How Accessibility Is Destroying America’s Legal Marijuana Industry

This article originally appeared on Cannabis.net and was republished with permission.

Interesting story from California last week where the marijuana industry sends an SOS letter to the state government saying their legal industry is on the verge of collapse. The crux of the story is that higher taxes, not enough locations, too many fees, and too many consumers entering the illicit market set off a financial firestorm for legal marijuana businesses.

The most striking line of the article is that 73% of cannabis transactions are in the illegal California market, rather than the licensed, legal one.

Photo by Kirill Vasikev / EyeEm / Getty Images

That’s bad for legal businesses. There are no taxes paid on illegal sales, no revenue generated to pay for those state marijuana licenses, no 280E tax breaks, and loads of software, banking, and technology fees. The state has pledged $ 100 million to find out the legal cannabis industry. But that only tells half the story of why the cannabis industry as a whole has just reached its first point of maturity.

For consumers, it was never about legalization; it was about accessibility.

What does that mean?

As the California drama proves, consumers are concerned not with the legality of their transaction but with price and accessibility. Yes, lab tests are nice, but not for the 50% markup that legal businesses have to charge to pay for all of these things like licenses, storefronts, technology, tracking, security, taxes, etc.

In a recent poll on Cannabis.net’s social network The WeedFeed, when asked how business is going in early 2022, illegal growers responded with the following types of jokes:

It’s okay, but not nearly as crazy as it has been for years, everyone seems to have a type of weed now.

Not as busy as it used to be, people now have plugs that are local and I don’t ship that much.

Steady, but not the crazy demand from previous years, there is just so much weed now.

Everyone has a plug.

This is an intriguing turning point in the cannabis industry’s supply-demand curve. Yes, everyone loves cannabis, both legal and illegal, but supply is now starting to keep pace with demand in many areas. Overall supply, including legal and illegal suppliers, appears to fill the entire demand curve of local customers. Plugs or cannabis suppliers are becoming more local and geocentric as people don’t want to receive illegal packages in the mail and are more comfortable buying locally.

Photo by Athima Tongloom / Getty Images

As access for millions of people continues to expand and become a “weed type”, prices will come under pressure. As consumers have more choices and offers, competition from providers has to intensify in order to generate sales. Price points and quality will now be king of the jungle in the consumer world.

Remember, every cannabis consumer survey so far has shown that consumers don’t really care or remember about branding or packaging, but they know how much they paid for a product and whether the product is producing the results they want. Consumers in highly developed markets like California and Colorado have massive access to a wide variety of legal and illegal products and prices.

RELATED: 73% of all marijuana bought and sold in California is made in the illicit market

The more mature the market, especially when it sells legal leisure and medical products, the better the access to products for the WHOLE population of this region. Do you need a pre-roll? Your nephew has a card or your son knows a guy. Do you want great edibles? Go to the pharmacy on the corner, or my corner shopkeeper sells food by the side. Do you need it quickly? Lots of delivery options from both the legal market and the illegal online market so you can order through a website or app. Can wait a day or two? You can still order and have it mailed to you, but who wants to wait these days when there are so many local plugs that can get you your weed in a matter of hours?

Does that mean everyone in America has access to affordable marijuana? No, states that don’t have a legal marijuana program will have the most inaccessible product. As states add medical programs and growing licenses, whether nursing or industrial, more products enter majority society. When a state has legalized both recreational and medicinal marijuana, the chances are overwhelming that the market will saturate within 2 years. Supply eventually catches up with demand because meeting demand generally makes someone money.

California = the mockery of the cannabis world; the figurehead of how not to legalize. Businesses be warned: if you don’t embrace Legacy to Legal, we’ll just stay outside the system – and compete for one more
80 years. https://t.co/1ExOIfRJOW

– Steve DeAngelo (@stevedeangelo) December 28, 2021

California voted on legal recreational marijuana in 2016. In 2022, the legal industry is on the verge of collapse for a variety of reasons. One of them is that consumers don’t mind buying from the illegal market like 73% of them do. The reason they can do this is because so many products are available, if not legal, per se. If people have access to quality products at 33% off the legal price, they will try to save money instead of having the benefits of lab-tested buds. Ten percent discount? Maybe people are still paying more for this lab test, but 35-45% off legal prices, charge the shisha pipe, and lab tests are doomed.

As California’s letter and the Cannabis.net survey show, America’s accessibility is reaching its first turning point. States like Illinois and Oklahoma have bustling illegal markets that can supply the Midwest. People no longer have to risk years in prison driving from the Emerald Triangle to New York City. The trip is much shorter from illegal cultivation in upstate New York and Ohio vs. San Francisco.

RELATED: Why Enforcement Isn’t the Best Way to Fight the Illegal Market

The scariest part of the future for the legal cannabis industry is that accessibility will increase forever, or until it is no longer economically viable to be an illegal cannabis grower and seller. When we get to the point where illegal growers throw in the towel, what happens to the legal version of these companies that have to pay taxes, overheads, fees, licenses, etc.? They will disappear before the illegal types, as the margin compression will only force the lean business models to survive.

It’s just too expensive to legally sell weed in America when everyone has a plug.

This article originally appeared on Cannabis.net and was republished with permission.