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Canadian Cannabis Buyers Want Mids

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Economics

Canadian Cannabis Buyers Want Mids

Banking futures on $100 super-premium grams hasn’t worked out well for Aurora or other publicly traded great northern weed companies.

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?

5 Comments

5 Comments

  1. Maxcatski

    March 22, 2020 at 9:44 am

    $10 a gram pot is a pipe dream that has already passed. I legally grow more cannabis than I can possibly consume for less than fifty cents a gram. (Yes, I live in Canada.)

    The pot companies need to get their costs below ten cents a gram to be commercially successful. I won’t be buying any until it’s selling for $2 a gram retail.

  2. Ray

    March 15, 2020 at 8:48 am

    These cannabis companies really missed the mark on their market research, not just on prices but competition. Canada has a strong black/grey market which has firmly established itself with a stabilized price and quality. For companies to think they are going to undermine what has successfully existed for decades with their stail flower is simply negligent.
    The next step for a legal cannabis venture will be in craft production similar to beer and wine where it’s kind of a destination experience.

  3. ShishkaBerry

    March 3, 2020 at 3:34 am

    What tf? 100$ grams, seriously? No wonder they’re all going under. I won’t even pay that for concentrates! I can get a g of resin for $30!

    We don’t want mids, we just ain’t paying for that crap. I refuse to pay more than $10 a gram for the top of the top shelf.

  4. Ron G.

    March 2, 2020 at 10:11 am

    $100 a gram? I live in Oregon–I rarely pay more than $100 an ounce. These people are fighting the laws of supply and demand. They’re basing their projections on past market conditions, back when growers took huge risks and needed to hide their grows in small spaces. When weed was more scarce, it was worth more.

    • ShishkaBerry

      March 3, 2020 at 3:36 am

      It was never worth 100/g on any planet in any universe. The people running these companies are ex cops etc, they have no idea what weed is.

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