California Is The World’s Biggest Legal Cannabis Marketplace, But…
From the outside, it seems that living in a place where cannabis is legal recreationally and medically is the ideal definition of utopia.
But we have a long way to go when it comes to mitigating and undoing all the problems caused by prohibition over the last two decades.
Let’s take a look at California, for example. California is the 6th largest economy in the world, and the biggest legal market for cannabis globally. But even then, the Golden State hasn’t perfected the cannabis model.
July 1, 2018, was a momentous day for the California cannabis market. This was when the Bureau of Cannabis Control (BCC) ended its transition period, and it marked the end of numerous exceptions to state rules surrounding cannabis consumption. More specifically and significantly, this date was when every single cannabis product being sold in the state was mandated to meet regulatory and statutory requirements, which has been dictated by the BCC.
The BCC’s new rules state that only cannabis products that pass all testing requirements would be able to be sold in retail outlets throughout the state from July 1 onwards. These requirements prohibited the sale of edibles that contain over 100mg of THC per package, and non-edible recreational cannabis products with more than 1,000mg of THC. It also banned the sale of non-edible recreational products that have over 2,000mg of THC. Additionally, every single product should be packaged in child-proof packaging once distributors deliver them to all retail outlets.
Any product that was unable to comply with the new requirements were destroyed by July 1, according to state rules. And while some cannabis companies did their homework and prepared ahead of time, many struggled with last-minute decisions in order to stay compliant by the deadline. But the hardest, and perhaps costliest adjustment of all was having to change the packaging of all products, oftentimes which resulted in bottleneck problems for manufacturers.
Additionally, data from the BCC has revealed that 1 in 5 batches of pot failed the new lab testing requirements due to inaccurate labels as well as contamination from processing chemicals, pesticides, and bacteria. As a result, many dispensaries and customers may have experienced serious shortages in supply over the last few weeks especially during the start of July.
California only has 31 licensed testing laboratories, most of which are concentrated in Northern California and many of them aren’t even doing business with customers just yet. For this reason, many businesses are suffering from a backlog in their cannabis safety tests.
Although this sounds problematic, the silver lining is that these labor pains should be seen as a sign that the California cannabis market is finally reaching maturity and soon enough it could resemble other regulated industries including food and booze.
High Taxes Equate To A Robust Black Market
A new study released by Eaze just revealed that even if California consumers are already thriving, living in the world’s biggest legal cannabis marketplace, 18% of consumers still purchase their pot from the black market – at least in the last three months.
The Eaze data was taken from an online survey of 1,750 people from California, as well as Colorado. They found that 84% of consumers who bought cannabis from the black market are “highly likely” to do so again, and that 23% of them admitted that a 5% decrease in the California state tax is enough for them to shift their purchase to the legal market. It also stated that 84% of consumers who purchase from the legal marketplace are “very satisfied”, with 85% of them stating that they are highly satisfied with labeling. However, 96% of respondents said that they purchased from a state-licensed cannabis business with 92% saying they would spend their money on the legal market again.
The sky-high taxes on cannabis products remain the primary reason why customers still purchase from the black market. Even if there is a 5% decrease in taxes, this could translate to as much as a 23% shift from the black market.
Other noteworthy information from the data included the top factors for California consumers choosing to spend from licensed cannabis companies which include affordability, consistent product quality, laboratory and safety testing, electronic payment options, accurate labeling, and brand-name recognition.