Value pricing isn’t only way for cannabis businesses to compete with illicit market

(This is an abridged version of the cover package that appears in the August issue of Marijuana Business Magazine.)

The Illegal cannabis market continues to be one of the biggest threats to legal marijuana industry, whether through diverting revenue from licensed businesses or stunting the growth of legal MJ companies across the United States.

Though industry advocates persist in their pitches that legalization – either through new states coming on board or a federal mandate – would put an end to the illicit market, their argument has not come to fruition.

Instead, illicit operators are still open for business in most markets where adult-use marijuana sales are legal.

In California, for example, about 80% of marijuana sales are illegal, according to New Frontier, an analytics firm in Washington DC.

The illicit market is even stronger in states that have legalized only medical marijuana sales. And, of course, the illicit market is the only option to procure cannabis in states where no form of marijuana sales has been legalized.

According to industry insiders contacted by Marijuana Business Magazine, here are three key factors that should be considered in any discussion about the illicit market:

According to Kris Krane, president of Arizona-based multistate operator 4Front Ventures, the illicit market is “probably going to remain an issue until cannabis is legal nationwide and we can really enjoy the economies of scale of interstate, international commerce that’ll bring pricing down to a point where it’ll be virtually impossible for the illicit market to compete.”

Legal marijuana businesses don’t have to wait for federal legalization to compete with the illicit market, however.

Cannabis executives provided Marijuana Business Magazine with insights and advice on how the industry can combat the illicit market on its own:

2 comments on “Value pricing isn’t only way for cannabis businesses to compete with illicit market
  1. Paul M. on

    Over thirty years ago, I predicted that any legalization scheme would contain a poison pill that would ensure the survival of the black market, cause said scheme to fail and therefore validate the claims of those opposed to any form of legalization. That poison pill is taxes. As long as government greedheads insist on taxing MJ at a rate that ensures prices remain at least as high, if not higher, than the prevailing street prices, the retirement plans of pot dealers will remain secure. This eventuality was so obvious to me that I can’t help thinking it was done deliberately in order to lend ammunition to the anti-legalization types.

    It’s not enough that law enforcement, court and incarceration costs would have plummeted with genuine legalization, saving the taxpayers billions. No…… Politicians saw a cash cow they hoped would enable them to balance their budgets and fund the corporate tax cuts that generate campaign contributions almost as large as the deficits they create.

    Personally, if I want MJ, I’ll call one of my local dealers who will cheerfully hand deliver to my home high quality product grown with tender loving care. The whole experience will be far more pleasant and cheaper than it would be at any dispensary. I will receive pictures of the current offerings in advance and he’ll bring samples of his wares with him. I won’t have to waste gas driving, register with Big Brother or pay bribes for a medical card and, last but certainly not least, my money will go to someone who actually earned it instead of being used to fund government propaganda, the drug war, drug warrior organizations or corporate tax cuts. And, since a medical MJ card, or even full legalization for recreational use, does nothing to mitigate abusive drug testing programs, foregoing the imprimatur of Big Brother won’t put me at any particular disadvantage in the workplace either.

    Until MJ attains roughly the legal status of a cucumber, that’s the way it will remain and the “illicit” market will continue to thrive, at least with respect to dried flower products. More complex derivatives like extracts, THC carts, edibles and so forth may be in a little better position within the legal market due to the difficulty in analyzing their purity and potency, but even those products are often produced by perfectly competent, decent and honest people with a loyal “following” and they will continue to be sold without the onerous burden of stupid regulations and insane tax rates.

    Think about it, MJ biz people. If tomorrow, laws were passed deeming that tomatoes could only be sold under the circumstances currently imposed on MJ, would you think it a good business opportunity to enter the tomato industry? What makes the current situation with MJ any different?

    You can go ahead and demonize, threaten, fear monger and spread all the disinformation you like. As long as taxes and regulations on legal MJ remain as they are, you will never be able to compete with the “illicit” market and you’re survival will depend on the timid, the intimidated and a constant supply of new users who have yet to discover the advantages of patronizing their local entrepreneurs who didn’t have millions to invest in compliance with the demands of greedy, foolish and ignorant government regulators.

    Reply
  2. Spaz M on

    @Paul M
    So you have never had your dealer, sell you a bag of ditch weed or sea weed?
    You never have your dealer geek yours with a hit of crack or tea?
    You never had a curb service dealer, point a gun at your head and run with your money, leaving you with nothing but your empty wallet?

    I kinda like my local LEGAL dispensary, because they don’t jack me …. and they won’t sell me garbage ….

    Reply

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