By Jonathan Gilinski
As a customer or medical marijuana patient, there are many considerations that run through your head before making a purchase in a dispensary. How good is the product? Is the dosage enough for me? Will it satisfy my dietary needs? How long will the effects last?
However, the one question that often makes or breaks the decision is “how much does it cost?”
When you walk into a cannabis dispensary you are confronted with an array of products from flowers and concentrates to capsules and brownies. As a buyer, you must make a quick calculation to decide how much you are willing to pay for a specific product.
This is not as simple as it sounds. The consumer’s decision depends on the quality and the quantity of cannabis contained in the product. Its potency compared to its price will determine whether this is the right cannabis product for the consumer. Depending on each of these delivery methods, your cost analysis may be swayed in favor of one product over another.
The most influencing and determining factor in your cost analysis, however, is the price per milligram. It is crucial for both the buyer and seller because it influences everything else; from how the product is produced, marketed, sold, and bought. When it comes to the various delivery methods for cannabis, the cost per milligram of some products are inevitably more than others due to its makeup and method of production. This results in creating barriers of entry for many smaller cannabis companies.
Understanding the Cannabis Industry Barrier of Entry
In the cannabis industry, edibles traditionally have a higher cost per milligram compared to capsules for a myriad of reasons. The first reason is that producing edible products, such as brownies or chocolate bars, demand a lot more than producing capsules. For instance, edibles not only require a detailed recipe for both the consumable and for the cannabis oil, but also require experienced personnel overseeing and running the production process. One seemingly insignificant miscalculation with the raw ingredients can cause the entire production to easily be tainted. In other words, there are many ways one can mess up an edible. In contrast, one can produce large quantities of capsules with a very simple procedure that does not demand as much effort and has very little room for mistakes. Since there is a positive correlation between difficulty of production and final sale price, edibles naturally have a higher cost per milligram and thus a greater barrier of entry.
Another factor that affects the barrier of entry of a product is the facilities and equipment required for production. To produce edibles you need a fully equipped commercial kitchen, which is quite costly. Additionally, there are more steps required to produce edibles. For instance, you must cook raw materials for infusions which takes time and requires numerous ingredients; adding to the cost of production. While edibles require all of these (ingredients, recipes, kitchens, machines, and human skill), the requirements for capsule production are pale in comparison. To produce a cannabis capsule, one needs is a clean room that complies with guidelines—including proper ventilation and clean machinery—which most standard facilities already have. Since capsules are very simple by nature and only comprised of a filled material and shell, the process is uncomplicated and enables the cost of production to remain low.
As explained above, because the cost per milligram is the major deciding factor for customers, it is important to provide them with products that are not costly. Therefore, instead of producing edibles at a high price per milligram and deterring customers, it is more beneficial to produce capsules, which maintain a low cost per milligram. By keeping the production process effortless and at a minimal cost, your company will be able to provide the market with the cost effective products that your customers want!