CHEAPER, HARDER

The dilemma of medicinal cannabis on the island: Who wins in the game of cheap?

We are in a transitional phase, as natural as it is inevitable. Every emerging industry grows, matures, stumbles, but also learns to get back up. However, to move forward, it is essential to engage in self-reflection: identifying past mistakes and setbacks is key. Questioning aspects of operational logistics is also crucial.

In the last two months, the most prominent news stories have revolved around laboratory tests, the partial reopening of a lab under certain conditions, and recently, the headline: “The End of the Medical Cannabis Boom” on the front page of the nation’s leading newspaper. A headline we’ve seen before in states like Colorado, which opened its recreational market in 2012.

As the saying goes, “the flap of a butterfly’s wings in Africa can unleash a hurricane in the Caribbean,” reflecting that what happens there eventually affects us here, albeit with a certain delay. Many of the challenges the cannabis industry faces today in Puerto Rico were already experienced years ago in other states. In analyzing this new hot topic, the “end of the cannabis boom,” it is necessary to ask several questions.

First: If for years an eighth of cannabis cost $60 and the cost of living was lower, how is it possible that today that same eighth costs $20, while operational costs are six times higher than in 2017? For example, a bale of soil used to cost $35; today, that same bale costs $70, and we could cite several other examples. Second: How much does it cost to produce a gram of cannabis in Puerto Rico, considering also how long it takes to sell the pounds already produced, or if they also offer credit? And third: For how much longer can a gram be sold at the cost of production or even below before it becomes unsustainable, and how can we make patients understand that an ounce doesn't really cost $70 in Puerto Rico, where electricity is four times more expensive than in Colorado and California, taking into account the price per kilowatt?

This strategy is already known in states like California, for example, where retail outlets belonging to vertically integrated chains began selling below cost to attract customers solely on price. Once independent businesses could no longer sustain the loss of customers, these chains bought their establishments. Then, having consolidated a significant market share, they began to progressively raise prices. It is at this point that the customer, whether in California or the patient in Puerto Rico, begins to feel the pinch.

Unfortunately, everything costs more on an island, and that reality can't be hidden from the patient. Cannabis is no exception. It's difficult to achieve sustainability when operating expenses are extremely high, but at the same time, we aim to sell the product below the cost of production. Trying to regulate the price per pound would only be a lifeline after the previous mistake of lowering prices to attract more sales in a limited market, ignoring the cost of production.

Now, should this price control be implemented at the production stage or at the point of sale to the patient? Who actually benefits from price controls? We need to evaluate the legal and economic feasibility of this complex issue before drawing any conclusions.

Mr. Gabriel Sifre

Consultant

@unamoñasinpelo