1st AZ Dispensaries, Generating Millions of Dollars in Revenues, Brace for More Competition

arizona medical cannabis

For many businesses, it takes years to grow revenues beyond six figures and climb into the black.

But some of the first dispensaries to open in Arizona have already managed to hit those benchmarks, generating millions of dollars in sales and hitting breakeven after just a few months in business. In fact, the initial dispensary in the Phoenix metro area reportedly is on track for $8 million in revenues in its first year of operation.

Chalk it up to unusual circumstances that limited competition early on and gave the first centers – which started opening in December – a monopoly on a huge market (there are roughly 36,000 registered patients in the state).

Now, however, the landscape is changing.

Four dispensaries are slated to open in Arizona by next week – bringing the total to 11 – and dozens more will launch in the next few months, introducing competition to markets where none existed before. The initial dispensaries that opened could see their revenues and margins dip significantly, especially those located in or near larger cities where competition will be the heaviest.

The state allows only one dispensary in each of 126 pre-defined regions (called Community Health Analysis Areas, or CHAAs). So dispensaries in rural areas will be able to continue to corner the local market. But MMJ centers in Arizona’s larger cities will compete for patients. The Phoenix metro area, for example, has more than 40 CHAAs, while metro Tuscon has about a dozen.

As one would expect, simply opening your doors will no longer guarantee immediate success. Going forward, “the operations with the best patient services and the best medicine will be the ones that emerge as market leaders,” said Kris Krane, managing partner of Arizona-based MMJ consultancy 4Front Advisors.

“Typically, what we see in other states like California is that the dispensaries that have the nicest storefronts, the best-trained staff and the best medicine and those that offer great services to patients tend to do significantly better than all other dispensaries in their markets,” Krane said. “We expect that will be true in Arizona as well.”

Many cannabis entrepreneurs dream of – and expect – to see huge revenue growth and profits when starting out in the medical marijuana industry, yet in most cases it doesn’t play out this way. Competitive and regulatory challenges often get the better of MMJ businesses, and those huge expected profits never materialize.

In Arizona, however, early entrants were able to capitalize on a unique situation.

The few dispensaries already in business took on sizable risks by laying the groundwork to open despite a pending court case that could have sunk the entire program. They gambled big and won big: A judge ruled in favor of the MMJ industry in December, giving them the jump on most other would-be dispensary operators that held off on their plans until the court’s decision.

Existing dispensaries have been able to build a sizable competitive advantage over newcomers, having already developed a loyal clientele and learned what works and what doesn’t.

6 comments on “1st AZ Dispensaries, Generating Millions of Dollars in Revenues, Brace for More Competition
  1. Jose on

    The dispensary with the most strains and variety wins. I’ve found this to be the case personally. Many patients have discontinued going to their existing dispensary due to not enough variety and low quality meds.

  2. eeniemeenie on

    While this seems to most layman as a major profit to the dispensary owners, lest us remember these are non profits. Which means any profit has to be donated. The Directors, Managers, Owners can only be paid a salary, and not exorbitant amounts according to IRS.

  3. steez on

    all the meds from the dispensaries has been overpriced garbage. its a shame they can serve patients powdery mildew nuggets

  4. MC on

    I was born here in Az. I am one of the first mmj card holders. Az blew it when the objected to mmj. In fact two previous times mmj was voted in and the legislature decided not to up hold the will off the people.I consider that as close to treason as it gets. Az delayed the dispensaries from opening up.This has caused a lot of networks (compassion clubs) to get established and that means less revenue for Az for a LONG LONG TIME. But this action kept the conservative politions in office because they all barked publicly they dont believe medical or recreation mmj is good.The dispensary in west glendale is nice because I don’t feel like I’m walking the fine line any more but they are idiots as they never have the medicine I desire ( Sativa ) in stock. I try call ahead of time to save a 35mile round trip but they tell me dont call cause we cant tell you what we have in stock. So I go down there 5 times to never see any Sativa in stock.And to really kick your customers in the head there is a 50.00 minimum purchase. they have no sampling of different strains available so if you dont like the 50.00 of medicine you bought you better throw it away. And mean small 5 or 10 dollars samplers NOT free samples. And I asked more than once what cannabis cup winners do you carry in sativa, indica or hybrid and they ask what is the canabis cup????.WTF!
    And recently I was notifed that they are reducing business hours so they can better serve the public! What business model does a company use to warrent that LESS business hours will help serve their patient’s better? I think they may be smoking crack not weed down there.My God…

    Bring some professionalism to this controversial situation ! Guess where I DONT GO FOR MY MEDICINE…..

  5. CArol K on

    I look forward to Arizona MMJ Caregivers getting their place setup. They will be on 35th ave and Southern and called Phoenix Relief Center. They have had the best meds for years and im very happy to see their meds all being donated to Phoenix Relief.

    They should be open by May 1st and ready for biz from what I hear.

  6. RickE. on

    The same thing that just happened in California, will happen here in Arizona! Towns and counties will ban medical marijuana clinics. I will enjoy it while I can!

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