California’s Legal Market Could Gain the Upper Hand in Five Years
Light might be at the end of the tunnel of California’s struggling legal marijuana industry, says The Sacramento Bee. An analysis from BDS Analytics Arcview Market Research predict that California will finally pull ahead of the black market – albeit by a small margin – within five years.
This is in stark contrast to the current situation, which still seems rather bleak.
In the world of legal cannabis, we could argue that California is famous for two things. The first is its role as a pioneer in medical marijuana, being the first state to legalize it for certain conditions.
The second thing is not very noteworthy – at least in a positive way. Despite having plenty of time to establish itself, California’s legal market is not even close to defeating its illicit counterpart.
As we discussed before, many counties opted to not allow legal dispensaries. It also did not help that marijuana delivery services were illegal until early 2019. Naturally, this is fertile dealing ground for criminals.
There is also the issue of tax. Running a dispensary is way more expensive than necessary, forcing very high prices and often rendering such businesses unsustainable.
But despite these obstacles, analysts believe that California might actually turn its fortunes around.
Black Market Holds Major Lead
If we examine current status of the legal market, to say it trails behind is an understatement. According to The Sacramento Bee:
“California’s black market for marijuana still rakes in more cash than the state’s legal cannabis industry, but a new analysis suggests the dynamic could flip within five years.The forecast, from BDS Analytics and Arcview Market Research, estimates that California’s total cannabis market is expected to earn about $12.8 billion this year, with $8.7 billion going to illicit operators and $3.1 billion to the state-authorized market.”
This means that the black market currently takes in about 68% of the state’s total cannabis revenue. However, given that the black market’s share used to hover at around 80%, this is already an improvement.
But progress is clearly slow. Nonetheless, analysts expect the open market to take the lead within five years. However, it is not necessarily a substantial one.
Assuming the current trend continues, predictions state that by 2024, $7.2 billion will go to legal sales, with the black market hitting $6.4 billion. This amounts to a total of $13.6 billion in sales, with about 53% of those revenues going to legal products.
It is a small lead, but a lead nonetheless.
The Key to Success
The easiest solution to expedite the legal market’s success would be to reduce the crippling taxes. According to the report, these taxes will still hamper California’s ability to fight illicit sales, while other, less heavily-taxed states will see much better progress in phasing out the black market.
However, Californian dispensaries managed to gain a leg up in other ways by focusing on quality over pricing.
The report explains:
“A good number of California’s legal cannabis businesses are finding out they can compete, with their convenient, modern storefronts and delivery services, and branded edibles, concentrates, topicals and other products the illicit market largely doesn’t offer. Hence, nothing like the growth rates seen in earlier adult-use transitions can be expected unless California lightens the tax load and loosens constraints on legal operators.”
Many customers value experience over pricing and are more than willing to pay extra for it. Being able to browse, look at and choose strains based on preference also helps justify the price difference.
WeedAdvisor’s Strong Opposition to the Black Market
This recent news from California is particularly encouraging. If an overtaxed, disadvantaged legal cannabis framework can ultimately scrape its way into dominance over the illegal market, then it speaks volumes for other places in much better positions.
Opponents love to point out the continued presence of the black market, but fail to acknowledge (intentionally or out of ignorance) that some changes take time.
WeedAdvisor looks forward to supporting new retail stores with our business solutions in POS, reward programs, compliance, inventory tracking and much more as they gradually snuff out illicit sales.
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