It’s not that startup companies trying to hype up their valuations are dumb. But if they aren’t foolish or deluded, unicorns, in both the weed and the normie world, are deliberately misleading.
Blue Apron, the cook-it-yourself meal-by-delivery startup, floated itself to an obscene only-in-Silicon Valley valuation of $3 billion on the promise that it could ship meals to “99 percent of would-be home cooks.” Spoiler, but blanketing the continent in boxes of food didn’t quite pan out.
In this spirit is Canadian cannabis company Aurora. Like other onetime weed unicorns but maybe worst of all, Aurora has lost 87% of its value since its $1 billion public debut six months ago, forcing a grand exodus of its board.
What went wrong? The company believed at one point that it could right the ship and make everything right if only cannabis customers part with buying habits of all other consumers, and start paying more for their weed. Like, a lot more. Like $100 a gram more! But instead, demand for affordable and plentiful weed swamped pleas for top-shelf Scotches of weed.
Riding very expensive pot to profitability was not just Aurora’s dream, but Aurora seems to have pegged its futures squarely to this concept. As MarketWatch recently reported, Aurora has for years promised to unveil a “super-premium” cannabis product line that, the company promised impatient investors watching the company’s stocks plummet, would see cannabis buyers happily plunk down four times the going rate for weed. What’s the hoary old metaphor? Champagne tastes on a beer budget? What about cannabinoids and terpenes, on a cocaine budget?
At one point, the company floated the idea of $100 superpremium grams of pot. How they would do this — what they would create to sell at this rate — and to whom they would market this platinum-coated Platinum Kush beyond, say, Drake and people in Drake’s tax bracket, the company really couldn’t say. And apparently! It did not work.
A full 17% of the Canadian consumer market was for mids or below, weed priced at $6.79 U.S. or less per gram. As recently as last summer, the mids market was only two percent of Canadian cannabis buyers — a realization that was a “hard turn” for the market as well as the company, as Aurora CFO Glen Ibbott said on a recent conference call, according to MarketWatch.
In theory, sure. Pushing a slightly better product at a quadruple markup, that would probably help sales! But in practice, cannabis buyers really do prefer cheaper cannabis — just as they were promised by economists and cannabis-growers alike ahead of legalization. This isn’t what any grower or seller wanted, but any Canadian company surely could have seen what would happen if they inundated the market with supply as they did by simply peeking south to situations in Oregon and California.
This is a discovery Aurora is only recently making. Aurora has come to this realization the hard way, but the company is at last there, grappling with the obvious. In the same conference call, Ibbott told investors, analysts, and reporters that the company will instead launch a super-mids line it will call “Daily Special.”
But scratch a convocation of weed buyers — of buyers of any consumer product! — and you will be hard-pressed to find someone willing to part with all of their money for slightly better product. Yes, there are whiskey and wine buyers who want to invest hundreds or thousands in a showpiece bottle, but maybe as a store of value investment or a sign of their own wealth. Weed, a perishable product that you smoke, just doesn’t work like that, yet.
TELL US, do you buy ultra-premium pot?