The increasingly competitive cannabis market is fostering a pay-to-play mentality among both marijuana retailers and the brands they carry.
Known as slotting fees, the practice requires brands to pay anywhere from $500 to $15,000 a month for premium space on marijuana retailers’ store shelves.
Cannabis industry experts recommend marijuana brands build the fees into their budgets because they can cut into their profit margins. The fees are not tax deductible.
While slotting fees are common among mainstream retailers, many in the cannabis industry are just starting to encounter them.
“In an early market, it’s a slippery slope because it can really affect the customers’ perception of a product’s quality,” said Shane Terry, CEO of TapRoot Holdings, a vertically integrated cannabis company in Las Vegas.Slotting fees could have repercussions in a fledgling industry such as cannabis, though they already are common in California.
“I don’t think it’s something we can stop unless the state decides to regulate it, but as a practice, I’m personally a little concerned about it for the industry.
“As customers are pushed toward a product and don’t have as good of an experience as they would with another brand, it could damage the dispensary operation.”
Wana Brands CEO Nancy Whiteman said slotting fees in high-volume stores such as Las Vegas marijuana retailer Planet 13 could make sense for companies seeking to expand their distribution and brand recognition.
Published: February 19, 2020
Founder & Interim Editor of L.A. Cannabis News