Legal cannabis vs. black market: Can it compete?
The black market’s head start
As I’ve noted before, it’ll be tough to lure customers away from established illegal vendors. For one thing, cannabis-infused foods and drinks aren’t yet legal. Black markets will monopolize those products for another year.
Dried cannabis and oils are legal now but may experience shortages. But those should disappear next year as more growers become operational.
Places to legally shop are also scarce in most provinces. QuÃ©bec only has 12 stores open and Ontario won’t have any brick-and-mortar stores until spring. By contrast, Alberta has a hundred stores opening this month. As store counts grow, legal cannabis will grab more market share.
Pricing also handicaps legal vendors. They must pay fees and taxes while competing with street prices around $7.20 per gram.
However, legal cannabis might eventually undercut illegal weed. Mass production is already reducing per-gram growing costs below $0.75 and is heading for $0.20. Moving production to countries with lower wages and warmer climates could drop that to $0.05.
Promotional marketing could give legal cannabis an advantage. But federal law restricts advertising to “informational” purposes; no cartoon characters or happy puppies. That makes it harder to build brand reputations.
The pre-existing “gray-market” dispensaries further complicate the legal-illegal competition. Will most close or go legit? If not, they’ll provide another challenge for legal retailers.
For complete story go to… Welcome to Three Drug Markets!
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