Message Font: Serif | Sans-Serif
 
No. of Recommendations: 4
Most of those comments make sense to me. I think most cannabis will be like Budweiser beer, cheap, good enough, very low margins, and all the value is in the brand. There will be a few high end brands that will emerge and will be able to sell marijuana at much higher prices.

In that case, most growers are going to be in big trouble, just like barley and hops makers. They will be subject to cut-throat competition, and there will be no major money to be made. This might be a problem for your Miracle Gro position, if growing ends up being unprofitable.

Then there will be a few high end brands that do fine, despite low prices, like Sam Adams beer maybe, or even smaller craft brewers, or Absolut vodka. Guessing who these will be will be very hard to do - I see no particular reason why this should be Aphria, Aurora, Canopy, Cronos, Hexo, Tilray, etc. etc. I think they are all more likely to be Budweisers than Adams or Absoluts, but who knows?

As your investor says, low input prices, while bad for the grower, are good for the company that is transforming the product - Absolut is not complaining about low wheat prices in Sweden.

My point in comparing other flowers like saffron to cannabis was not to suggest you could get high on saffron or that it was worth just as much. The point is, the cost of these things, once they're legalized, is basically a function of how costly it is to produce them. If you can sell saffron for $1 a gram and it is way harder to grow and harvest than marijuana, then I would presume that competition is going to force marijuana farmers to sell their marijuana crops at prices much lower than $1 a gram.

The value of saffron vs marijuana is not the issue, it is the cost of production. There are lots of things I would pay a lot more for, like wheat flour for instance, because I like making bread and I don't really care whether flour costs $1 a kilo or $3 a kilo. But since lots of companies offer to sell it to me for $1 a kilo (because they have to compete against each other), $1 it is. Marijuana is probably going to be the same thing: lots of people would pay $10 a gram ($280 an ounce) if they had to, but if they can get it for $1, for a product of reasonable quality, that's usually all they will pay, no matter what its value for them is.


dtb
Print the post  

Announcements

What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.