California has been hailed with potential to rein as the world’s largest regulated marijuana market on the planet, but currently trails in per-capita sales when compared with other recreational markets across the United States. Much of this can be attributed to California’s rampant illicit cannabis market, and further compounded by the state’s stringent regulation requirements for lawful cannabis businesses.
By the end of California’s second year permitting the legal sale of adult-use recreational marijuana, the state’s per-capita sales reached just $70 per consumer. Comparatively, Colorado’s year two per-capita sales came in at $99, closely followed by Oregon at $97, while even Washington state reached $89.
California’s Cannabis Market Pitfalls
Industry insiders estimate that the Californian market could have delivered an additional $1 billion in sales during its second legal year, if it could only have kept pace with these other states.
Our Riverside County marijuana business attorneys note there are many factors contributing to the state’s cannabis market challenges, such as:
- The size and scope of California’s illicit marijuana market, continuing to secure a sizable piece of the state’s cannabis spend;
- The illicit market’s ability to undercut licensed retail store marijuana prices, particularly as illegal storefronts can dodge the 30% retail tax captured in most cities, plus the $9.65 per ounce tax on adult-use cannabis sold at wholesale; and
- The limits imposed throughout California a number of local municipalities prohibiting cannabis business operations within their boundaries.
Licensed Business Owners
Los Angeles business owners have shared that they are yet to see big increases in bottom lines. Even though they have seen pickup in foot traffic through their stores after the California-based online marijuana advertising site, Weedmaps, ceased posting ads for any marijuana stores without state permits, it has not amounted to much. That’s because they typical amount each customer is spending in store has also nose-dived. As a result, even with more customers, store revenue has basically remained the same.
Some Cities Are Making Adjustments
Amid warnings that high city and state imposed cannabis taxes are effectively stoking the underground marijuana market, and in response to industry-wide calls for help, Monterrey County and Oakland have lowered taxes on marijuana sales. Whether those tweaks will deem effective in the long term remains to be seen.
There is still huge growth potential for the legal cannabis market in California. The sooner the state can seriously combat and discourage illicit market operators, the better for fully licensed, law-abiding cannabis businesses. If taxes could be relaxed and limitations on operations lifted in certain communities, the growth in California’s legal marijuana market could be huge.
But as it stands, California’s local and state taxes on marijuana sales are set so high that it’s virtually impossible for legal retailers to compete with the unregulated market on price. Safety is a different issue. Following the vaping crisis that has claimed many lives, consumers seeking vaping products appear to be more readily seeking out permitted shopfronts for those transactions.
The Los Angeles CANNABIS LAW Group represents growers, dispensaries, ancillary companies, patients, doctors and those facing marijuana charges. Call us at 714-937-2050.