5 ways grading benefits cannabis market prices
By Allison Cohn
It is often assumed that when a product is all generally the same type of thing, its pricing won’t fluctuate much — but it’s not that simple.
The worth of cannabis is determined by a wide variety of factors. Think of it like this: You pay more for craft beer than you do for PBR (not that there’s anything wrong with PBR!). Similarly, consider the wide price range of wine. It’s the same with cannabis.
In this burgeoning industry, the price and value of legal cannabis is still a new frontier. Growers, suppliers, buyers and retailers alike are striving to achieve pricing standards and consistencies within the expanding market — and Big Tree Grading is helping with that.
TRUST EQUALS SUCCESS
According to Big Tree CEO, Eric Cozens, “The overlying benefit of grading cannabis is that it instills trust into the industry, creating a common language to communicate with.” Not only does this common language — built for the industry, by the industry — lay the groundwork for communicating the quality of cannabis throughout the supply chain, but it directly impacts the market pricing and value of the product.
“Within the industry, there are all of these small manufacturers competing against one another in a commodities market,” Cozens explains. “There are price and value complications within the supply chain because of the lack of a common communication system.”
Big Tree strives to create transparency by establishing an industry standard language with their grading system. Through this unique language, everyone in the cannabis industry from the distribution networks to the retail stores can share basic knowledge regarding the quality of flower. Since everyone along the line can’t personally smell and touch the product, the grading score is able to denote the product’s specific attributes and qualities, enabling both suppliers and retailers to receive a Fair Market price. Big Tree’s grading system serves to educate cannabis suppliers to ensure that they are earning what their product is worth.
“A lot of growers are out there in their own little vacuum, depending on their own network for feedback on pricing. We use our experience and expertise in the business side of the industry to provide them with resources to know what their product is worth,” says Cozens.
Grading provides growers with resources to use when selling their product. Having both the knowledge about the worth of their own product and a common language to communicate that worth to buyers gives growers the ability to feel confident in their product. In turn, it allows them to receive a fair price for their crop.
2. MARKET INSIGHTS
Graded product typically sells for a higher price and holds more market value. Being able to produce discernible proof of the quality of their product justifies its worth to buyers, period. This allows suppliers to ask for — and receive — fair rates. Grading assigns cannabis a certain, indisputable pedigree and buyers are willing to pay for it, knowing its proven history and quality. According to Cozens, “Suppliers who get their product graded generally receive a higher price, having had that valuable insight into the market data.”
Grading provides transparency and valuable knowledge of where the product came from and its history. Grading reveals a lot about the history of the cannabis: the environment it was grown in, the product type, its processing methods, historical data (age, storage, consistency, yield), etc. When given all of this valuable information up front, buyers are able to make well informed decisions about the type of cannabis they want to buy and what its fair price ought to be, both when purchasing it from the growers and pricing it to sell to consumers.
4. A LEVEL PLAYING FIELD
Grading levels the playing field for all varieties of cannabis, giving a fair price to the product based on its qualitative attributes, not just its quantitative ones. For example, cannabis grown indoors generally sells for a higher price, because its overall quality is perceived to be more consistent due to its controlled environment. But with grading, outdoor growers have an opportunity to sell their product for higher prices if it earns high scores, as well.
An important note: It’s all a matter of preference. There are no good or bad scores, but if you see outdoor cannabis with a high quality grade, maybe you’d opt for bud that was grown outside organically and in the sunshine versus a similar scoring bud that was grown indoors, in a facility. Grading helps you make an educated decision about the product you’re buying and consuming. #themoreyouknow
5. THIRD PARTY VERIFICATION
Grading serves as third party verification/certification; an objective analysis of the product from educated, unbiased and experienced industry employees. Big Tree’s grading system holds no allegiance to any one grower over another. Graders strive to be as unbiased as possible, grading strictly a product’s factual and material qualities. Having an analysis performed by those who are in no way emotionally or financially invested in this product assures a fair grade — because Big Tree has nothing to gain or lose by grading the cannabis one way or the other. A fair grade will result in a fair price, for both the suppliers and the buyers.
There are two growers, and they’ve got very similar crops. One supplier harvests their product, is ready to sell and needs the money. So they sell for whatever amount someone offers them first, without getting any market insights or a second opinion.
But the other farmer gets their product graded and is then able to see what sort of variation they’ve got within their own product. Big Tree provides this farmer with a tool they can use when they’re ready to sell so that they can feel confident about the price they get. Whether the price is higher or lower, at least they know it’s fair.
Grading also permits up front communication, which leads to higher satisfaction all around between the suppliers and the buyers.
At the end of the day, grading helps to establish an equitable marketplace for cannabis. “Grading provides trust and communication, establishing a common language for trade,” says Cozens. “This ensures that people are getting what they paid for and selling their product for what it’s worth.”
Allison Cohn loves gold spray paint and nonsense. She also has a very difficult time sitting still and keeping quiet. She can often be found dancing like a fool when she isn’t hiding out in her mountain lair or gallivanting around the globe.