CANNABIS LOUNGES! Aren’t you so excited for cannabis lounges coming to Nevada? Isn’t it the best thing ever? Are you going to try to apply for one? They are going to be everywhere, right? It’s going to be great, right?
To give a quick overview, the Nevada Assembly passed Bill 341 this past summer. Gov. Steve Sisolak signed it into law on June 4. The new law allows each dispensary group to have only 1 lounge license and allows for 20 independent lounge licenses. Of those 20 independent lounges, at least 10 have to be given to social equity applicants. Consumers will be able to buy “single serve” products and consume them at one of these lounges legally. This sounds great, right? While it is great for some people, it’s not the greatest for others
Let’s break down who wins and loses from this:
LAS VEGAS
As an advocate of cannabis for over a decade, on the macro level, I believe this is so huge for the cannabis movement. Las Vegas is the global epicenter of entertainment and giving this city a chance to show what cannabis lounges could be, not only across the country but the world, is really exciting.
CONSUMERS
This is great for cannabis consumers. The opportunity to be able to sample products before buying is dope. Also, this is a great alternative for people who don’t drink and only smoke. I also believe in the butterfly effect: that people with financial and political influence being able to experience cannabis Vegas-style will hopefully bring cannabis and cannabis lounges to more states and countries. It is also very cool that consumers will potentially be able to hear their favorite music artist or have a strip quality dining experience with more than just alcohol.
DISPENSARIES – the biggest winner of them all!
While the sticker price for a cannabis lounge license is $100k plus the buildout,which won’t be cheap, this is a drop in the bucket for the majority of dispensary groups. This gives opportunities to a dispensary to raise their average spend per visit, showcase higher-end products that are harder to sell and give an overall better customer experience. I am truly excited to see what groups like Planet 13 have in store. They will help push the national and worldwide effort of destigmatizing cannabis. With all that being said, the best part about these lounges for the dispensaries is that independent lounges have to buy their product not from the wholesaler but from a dispensary. This will allow them to control the lounge market, how brands interact with the independent lounges and give them more power than we have ever seen before. *Slow clap for the dispensary lobbyist* This will be covered more later in this article.
NON-DISPENDARY LICENSES/BRANDS
At the macro level, this is a win for cultivators and production facilities – especially brands who are well funded and/or are vertically integrated with dispensaries who have lounges. This will allow brands to do really awesome activitations and allow consumers to connect with their products at a level that has not been seen before…BUT this will cost them. If you have ever worked as a salesperson in Nevada cannabis, it is very obvious that the dispensary has all the power. With this new cannabis lounge bill, even more power will be given to the dispensary groups. How? 1) Brands will most likely have to “pay to play” at these lounges. This means brands will have to cough up thousands of dollars to even have the chance to be in a dispensary lounge. 2) The bill states that independent lounges have to buy their single serve products not from the wholesalers but from dispensaries. I am going to guess that there will be a price attached to that as well for brands to be on their menu of products for independent lounges. It will also put handcuffs on brands who want to work more with independent lounges. So I would say it is a wash for this group.
INDEPENDENT LOUNGES/SOCIAL EQUITY APPLICANTS
The real losers of this whole situation are the independent lounges and the social equity applicants. While the price tag for these are only $10,000 for independent lounges and a potential 75% discount to social equity applicants, it still does not make up for the fact that they are getting the short end of the stick. The First issue I see is that they are capping the amount of licenses. Twenty licences on a lottery system does not seem like a way to allow everyday entrepreneurs to hop in the cannabis lounges. Also, they think 10 lounge licenses for groups who have been affected by the war on drugs is going to help anyone? Seems like an afterthought.
Next issue, the Nevada cannabis regulatory body, formerly Department of Taxiton and now Cannabis Complince Board, has a track record for making things ultra difficult and stupid expensive. A great point that was brought up in a Politico article by Vegas cannabis industry vet, Jenn T, is HVAC systems. All lounges are going to have to have insane air quality and odor control systems in place, which will not be cheap. How the hell are “independent groups” supposed to pay/raise money for things of that nature? While a lot of the regulations are still up in the air, if this process is anything like applying for a dispensary license back in 2015, then independent lounges will need the property for their lounge before even applying. That means they either have to raise money to buy land/property or find a space that is privately owned and not attached to any banks (which is very difficult by itself). And they’ll need to lock a lease on a space for a license they may not even get. This is only the tip of the iceberg when it comes to money issues.
Let’s loop back around to the fact that independent lounges have to buy products they are going to sell in their lounges from their competitors aka the dispensaries. For anyone who has ever sold anything, especially legacy market cannabis, the more middle man there are, the higher the cost of the product. On average, weed is sold to a dispensary around $4-$7 a gram, then that dispensary will turn around and sell that product to a consumer for around $12-$15 a gram. Now think about an independent lounge buying from a dispensary. Brands sell to a dispensary for $4-$7 a gram and, if they are nice, sell it to independent lounges for $10-$12 a gram. Now, that independent lounge is selling that same gram for $20-$25 to a consumer. Why would the consumer go to an independent lounge to buy a gram for $20-$25 when they can buy that same gram at a dispensary for $12-$15 AND smoke it at the dispensary lounge?
You might be thinking ,“Wow, how does an independent lounge succeed?” Well, my prediction is that only 2 will be able to have truly profitable futures. Who are those 2? The first is a powerhouse group in the hospitality industry which does not have gaming attached to them. I am talking about big nightclub groups like Hakkasan or TAO or big restaurant groups like STK or Mortons. These groups have the money, industry expertise and connections to make a run at a good independent lounge. The second is a group that is a culture spot: an individual or small group of people who have the ability to raise money AND have connections with entertainment artists, such as hip-hop artists, ex-athletes, etc. The culture will rally behind them to have a really poppin’ spot. As for the other 18 independent lounges, I pray for you and wish you the best of luck.
With all that being said, there is still some hope. On Dec 14th, the CCB will be holding the first regulatory workshop on cannabis lounges. This is a great opportunity to share your thoughts on the lounges. It will be available virtually and in-person. If you want more information, check out the CCB website.
