Home Business Why Lower Prices on Legal Cannabis is Great for the Industry

Why Lower Prices on Legal Cannabis is Great for the Industry

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It doesn’t take an expert economist to understand that when a product or service is banned, risks to provide customers with said products increase, therefore increasing profits dramatically. The U.S. saw this very thing happen in the 1920’s with alcohol prohibition. Alcohol prohibition was promptly ended in 1933. Not long after in 1937 though, another substance, one far less dangerous and even medically beneficial – was also outlawed. And while the federal government may have attempted to rectify the harms brought on by alcohol prohibition by ending it, the same logic and compassion has not been applied to cannabis prohibition for almost 80 years.

As soon as alcohol prohibition was repealed, its sale was again legitimized, causing prices of alcoholic beverages starting to fall. We are witnessing the exact same thing happening currently in the legal cannabis industry – especially in Washington State.

The Washington Post reports that as of March 2016, the average price of legal cannabis in the state has dropped to $9.32 a gram, gathering data from the state Liquor and Cannabis board. Cannabis wholesale prices are as low as $2.99 per gram.

This is a significant contrast to black market prices, which are typically anywhere from $20-30 per gram for high quality cannabis. Even legal cannabis can be that much sometimes, as seemed to be the case just two years ago in 2014. As prices of legal cannabis compete with that of the black market, patients and recreational users are ensured a safer, easier and better experience – not to mention legal.

The price of legal cannabis has also seen a decline in Colorado. Buying an 8th in the state would cost you between $30 and $45 last June 2015, down from $50-$60 the year before.

Obviously, these price drops are great for legal cannabis consumers visiting and living in Washington State and Colorado. The price drops may present challenges to dispensaries, growers and other cannabis professionals who make their living distributing legal herb. That shouldn’t be a problem for experienced entrepreneurs and professionals who are already used to an evolving industry that just keeps on improving. Any challenges that lower prices could present to growers and dispensaries will almost certainly result in more innovation and better competition for customers. Some house strains could become so inexpensive that they are given away for free… Much like you’d see a brew house provide a customer with a small sample of a specific craft beer before committing to ordering a pint.

2 COMMENTS

  1. I take issue with this: “That [the challenges cheap weed represents for growers / dispensaries / etc.] shouldn’t be a problem for experienced entrepreneurs and professionals who are already used to an evolving industry that just keeps on improving.” … This completely glosses over the industry being veritable mess … Most dispensaries haven’t adopted best practices in creating rich retail experiences, budtenders (the gatekeepers) are typically undertrained and high-turnover, knowledge of the product itself is often lacking through the entire organization, and most consumers are hard-pressed to find real resources to make sense of everything. That’s saying nothing about the regulatory churn.

    What we should hope for (and work towards) is not lower prices across the board but 1) an educated consumer which allows for 2) a full variety of price points as we see in most other industries. You need the high-end lines as well as the bargain bin options. Outdoor, all-organic (real – not the nonsense some hype) Bruce Banner is different than indoor, non-organic hydro.

    What I’d worry about here as far as these plummeting price points is consolidation – if you’re a grower, even a top-tier one as far as quality is concerned, and there isn’t a discerning buyer, I have no advantage. I’m going to be snapped up or go out of business.

    You mention Prohibition – during those years small, illegal breweries did quite well, because they were nimble and flexible. Once the walls came down, the big boys came in and absolutely dominated the landscape for nearly two generations. The micro-brewery movement gave consumers a reason to spend more and be selective (I live in Denver – there is a microbrewery on every block if not two!) but that’s taken a LONG time to cultivate.

    Do we really want to wait decades for this to sort itself out?? Or should we as an industry work aggressively and concertedly to bring the public up to speed on the amazing variety of options this plant provides them? The state-by-state protections we’re afforded won’t last forever. If companies are complacent they don’t stand a chance against big pharma, wall street, and silicon valley. Lot of folks out there risked their freedoms to produce this product – would be a shame if the rewards were yet again sucked away by the traditional powers.

  2. This article has a misleading title; falling prices are good for the industry because entrepreneurs are innovative? That doesn’t make sense. I don’t see how this article even touches on the title it presents.

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