The Illicit Cannabis Market Is _______ Cheaper Than the Legal Market? 10%, 55%, or 93% Cheaper?
$80 legal ounces in Michigan, $4 grams in Oregon, what is going on with price compression in the legal cannabis market all over America?
Unless you have been living under a rock, you do know that the illicit cannabis market is cheaper than the legal market, and one of the main reasons the legal market is stumbling so badly across America right now. Combine lower prices from non-licensed sellers with heavy regulations and the 280E tax code, and it makes it almost damn near impossible to make a buck in the legal cannabis game.
But how much cheaper is illegal weed compared to legal, dispensary-bought weed? Won’t people pay a premium for lab testing and “knowing your source, seed-to-sale tracking” stuff? Yes, to an extent, but what premium would YOU pay for a gummy or vape cart in order to feel safer and more confident the product you are taking home?
Would you pay a 10% premium on a vape cart or pack of pre-rolls? So for $20 on the illicit market, you would go $22 at a reputable dispensary for peace of mind? I think almost everyone would say, “Yeah, sure, why not, be safe”.
What about 20% more on that same vape cart or edible pouch? $20 on the illicit market and now $24 at a dispensary you “like, know, or trust”. Hmmm, okay, but now it is starting to make a mark and taking away purchasing power from other products I may want to pick up like a pre-roll or lollipop.
What about 30%? Would a regular consumer of cannabis pay 30% more for a 100mg chocolate bar from a dispensary as opposed to a non-state licensed vendor? So, your $20 chocolate bar is now $26? (Taxes will be discussed later, so don’t get all excited yelling at me, yet.) Ouch! On a $100 order, no taxes yet, you are at $130, and now throw on the taxes the legal guy has to charge you and the illegal guy does not. Probably closer to 45% higher now than the black-market chocolate bar when taxes go all in depending on your state and if it is medical or recreational.
Cannabis.net decided to do an undercover sting if you will, to find out the true prices of illicit market weed in two distinct areas, Maine and California. Each state has a massive illicit market thanks to a variety of reasons like geography, taxation, population or lack thereof, and access to other state borders.
If you want to skip to the punch line, with state taxes included, illicit market vape cartridge run 60 to 65% cheaper and edibles such as chocolates and gummies can run 93 to 98% cheaper! I think we call that a “clue” said the legal cannabis market!
Most of the industry rolls their eyes when they say “black-market weed is cheaper”, and in their heads they are thinking 10, 20, 30%, maybe. Throw in onerous state taxes and federal 280E codes, and maybe in crazy liberal places like California you hit 40% more?
Not even, close, bud, as Bender would say in the Breakfast Club.
A quick stroll through Weedmaps menus will show you that in Maine, a milligram of THC in an edible form can be had for $0.10. Yes, a dime for a milligram of THC. You will see many medical shops selling 250mg chocolate bars for $25 and 250mg gummy pouches for $25, plus a 6% tax. With specials, a la Weedmaps, or bulk buying, you can probably get that lower to say $0.08 a milligram of THC.
We picked Los Angeles as our California quick check and looked through 3 legal dispensaries for deals and offers. 1 gram vape carts, live resin, were $25 to $30, and a milligram of THC in edible from was between $0.11 and $0.15. Please note, California has onerous taxes on weed, so those number will balloon much higher at checkout.
Now, comes the part you thought you knew, but you were afraid to ask.
From a California non-licensed cannabis dealer:
THC gummies 1000mg pack (10x100mg) $8 a pack in bulk $80 for a 10-pack case, no taxes. That would be $0.008 per mg of THC. You thought a dime ($0.10 was cheap, how about an 8th of a penny per mg of THC!)
1g live resin or sauce vape carts for $12 in bulk, 10 for $120, 35 strains. Yes, I am bringing up bulk ordering to make my prices go lower than single retail, but I am doing so to show you that bulk ordering is $80 to $100 on the illicit market, not $500 minimums, so while not quite apples-to-apples, it can be close with a $100 bill in your hand. $12 compared to LA’s $26 and that didn’t add on $7 in legal taxes yet, starts to sting, no? 55 to 60% cheaper in California on vape carts from legal to illegal stores.
Chocolates? Sugar must be cheap in California. 200mg chocolate bar for $2 in packs of 10, or a 2500mg bar for $18, pack of 10, but no taxes obviously. Those come out to $0.01 a mg of THC and $0.007 a milligram for THC in edible form. A seventh of a penny, compared to a reasonable dime for a mg of THC at legal, competitive prices. That is a 90 to 95% price difference with taxes factored in. Would you pay 95% for THC gummies or chocolates just so you knew they were lab tested?
To stick the knife in a bit more, these quoted prices were from menu sheets, no bargaining or haggling even tried yet. In the gray markets, haggling and deal making is a wide-open space, so yep, you can get those price per mg of THC lower with higher buying power and larger orders.
The point of the story? Yes, illicit market cannabis is cheaper than legal weed, not bit a little or a lot, but by a massive, massive, amount. So massive, I am not sure how the legal industry can even come close to competing, even with lab testing and friendly budtenders.
When low-cost cannabis providers, such as Colombia and Brazil, come into the market and start shipping their legally and licensed grown weed at $0.06 a gram, what happens then to the US illicit market. At that point, the undercutters become the undercut, and the cycle continues until we hit a rock bottom price for a gram, ounce, and pound of weed. That is $0.06 a gram at a legal grow in Colombia, what do you think THEIR illicit market prices will be?
And you wonder why the black mark is leaving such a bruise on legal weed?
(Article first appeared on LinkedIn here)
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