Source Cannabis Observer
The largest retail group in Washington has subtly grown since cannabis legislation was passed to outlaw consolidated brands. Here’s how, and why it matters.
Part two of a three part series on cannabis management agreements; read part one, “Washington weed divided as many reach breaking point.”
A handful of core issues are plaguing Washington cannabis. One problem at the center is store discount culture, a practice that leads to misleading constant “sales” and gouged wholesale pricing. Many blame large retail groups, but representatives of those groups disagree, arguing that all is fair under capitalism. Without change, attrition will continue towards massive consolidation of licensed cannabis businesses.
Under Washington state laws, individuals can hold up to five retail licenses. This number was set to limit the market share that one entity can leverage, but some groups use intellectual property and management agreements to bypass it. These agreements, which are reviewed by Washington State Liquor and Cannabis Board (LCB) staff, serve as a seemingly compliant bridge to connect operations of more than five licenses into retail groups with consolidated branding.
According to many industry insiders, cannabis retail groups use their buying power to haggle for lower prices with producers. This has pushed down the market price, which is driving both farms and smaller dispensaries out of business. Hopeful but struggling operators look to a new law established by Senate Bill 5403 (SB 5403) for potential reprieve, but its efficacy relies on compliance and enforcement.
Rise of the retail groups
Several retail groups—multiple stores that share branding, purchasing, and other procedures—operate across Washington. Kush21 and Zips were mentioned most frequently in the extensive interviews conducted for this series. At the start of the investigation, there were 12 Kush21 store menus linked under the ‘Locations’ drop-down tab of their website; Zips had eight.
But a lot has quietly changed leading up to the new year. Now, Kush21 displays five Washington locations, one of which links to a Lidz store at the former Everett North location. Meanwhile, Zips still lists eight stores– but two redirect consumers to newly branded Kush21 websites and two links show stale Zips websites for locations which belong to new owners.
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