With dearth of approved growers, the state's first day of legal retail weed could see demand outweigh supply.
Long lines and limited supplies could leave many Washington residents without a buzz today, the first day of legal recreational marijuana sales in the state.
The State Liquor Control Board, which regulates marijuana, issued the first wave of business licenses to a small group of retailers early Monday, giving those owners roughly 24 hours to coordinate with growers to stock their shelves before they could open up for customers today.
Washington is just the second state to allow legal sale of marijuana for recreational purposes, following in the footsteps of Colorado. Washington voters approved legalization in January, and since then, state officials have been trying to get organized for today’s kick-off.
A total of 24 business-owners got the state’s approval on Monday after being selected from a pool of more than 300 prospective retailers who won a lottery earlier this year for a chance at the licenses. Officials had set a cap of 334 recreational marijuana stores across the state – unlike Colorado, which has no cap and currently has about 200 licensed stores.
It is not clear how many of the 24 businesses will be ready to operate immediately, but one possible downer for customers at those that do open their doors Tuesday morning is the potential for demand to outpace supply. The state only began doling out licenses for growing recreational marijuana in March and only about 79 growers are currently approved. That small crop of growers hasn’t had enough time to build up a supply large enough to satisfy customers who can buy up to one ounce of recreational marijuana apiece, assuming they are at least 21-years old. As such, some retailers may place restrictions on how much recreational pot each customer can take home.
One of the newly-licensed retailers at Seattle’s only approved weed store, Cannabis City, isn’t even sure his products will make through his first day of business. James Lathrop told the Seattle Times on Monday that he expects to sell all of the 10 pounds of marijuana he’ll be stocking before within hours.
One Washington-approved grower even told Reuters that it could be years before the state’s supply chain can catch up with demand, though lawmakers and others in the market are hopeful that more crops will be ready later this year.
Derek Peterson, CEO of Terra Tech, a publicly-traded agricultural company that invests in the marijuana industry, expects there will be “lines out the door” when Washington’s retail dispensaries open today and that could lead to some people coming away empty-handed. “You will see some semblance of shortages,” he says. “I don’t know how long-lived they’ll be.”
Low supplies should drive up prices, with Reuters reporting recently that customers looking to be part of weed history on Tuesday could pay as much as $30 per gram, which is more than they might expect to pay an illegal dealer or even a loosely regulated medical dispensary.
Colorado became the first state to allow recreational sales in January after both states passed new laws regulating sales of the drug for non-medical reasons in 2012. But, Colorado already had the infrastructure from its larger and more tightly regulated medical marijuana market to expand upon, allowing the state to get its own recreational market off the ground more quickly.
Of course, a few hiccups from the supply chain off the bat are not likely to dampen the enthusiasm of potential investors in the market.
“People just understand, growing pains or not, that it’s a significant industry from a financial and economic standpoint,” Peterson says, adding that any early shortages may even serve as an indicator of high demand for recreational marijuana in the state. What’s more, Colorado dispensaries also experienced shortages when recreational sales became legal in January, but supply was able to catch up to consumer demand.
Fortune reported last week that Colorado’s recreational marijuana industry is riding pretty high six months into its existence, with roughly 10,000 people employed in a market that has already reported almost $70 million in retail sales and $11 million in tax revenues.
Despite Colorado’s head start, though, Peterson thinks Washington could grow to become the larger of the two markets for recreational weed. “I’m looking at the [Colorado] market as a forecast for what Washington may experience over time,” Peterson says.
For one thing, Washington has the larger population of the two states, with almost two million more residents than Colorado. Peterson also notes that Colorado’s recreational marijuana laws allow residents to grow a small amount of pot for their own personal use, whereas Washington residents will need to have their legal marijuana needs satisfied solely by folks like the state-approved retailers opening their doors today.