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Money Talks: Pay-to-Play on Cannabis Retail Store Shelves, Will The Little Guy Survive? Bishop Henry
Edibles Magazine™ Issue 62
Whether it’s the video game industry, organized sports, or in most context’s it comes up in; “Pay-to-play” hasn’t always been viewed as the best of practices. In video games, players pay extra money in order to gain an advantage over players who are just playing with the base models of what’s available in-game, or what they have to earn slowly over natural progression. In sports, if you pay the fee to be on the team, you are entitled to play, regardless of your skillset. It’s great for the player, it’s not what’s always best for the team. Now, in the cannabis industry, if you have the cash, you can get an advantage over the competition by paying to push your brand in front of others on the shelves, and again, that’s not entirely a good thing.
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companies begin to factor slotting fees into their bottom line.
Retailers are stepping up what they offer to the brands they sell their shelf space to. Big time retailers like Planet 13 in Nevada, which serves about 130,000 clients a month, a lot of those visitors being tourists, offers a total partnership package from $10-15,000 a month. With 50 television screens to promote product, they also offer in-store promotions, pop-up demonstrations, posts on its social media account, which has about 26k followers on Instagram, and photography and menu board advertising. David Farris, Planet 13’s Vice President of Sales and Marketing says, “What we try to do is provide value for those brands. The idea is that it translates into revenue for A common practice in the retail industry them. We provide services, and we hope that known as “slotting fees”, individual brands pay that provides value for them. Las Vegas is a retailers a fee to have the prime real estate in destination, and we’re a destination.” their stores, shelves, and displays. According to an article by mjbizdaily.com, some brands pay In California, the legality of slotting fees in anywhere between $500-1500 to dispensaries the cannabis industry is still up for question for priority shelf space. The practice is gaining by manufacturers. In a separate mjbiz.com popularity in California and Nevada, especially article, Cannabis industry attorney Khurshid among shops desperate for any source of Khoja and Hilary Bricken weighed in on their legal income. The black market of cannabis experiences with slotting fees. Bricken, who is still thriving due to the over-taxation and wrote a blog about the trend after several of state regulations, especially in California, and her clients needed to negotiate these fees, it’s making business difficult for legit retail says that there is no clear cut answer and that stores. The cost of doing business is getting all cases would need to be settled on a caseexpensive, and that can spell a lot of problems by-case basis. for smaller operations. A lawsuit will probably be necessary in order Slotting fees are non-tax deductible. According to clearly define the currently vague California to the IRS Tax code 280E, you can’t write off guidelines. Khoja notes that California liquor any fees associated with selling a federally laws prohibit slotting fees and that the current illegal product. This is a tax practice that legal head of Bureau of Cannabis Control, Lori Ajax, retailers employ when it comes to slotting was a former deputy with the Department fees, which lessens the financial impact of Alcohol Beverage Control. A primary of marketing their merchandise. For now, factor would be, according to Khoja, whether cannabis brands are forced to absorb these California wants to model its regulations after costs. Cannabis consultants recommend that the liquor or grocery industry. EdiblesList.com I EdiblesMagazine.com
