The cannabis industry in New York State is maturing. The initial wave of pioneer optimism is now meeting the hard realities of a burgeoning market: increasing competition, regulatory costs and the inevitable compression of profit margins. For many operators, the instinct is to slash prices and appeal to the cost-conscious consumer — the much talked about race to the bottom. While this tactic may offer short-term relief, it is a dangerous, unsustainable game that erodes brand value and accelerates a market’s commoditization. From my seat providing banking and financing to the cannabis industry, this is something I have seen play out before in many other markets.
The perhaps counterintuitive, yet far more resilient, strategy lies in moving decisively in the opposite direction — upwards. In an era of squeezing margins, a deliberate focus on premium products is a business survival tactic.
Here in New York, our cannabis market is uniquely positioned for both immense opportunity and intense pressure. High taxes, coupled with significant operational overhead, mean the baseline cost of doing business is substantial.
Simultaneously, as more cultivators and retailers come online, the sheer volume of available product will increase. We all know that as supply grows, prices for standard, undifferentiated goods will fall. This is the margin compression trap: Businesses are stuck selling more for less, working harder just to maintain their position. Consider your own buying journey: When you walk into a store and there is a value section, don’t you look for the cheapest item in that pile?
Premium products offer a multifaceted defense. They deliver a value proposition that transcends the basic utility of the product itself.
1. Defending Margins, Not Just Volume: A premium product commands a higher price point and a healthier gross margin. Instead of selling 100 units of a low-margin product, a business can sell 30 units of a high-margin premium product to achieve the same result. This reduces operational strain, limits carrying costs and creates a more efficient, profitable model, shifting the goal from moving volume to cultivating valuable customers.
2. Building Brand Equity as a Moat: A strong brand is a fortress. Premium products are the perfect tool for building that brand. A consistent, high-quality experience from the product’s efficacy and flavor to its packaging creates a story that builds trust and loyalty. Consumers don’t just buy a vape cartridge; they buy the experience associated with a name they trust. This emotional connection is a powerful moat that price-cutting competitors cannot easily cross.
3. Attracting a Loyal, Less Price-Sensitive Clientele: The premium customer is a different demographic, often more educated about cannabis and more discerning in their tastes. Crucially, they are less sensitive to price fluctuations. Their purchasing decisions are more driven by factors such as quality, consistency and brand alignment. By catering to this segment, businesses can insulate themselves from the brutal price wars that will inevitably consume the value segment.
4. Driving Innovation and Market Differentiation: A commitment to the premium segment forces a company to innovate, whether through superior extraction techniques, unique flavor profiles or new product formats. This innovation justifies the premium positioning while keeping the brand relevant and ahead of the curve.
The Rolling Stone Culture Council is an invitation-only community for Influencers, Innovators and Creatives. Do I qualify?
I like to look to more mature markets for lessons learned. In established states, brands like Rove have successfully navigated competitive pressures by building a formidable premium identity. Rove didn’t become a standout by offering the cheapest vape cartridge, but by focusing on key principles such as a defined experience and a brand aesthetic with sleek, minimalist packaging that communicates sophistication before the customer even uses the product.
For my New York cannabis folks, the mandate is clear:
• Identify Your Premium Niche: Find your point of differentiation, whether in flower, edibles or concentrates, and own it.
• Invest in the Entire Experience: Premium is a whole product journey, the customer service, the knowledgeable budtenders and the elegant packaging. Every touchpoint must reinforce the quality promise.
• Communicate Your Value Story: Educate customers. Talk about your cultivation practices and extraction methods. Transparency builds the trust that justifies the price.
The coming margin compression is not a signal to retreat, but to advance. It is a call to action for New York’s cannabis industry to elevate its ambitions. The race to the bottom is a dead-end street. The path to sustainable profitability winds upward, built by those who dare to invest in quality and understand that valuable customer relationships are forged through demonstrable excellence. The future of New York cannabis will be defined by who created products worth paying more for. The time to build that future is now.
