Cannabis Businesses Are Also Feeling Supply Chain Woes

By Rick Gonzales | 1 month ago

cannabis

As the COVID pandemic slowly rolls on, the country, as well as the rest of the world, is truly beginning to feel the pain and consequences of each and every variant that no vaccine or booster has yet to solve. We’ve faced lockdowns and mandates that have caused not only workforce issues but supply chain ones as well. Basic materials are finding it difficult to reach their destination. One industry, though, has been almost impervious to these troubles – the cannabis industry.

Until recently, the U.S. cannabis industry has seen little trouble. But now, it too is beginning to feel the pinch of the stunted supply chain that is leaving many to wonder just how much their next joint, bong, or vape is going to cost them.

The US’s desire for cheaply made products from China is the driving force here. Recent rolling power outages in China have affected six out of the 13 components that are used to build a cannabis vape. Of course, the global problem with the supply chain isn’t helping but that isn’t the only issue that may see the rise in cannabis vape prices. The Lunar New Year is almost here.

The Lunar New Year is a festival typically celebrated in China and other Asian countries that will surely affect production moving forward as workers will take longer holidays. The Lunar New Year is set for February 1, 2022. Combine this with the issues already seen and the cannabis industry expects to see more disruptions and longer delays.

The Blinc Group is a vape maker that gets much of its hardware from China. CEO Arnaud Dumas de Rauly expects these delays and disruptions to last well into next year.

“I believe this issue will go on at least until the end of May,” Dumas de Rauly told Bloomberg. “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.”

To go along with all that, the cannabis industry is now also greatly affected by the computer chip shortage as well. Like most companies who rely on computer chips for their technology devices, the Blinc Group and other vape makers use chips for vaping marijuana.

For the longest time, the cannabis industry has had little concern with the supply chain troubles as most of their product comes locally. With pot being a Schedule I substance, companies must grow and process the green leaf in the state where it is to be sold unless they wish to enter legal ramifications. However, supply chains that are state-specific can only do so much to protect the industry.

Josh Krane is the vice president of operations for 4Front Ventures in California. They have their operations scattered throughout the country in California, Michigan, Washington, Illinois, and Massachusetts. Krane says they haven’t yet seen any shortages of raw materials, but his company is already seeing issues from shipping delays.

supply chain

“We’re trying to order ahead — we’re not paying more, but we’re paying upfront, also we’ve begun to source domestic pools of inventory,” he said. He also said that he put down deposits for goods they won’t need until April, May, or June of next year. They are definitely hedging bets on the chance that things get worse before they get better.

Thankfully for all you “rollers” out there, Blinc and 4Front have been able to avoid passing along rising costs to consumers as the prepaying in advance and finding alternate suppliers has been working. They are just not sure they can continue keeping prices where they are currently sitting.

So far this year, prices of green goodies have dropped dramatically. According to Cannabis Benchmarks, the average spot price for marijuana at the end of November rolled in at $1,290 a pound, which was a 19.1% drop from a year ago.

While this is sure to put a smile on many faces, Krane notes that when the supply-chain issues finally hit, they are going to affect the fun products such as packaged pre-rolled joints and vape cartridges. The green bud price itself probably won’t see a rise in price.

“Cannabis products should be getting cheaper for the consumer,” Krane said. “But they’re not.” In fact, he added, prices for these products should be dropping significantly if it weren’t for the supply-chain issues that are causing inflation.

You know things are bad when getting high is about to cause more stress. Sorry smokers and tokers, you may have to go back to the old way of doing things.