Lunar New Year is a looming threat
Getting basic materials like ceramics, stainless steel and computer chips from China has gotten so difficult that its about to hit one of the few industries that has so far been insulated from supply-chain woes: U.S. cannabis.
“I believe this issue will go on at least until the end of May,” Dumas de Rauly told me.
“It’s not just vape devices. The raw materials for the equipment that fills them with cannabis, the LEDs for the grow houses — all of it comes from China.”
The company has noticed shortages of chip sets, which are used in most technology devices, including those for vaping marijuana.
The cannabis industry has so far been shielded from supply-chain woes because most of it is hyper-local. Since it’s a Schedule I substance, companies risk legal imbroglios unless they grow and process it in the state where it will be sold. But state-specific supply chains can only protect the industry for so long.
4Front Ventures, a company with operations in California, Illinois, Massachusetts, Michigan and Washington, hasn’t seen shortages of raw materials yet, but is already suffering from shipping delays from items such as vape cartridges and specialty packaging, including tin boxes.
“We’re trying to order ahead — we’re not paying more, but we’re paying up front, also we’ve begun to source domestic pools of inventory,” said Josh Krane, the company’s vice president of operations for California.
This November, he made orders and paid deposits for goods that he won’t need until April, May or even June, he told me.
So far, both 4Front and Blinc say they’ve managed to avoid passing costs on to consumers by finding alternate suppliers and prepaying far in advance for orders. Whether consumers see an impact will hinge on the multistate operators and dispensaries that sell the end products. Thanks to market dynamics, however, many of them have some wiggle room.
Prices of marijuana itself have fallen sharply this year — the volume-weighted average spot price for cannabis for the week ended Nov. 26 was $1,290 a pound, down 19.1% year over year, according to Cannabis Benchmarks, a division of New Leaf Data Services and Cowen & Co. Therein lies an interesting twist for the cannabis market.
So far, Krane said, the depressed prices have shielded cannabis consumers from higher prices at dispensaries. When the supply-chain impacts arrive, they’ll hit products like fancily packaged preroll joints and vape cartridges more than raw flower. Prices would be broadly falling if it weren’t for the inflation and supply-chain issues, he added.
“Cannabis products should be getting cheaper for the consumer,” Krane said.
“But they’re not.”
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