Slash Legal Cannabis Prices, Say Industry Analysts
Price Gap with Black Market Cannabis is Widening – LPC
Industry analysts say that licensed producers (LPs) need to focus on slashing legal cannabis prices in 2020. The price gap between legal and illegal cannabis is growing, which undermines the whole industry.
“Legal cannabis has been priced much higher than the black market ever since legalization day,” said Professor Michael Armstrong of Brock University.
Last week, Stats Canada announced that the legal cannabis prices increased to $10.30 per gram on average in the last three months of the year. That’s compared to $9.69 during the same period in 2018, when cannabis was first legalized in Canada. Meanwhile, prices for illegal cannabis fell from $6.44 to $5.73 in that time.
“I think for any of the mass market producers, (price) has to be their objective for this year, if it hasn’t been already.”
At least one LP is trying to lower legal cannabis prices. Hexo launched Original Stash in October. Sold in bulk (28-gram packages), the consumer price works out to $4.49 per gram. Hexo said it was able to offer this low price due to less packaging, increased production scale, and lower electricity costs in Quebec.
Legal Cannabis Prices Only One Key to Eliminating Black Market – LPC
Lowering legal cannabis prices is only one key to eliminating the black market, though it’s an important one. BC has the lowest cannabis sales per capita for a variety of reasons including a mature, established black market and not enough legal stores.
Alberta, on the other hand, now has over 400 locations in the province, which helps improve availability, another key to eliminating the black market. It also helps normalize cannabis, which will increase legal cannabis sales.
The black market is still strong in places like Quebec, which has higher restrictions including raising the age of consumption to 21. Lack of availability in Ontario has been a persistent problem. The province has the lowest access to legal cannabis in the country. Ontario announced last year that it will open up its retail cannabis store licences starting this year.
Some see outdoor-grown cannabis as another way to reduce legal cannabis prices. Production costs including particularly energy costs are much lower.
However, it’s important to note that Canada is doing well compared to the United States. There, legal cannabis prices can be two or three times higher. Yes, lowering prices should be an objective for LPs this year. But increasing availability, normalizing cannabis use, and encouraging a culture of legal cannabis are important goals too.
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