One of the biggest benefits of legalizing and regulating cannabis sales is taking revenue away from the unregulated cannabis market. An unregulated cannabis market is never entirely operated by gangs and cartels, however, it is well documented that gangs and cartels do use illegal cannabis sales in some cases to help generate revenue.
Rather than having consumer dollars supporting those types of entities, it is much better for consumer dollars to support a regulated system in which revenue is generated by licensed entrepreneurs, some of which goes to taxes that support society. It is better for local economies and it is ultimately better for consumers who are able to purchase tested products that have met industry safety standards.
Convincing consumers to make their purchases through a regulated system is easier said than done. A number of factors affect consumer purchasing practices, with arguably the biggest factor being the cost of the cannabis to the end consumer.
Regulated options provide a number of non-monetary benefits including variety and convenience. However, those benefits only go so far. If regulated cannabis is significantly more expensive than unregulated cannabis, consumers will often make their purchases through unregulated sources.
A Canadian cannabis company has announced that it is going to offer a cannabis flower option that will cost less than the average price of cannabis flower from unregulated cannabis dispensaries. Per Global News:
Cannabis company Hexo Corp. says it is aiming to undercut prices in the illicit market with its new 28-gram product, that costs as much as one dollar less per gram than at a illegal dispensary.
Hexo says the product will be on sale in Quebec cannabis stores for $125.70 taxes included, or $4.49 per gram.
Statistics Canada’s latest price analysis based on crowdsourced data showed that the average cost of a gram of cannabis was $7.37 during the third quarter, with the price of legal and illegal weed slipping to $10.23 and $5.59 per gram, respectively.
The cannabis flower will be sold under the name ‘Original Stash’ and will have a THC content between the range of 12% and 18%. The THC percentage could be an issue and affect the potential success of the new offering. Many cannabis consumers prefer cannabis flower that tests at 20% or above.
The proposed price for the 28 grams of Original Stash could also be an issue too. $4.49 per gram may be lower than the average price of a gram at an unregulated dispensary in Canada, but it’s likely not lower than a non-dispensary gram of flower. Consumers may still be able to find cannabis for cheaper from a local dealer and continue to opt to make purchases from them.
With that being said, the lower price should still cut into unregulated cannabis sales to some extent. How much of an impact it will ultimately have is something that will be determined in the coming months as sales data is compiled and analyzed.