Marijuana Business Magazine September 2018

Find Reliable Data Sources BDS Analytics in Boulder, Colorado, is a useful source for market research, Wana Brands’Whiteman said. It can be a helpful tool to break down your com- petitors’ wholesale prices, which aren’t readily available. BDS partners with dispensaries to aggregate data from point-of-sale systems. Subscribers to BDS services have access to products’ average retail prices, market share data by brand and stock-keeping units (SKUs), as well as other information they can leverage to better understand their particular markets. Average retail prices are key here; in general, retail prices are approximately double the wholesale price,Whiteman said, but loyalty programs and patient discounts can skew those numbers. “It’s an imperfect science, but as a rule of thumb, if you consistently see an edible selling for $20, you can surmise the wholesale price is around $10,” Whiteman said. Organa Brands, a Denver extraction and manufacturing company with opera- tions in 12 states, Canada and Jamaica, also uses BDS Analytics as a “scorecard for the industry,” said Chris Driessen, president of Organa Brands U.S.The company provides vape pens, edibles and other infused products. “We can all beat our chests, say we’re amazing and that we’re going to take over the world, but BDS tells you what is ,” he said. “It’s the only reliable source for market-share information across multiple states.” Driessen said some retailers accept less than keystone margins – meaning margins less than half of double the wholesale cost – to attract new customers and get an upper hand on the competition. He said it’s a savvy move, and margins can be made up with sales volume. Before BDS Analytics was available, data was so important to Organa Brands’ strategy for price setting and bundle promotions that the company employed two full-time employees who cold-called dispensaries to aggregate Organa’s own retail sales data, Driessen said. “You have to be able to do some level of market analysis to have an educated opinion,” he said. Evergreen Organix – a Nevada can- nabis cultivation and production facility that sells edibles, topicals, vape oils and accessories – uses Weedmaps as a resource to compare local retail prices for infused products, vape oils and accessories.Then, it uses those numbers to estimate wholesale prices for competitors’ products and uses the comparative analysis when it looks at its own wholesale price models, said Jillian Nelson, Evergreen’s operations manager. Nelson said local data has been more helpful to Evergreen Organix than data aggregated from multiple states. “Comparing pricing and sales trends between Nevada, Colorado and Califor- nia was not a good basis for us, because the markets and regulations are so dif- ferent,” she said. Consult with CPAs Evergreen Organix also consults with certified public accountants (CPAs) to understand tax liabilities for differ- ent wholesale price models and looks at amortization schedules to know what profit margins it needs to maintain to pay business expenses and turn a profit, Nelson said. The IRS tax code 280E restricts can- nabis companies’ write-offs to deduc- tions related to cost of goods sold, so their tax liabilities are higher. Evergreen works with CPAs on wholesale price models that build in the costs of labor, Jillian Nelson, operations manager at Evergreen Organix, said the company uses Weedmaps to estimate the wholesale prices of competitors. Photo courtesy of Evergreen Organix EXECUTIVE SUMMARY Infused product, vape oil and accessories manufacturers shared strategies for setting competitive wholesale prices. The big takeaway? Don’t fight price wars. Instead: • Use market data and research to set competitive wholesale prices. Average retail prices are good indicators of what you’re up against. • Work with certified public accountants to run wholesale price models and understand your tax liabilities. Lower wholesale prices might hurt you during tax season. • Offer premium and value-priced products; a larger distribution footprint makes you more competitive on the wholesale market. • Never underestimate the importance of your brand. A strong brand helps you hold wholesale prices steady. • Understand the drivers that directly (and indirectly) have an impact on wholesale prices. Manufacturing, labor and the cost of raw materials have an effect – as do state regulations. Chris Driessen, president of Organa Brands U.S., says BDS Analytics is invaluable for setting wholesale prices. Photo courtesy of Organa Brands U.S. September 2018 • Marijuana Business Magazine • 73