Pubdate: Thu, 05 Dec 2013
Source: Boulder Weekly (CO)
Copyright: 2013 Boulder Weekly
Contact:  http://www.boulderweekly.com/
Details: http://www.mapinc.org/media/57
Author: Leland Rucker
Column: Weed Between the Lines

WILL COLORADO'S POT SUPPLY BE ABLE TO MEET DEMAND?

Demand for Retail Marijuana Could Outstrip Supply.

The time is drawing nigh. In less than a month, Colorado and
Washington will open the first adult recreational marijuana markets in
history. Which brings up an interesting question. Will there be enough
product to supply this emerging consumer base?

"It's a tough one to know right now," says Michael Elliott, executive
director of the Medical Marijuana Industry Group. "The biggest and
most difficult question is, 'What will the demand be?' There are a lot
of outstanding variables. No one has opened a retail business yet, and
also you can't start growing until Jan. 1. Right now medical growers
are building as much as they can."

Meg Collins, who heads the Cannabis Business Alliance in Denver, is
cautiously optimistic, but says it really depends on the one-time
transfer of product that state rules allow to medical businesses to
convert part or all of their medical plants to adult recreational
retail product. "You can be allowed a one-time transfer to mirror the
production of what you have on hand, and that should allow for
sufficient quantities," she says.

"Nobody knows what the demand is going to be, but it should provide a
good base for starting out Jan. 1."

Another important piece of the supply puzzle is Colorado's vertical
integration system. A vertically integrated market is one where the
business is involved in all three aspects of the operation - in this
case, growing, processing and selling cannabis. Each must grow at
least 70 percent of the product it sells and is allowed to buy 30
percent from outside sources.

"Where there are shortfalls, there is vertical integration," Collins
says. "You can sell 30 percent to other folks. I think if they are
able to mirror their production, we should be alright."

Industry consultant Shawn Coleman points out that, come the first of
the year, due to licensing procedures and moratoria and bans by
counties and cities, there will only be about 100 stores open
statewide. He's not sure that the one-time transfer will be enough to
keep up with demand.

"There will plenty of medical marijuana," Coleman says. "But not for
retail when there will be a high amount of demand in January."

He expects things to stabilize in the spring, as production catches up
with demand.

Andy Williams owns Medicine Man, a large Denver operation that is
transitioning to retail, in addition to his current medical operation.
He isn't as optimistic in the short term.

When asked whether there will be enough retail product for the coming
market, he didn't hesitate.

"No, there won't," he says. "The recreational market is expected to be
$400 million to $500 million in 2014. Medical marijuana is $250
million this year. In addition, We're being restricted to no more than
double our capacity right now, and it might even be less than that."

Williams says that the expansion of growing facilities is at least a
six-month process, with another couple of months before harvest.

"We can't turn on and off the faucet. It takes time and a lot of
money," he says. "Supply will lag demand."

Williams says retail owners are stockpiling product and ordering
edibles in quantity. But those will run out, he says, because the
market is going to be larger than anyone thinks.

"This is gonna be an unbelievable time," he says. "Tourism is going to
come and bolster the state and the industry. Hotels and
concessionaires and others are going to benefit."

Prices for adult retail will likely be double the cost of medical
marijuana when stores open. The main limit on price, Williams says,
will be the current, flourishing underground market. "If we raise our
prices above a certain limit, the black market will take over," he
says.

He sees the price of a pound of cannabis, now priced around $2,700
wholesale, rising to $3,300 to $3,500. "I also see the price of an
eighth going from $25 to $45 or $50."

Adult retail will be taxed at higher rates than medical, which will
push up the price. That's not all, Williams says.

"Assume I kept my prices lower because I can produce a lot," he says.
"Competitors would be coming in to buy my stuff to resell. It's business."

When it comes to that all-important one-time transfer, which must be
declared the day the business receives its license, Williams says
he'll be leaning toward turning more of his grow operation to adult
retail.

"Anyone can buy retail," he says. "Only medical patients can buy from
medical. If I run out, medical patients will have to buy from
recreational. Not everyone has the growing power I do. It puts more
demand on medical than recreational."
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MAP posted-by: Matt