Oklahoma Cannabis Market: Survival of the Fittest
June 2, 2020
June 2, 2020
Contributing Writer: Alex Bibisi
Ways to Survive and Thrive in Oklahoma’s Competitive Cannabis Market
Launching and operating a successful cannabis business requires dedication and careful planning. It’s important to know what makes a market tough and how to avoid potential snags. In this blog series, we’re looking at some of the toughest states for cannabis businesses, and how entrepreneurs can avoid obstacles to create a thriving and successful business. Here, we’ll discuss Oklahoma, a relative newcomer to the cannabis industry that is quickly surpassing much larger and more established markets.
One of our founding partners at Canna Advisors, Jay Czarkowski, aptly summarized the Oklahoma market:
“It’s going to be survival of the fittest. People get into cannabis because they think it’s going to be instant riches, but the reality is, it’s competitive.”
Large Patient Base and Easy Licensing Process
In June 2018, Oklahoma voters passed State Question 788 (“SQ788”), a state constitutional amendment that created a comprehensive medical cannabis program. Oklahoma’s qualifying medical condition list is the most inclusive in the country because, quite simply, there is no list. SQ788 plainly states “there are no qualifying conditions” — a physician may recommend medical cannabis for any condition they deem fit. This has led over 220,000 patients (more than 5% of the state’s adults!) to register for medical cannabis in the state during the first 18 months of the program, quickly making Oklahoma one of the largest medical cannabis markets in the U.S. by patient count.
SQ788 also contained detailed provisions allowing business licensing for commercial growers, processors, dispensaries, and transporters. Unlike most other medical states, Oklahoma licensing is affordable and easy. Applying for a business license is as simple as clicking through a quick online web portal. Further, the fees to obtain a license are a mere $2,500, a far cry from the hundreds of thousands, or even millions, of dollars generally required to apply in other medical states.
Ample Opportunity in Oklahoma
The rapidly-growing Oklahoma cannabis market presents a promising opportunity for both new entrepreneurs and experienced business owners. Total sales in 2019, the state’s first full year of legal sales, topped $346 million. According to BDS Analytics, an industry leader in market statistics, sales in Oklahoma are expected to grow to over $815 million by 2024 — surpassing much more populous markets such as Ohio and Pennsylvania. State tax revenue for 2019 was $55 million, a strong earning for such a new industry and a powerful evidentiary datapoint for the state’s adult-use legalization advocates. In fact, two legalization initiatives are currently attempting to make it on the 2020 ballot: State Questions 807 and 808. While lawsuits and the global pandemic may delay these initiatives until 2021 or later, Oklahoma is nonetheless positioning itself to become one of the nation’s leading cannabis markets.
For businesses and entrepreneurs who are sufficiently capitalized, Oklahoma’s easy licensing process also makes the state a great candidate to launch or expand a multi-state cannabis operation. As a large and rapidly maturing market, Oklahoma is well-suited for established businesses looking to expand their brand recognition. Further, thanks to the state’s geographic positioning, future Oklahoma adult-use could be a major economic boon due to the prohibitionist policies of neighboring states, including Texas, which is home to around 20 million adults over age 21.
Open Market Means Fierce Competition
This all sounds great! What’s so tough about operating in Oklahoma? While the low entry bar is positive in some ways, the openness of the market also creates an immense challenge for licensed cannabis operators: competition. Oklahoma is perhaps the easiest state in the U.S. to obtain a cannabis license, much easier even than adult-use markets such as California and Massachusetts. There are already thousands of operational growers, processors, dispensaries, and transporters across the state. In fact, there are over 2,200 licensed dispensaries in Oklahoma, which equates to roughly 56 dispensaries for every 100,000 residents — the highest ratio in the country. This saturation level makes Oklahoma one of the most hypercompetitive cannabis markets in the U.S.
Fierce competition is leading to retail price cuts and drops in wholesale prices. Prices have decreased between 50% and 75% since businesses began opening their doors. Many small start-up businesses — unprepared and unaware that the Oklahoma market would be as competitive as it is — have failed to meet these challenges.
So how can a business rise to the challenges of competition? Simple: be prepared for anything and carefully select your priorities.
Keys to Success in Oklahoma
Creating and adhering to a detailed financial plan is a critical component of any long-term successful business. In a market such as Oklahoma, where retail and wholesale prices fluctuate heavily, your financial plan needs to address a myriad of contingencies to enable your business to weather any market conditions. Similarly, you’ll need a thorough and thoughtful business plan to navigate the crowded marketplace. Don’t just buy a generic business plan — get a customized plan that is tailored by our experts to the unique needs and circumstances of your business. Additionally, if you haven’t started operations yet, a financial model and business plan are necessities to obtain the investment you’ll need to establish a robust and lasting business.
Successful businesses in Oklahoma will also need to prioritize patient engagement, customer service, product quality, and competitive pricing. Growers and processors need to adhere to GAAP and GMP standards to produce premium-quality cannabis and products. Dispensaries need to make sure that their suppliers are reputable businesses that adhere to these standards in order to ensure they can offer the optimal, safest products to patients. Further, all licensed businesses need to hire the best of the best for their customer engagement teams to provide first-class support for their customers. Our consultants have helped hundreds of cannabis businesses in over 30 states scale from pre-operational licensing to full-scale operation. We understand these and other difficulties your business will encounter, and we can provide the guidance and support your business will need to thrive through hourly consultations or extended engagements.
It also warrants mention that ease of obtaining a license does not equal easy regulation. While the Oklahoma Medical Marijuana Authority (OMMA) had a slow start, the agency is now moving full speed ahead. In particular, the OMMA is now enforcing a new array of testing regulations, which are set to shake up the market’s existing operators. Many unprepared businesses were already struggling to keep up with their compliance obligations. As one Oklahoma dispensary owner put it, “we didn’t think they’d be regulating us like we were a doctor’s office.” Oklahoma regulations are far from the toughest in the country, but everyone desiring to do business in the cannabis industry would be smart to keep in mind that growing and selling cannabis isn’t like growing and selling daisies — cannabis is a highly regulated commodity, and you need to consult with professionals, such as our team’s attorneys, throughout your journey to make sure that your business is compliant with the law.
Planning and Preparation Lead to Flourishing Cannabis Businesses
Oklahoma’s cannabis industry has a wealth of opportunities, but cannabis businesses will need to be sufficiently prepared in order to stand out from their competitors and succeed. Business and financial planning, along with a clear and well-crafted plan to scale the business, are essential to long-term prosperity in this market. Further, while the legal situation surrounding cannabis operations in Oklahoma is considerably more relaxed than states like California, businesses still need a comprehensive written compliance program, along with the staff and consultants necessary to carry out that plan. At Canna Advisors, we have assisted businesses of all kinds, from startups led by a lone entrepreneur to multi-state cannabis operator companies with experienced teams.
Contact our expert consultants today and let us set your Oklahoma cannabis business up for long-term success.