Oklahoma’s Numerous Dispensaries Presents Distribution Challenges For Brands

To understand the unique distribution challenges of Oklahoma’s exploding cannabis market, one must first address the question that has preoccupied researchers, entrepreneurs, and investors ever since Oklahoma became second in the nation for dispensaries per capita, trailing only Oregon. That question being,  “Why Oklahoma?” According to a 2018 Verilife study, for every 100,000 Oklahomans there are approximately 15.6 dispensaries. Over 7,000 cannabis business licenses have been approved in Oklahoma, with per capita cannabis spending projected to reach $226.40 by 2025. 

The recent Marijuana Business Factbook projected that Oklahoma’s medical cannabis sales would hit $700 million-$860 million in 2020, more than double the $345 million brought in a year ago. The state looked like it could potentially place adult-use cannabis on the November ballot, but just a week ago Channel 6 in Oklahoma reported that the Oklahoma Supreme Court has struck down a petition that could have put recreational marijuana on the ballot. “If the petition were to have gotten enough signatures, State Question 813 would have been on the ballot in 2022. The court said the wording of the petition was misleading, and people who signed the petition weren’t getting enough information to make an informed decision.”

Liberal Licensing

Oklahoma’s liberal approach to licensing (it only costs $2500 to get a license there, as opposed to most other states where it can cost millions) and a 4% tax rate have been major factors in the state’s booming cannabis economy. This, in addition to the fact that Oklahoma has registered a comparatively high (5.8) percentage of the population for medical marijuana patient cards relative to other states with no qualifying conditions necessary means that there should be plenty of buyers to keep all of those businesses profitable. But given the sprawling geography of Oklahoma and a large number of dispensaries, success hinges on an efficient distribution model in order to keep shelves stocked and customers happy.

One company, Colorado-based 1906, has partnered with Stash House, the #1 distributor in Oklahoma. To date, Stash House has placed 1906 products in over 150 dispensaries across the state. So that covers getting the product from  Point A to Point B, at least for 1906, which has logged record-breaking sales and reorders since entering the Oklahoma market, but distribution issues extend beyond product delivery. Issues related to packaging and liability, for example. A company that manufactures boxes used to sell marijuana may still be held liable under the law even though they may be removed from the actual sale of marijuana by a factor of two or more.  

Also, given the scale of the cannabis distribution network necessary to keep Oklahoma’s dispensaries supplied and the fact that partial legalization necessitates more oversight (and thus more bureaucratic red tape, etc.), there is an additional burden on suppliers, distributors, and businesses to comply with stringent regulations.  This additional scrutiny includes that from taxing agencies since cannabis is still illegal at the federal level. This burden can impact the ability of companies to reinvest profits in refining and expanding their distribution models. 

Perhaps Oklahoma will take California’s lead, where state-licensed distributors take possession of goods before selling them to retailers. These distributors can represent multiple brands but must also test products for safety and pay state taxes on the goods. While there have been delays and sparsely stocked shelves as licensing and testing procedures are refined, this wholesale supply chain model is expected to inject new capital into the cannabis economy and encourage growth. Whatever route Oklahoma retailers and cannabis companies looking to get in on the action taken to address their distribution dilemmas, new capital and growth will certainly rank among the top priorities.

Other companies that have seized the opportunity to help simplify the supply chain include The MJSupply, OK Buds, and Argent Cannabis to name a few.

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