Massachusetts Marijuana Sales Will Drop to Start 2020
Massachusetts, which finally seems to have their cannabis licensing and dispensary program moving in the right direction, will face a stiff new challenge to start 2020. As with all states, the battle against the black and grey market cannabis sellers will intensify, but what is also more ominous is the legalization of recreational cannabis in Maine, with official sales starting in January of 2020.
Maine, the way life should be.
Why will Maine wreak havoc on the New England cannabis scene?
Maine is a poor state when compared to other states’ GDP and economic figures. Once you get off the oceans and lakes, where most homes are owned by out-of-staters from New York, New Hampshire, Massachusetts, and Connecticut, the state is very financially challenged, often ranking in the bottom 5 states for US per capita income along side states like Mississippi and Alabama.
Why does that matter to cannabis?
It means everyone is growing weed in Maine, to make a long story short. Grey, white, black market, Maine is turning into the East Coast growing hub for good quality, clean cannabis. When the citizens of a state are very poor, the incentive to find extra areas of income, whether it is a side gig with Uber or growing weed in your shed, field, or house, are great and it will be done. What is the price per pound going to be? It won’t matter in poorer sections of Maine, show up with cash in hand and many people will be willing to take 50% of market prices in order to pay their bills.
Poor states, just like poor countries on a global scale, have massive economic incentive to get into the cannabis game. If you can produce good quality cannabis as much lower costs due to your costs of labor, electricity, and water, you will grow it and export it. The formula is the same for international trade (see countries like Mexico and the Philippines legalizing marijuana), as well as state to state trade.
If you look at Maine on a map or globe, it is a big green forest bording on fully legalizaed Canada. That is a lot of wilderness, fields, and lower economic class people living there in the woods.
Think it won’t happen?
Look at what happened in Massachusetts when Governor Baker banned all legal and illegal sales of vaping products during the most recent vaping crisis. Maine vape stores and dispensaries got huge sales spikes from Massachusetts residents crossing the border to buy supplies. Did you ever go to New Hampshire or Maine to buy fireworks around the 4th of July and then drive back home to Massachusetts?
Maine cannabis prices at legal caregiver locations and dispensaries tend to already be 25% less than Massachusetts prices. Once the legal recreational market opens in January, all you will need is a valid drivers’ license or ID as proof of age to buy all your cannabis products at anywhere from 25% to 35% cheaper than Massachusetts. That is just comparing apples to apples, legal places selling cannabis with taxes included. If you want to jump over to the grey or black market, you can save upward of 50% on your flower and edibles.
Kittery, Maine is only about 35 minutes from Massachusetts and is already the home of a thriving tourist trade with many outlet malls and stores frequented by Massachusetts residents. Throw in 5 or 10 dispensaries or caregiver locations right over the state border and now you are looking at a firework set up, only for legal cannabis. This won’t be a one day in a July type run, this will be hundreds of residents going up and back a day, every day.
Now, crossing a state line with THC is a federal crime. Cannabis is still listed as schedule 1 drug on the Controlled Substance Act, but fireworks are also illegal in Massachusetts and bringing them back from New Hampshire and Maine is also a crime. How has that worked out for the last 50 years on 4th of July?
To give Massachusetts credit, they have been getting dispensaries open at a quicker pace for the past 12 months, included in that are both recreational and medicinal dispensaries. As we have always said here at Cannabis.net, eventually all orders will be done online or through an app like Amazon, but retail locations that can survive will be more like a gym model. You will go to the dispensary or two closest to your daily life, and in rare circumstance you will go an extra 5 or 10 miles for a certain product or special price.
If the prices are comparable between states, say within 10% of each other, most people will not drive an hour and back to get something they can get down the street, but when things are 50% (think outlet malls), then yes, consumer patterns show people will make time and drive to a further location to save that kind of money on a purchase. See also Massachusetts residents going to New Hampshire to make large purchases like huge TV’s or computers in order to avoid the Massachusetts sales tax.
What is the permanent fix?
Only full-scale legalization at the federal level, either legalization or descheduling, will fix the problem. Once you allow an efficient market to take place, where THC can be shipped and across a state line, then the market will self-correct on its own. The current Federal classification of cannabis allows for a pound of cannabis to cost $ 1,200 in California and $ 2,800 in New York. This will always create incentive for people to put 50 pounds in their car, drive the speed limit for 36 hours across the country, and make money on the price arbitrage. The black and grew market won’t be wiped out by legalization but it will put a large dent in their advantage now over legal cannabis businesses. People will lose the financial incentives to travel to other states to buy products when the prices are more closely aligned and you will consider the value of your time, gas, etc. before you go and drive to another state and back to buy your cannabis.