes money by leasing an existing facility to growers. The demand for growing space in WA is through the roof currently. As the market expands, expect more growers to enter the market needing a turn key solution like CGRA.
4) The Starbucks effect. As more cannabis stores open, you would expect foot traffic to drop. But the opposite is happening. From a discussion with a retail manager, after a new store opened across the street, foot traffic actually increased the following months.
5) Use of cannabis in Washington is exploding. What used to be taboo is now down right common. When I go to a retail store, the customer base is VERY diverse. You have college students, stay at home moms, professionals and working class. There is no stereotypical retail consumer in WA. As millennials age and younger generations reach 21, the number of users will only continue to grow.
Bottom line, while over production is a concern to some based on the drop in price of low end cannabis, from my observations it's really just price and product discovery occurring. There are still plenty of shortages on mid and upper grade cannabis, and retail demand is high. As the overall market grows in WA, the need for turn key growing space will still be needed. I fully expect CGRA to bring on more than three growers given the 47 acre site.
As a fair notice, I'm long CGRA and have been for a few months. I plan on continuing to hold and expand my position moving forward.