Chronic Topics: Why the Grey & Black Markets Still Have a Window of Opportunity Post-Legalization

Article by Michaela Freedman, High! Canada

Chronic Topics: Why the Grey & Black Markets Still Have a Window of Opportunity Post-Legalization

In a few weeks from now, Canada will become the first G7 nation to legalize recreational cannabis in hopes to prevent underage use and reduce illegal activity. The latter will be a hard goal to meet since for now, and likely the first year of legalization, the laws around production and distribution will be very strict. October 17th will certainly be a symbolic day for the country but it will be a while until our government will be able to compete against the grey and black markets.

There will still be many advantages to buy from an illegal dispensary or dealer. Canadian Licensed Producers (LPs) are restricted in the different types of products they can sell, there is a tight cap on THC potency, and prices will be high. These setbacks make the black and grey markets formidable forces. If the government is going to fulfill their mission, here’s what will have to happen:

A wider diversity of products

The current law only permits dried flower, cannabis oil, gel capsules, plants, and seeds to be sold. So if you are a fan of vape pens, edibles, or concentrates, then October 17th will be just another day. The lack of product variety is a definite shortfall. These products are booming in other legal markets. As cannabis enters the mainstream there becomes a greater desire to make its use more convenient and discreet. This is why cannabis vape pens and edibles are all the rage. Vape pens are easy to use, produce little to no smoke, and are completely odourless – a great option if you don’t want to worry about reeking of weed after a smoke break. Edibles are even more convenient and safe to use, appealing an even wider market. And then there are concentrates. Shatters, waxes, resins, and the likes are extremely potent, where actives like dabbing are usually reserved for the most experienced stoners. None of these products will be available in October.

While the government does plan to introduce vapes, edibles, and concentrates within the first year of legalization, these products likely won’t be available until October 2019 (assuming the government will take the entire allotted me to figure out how). In the meantime, the grey and black markets will take advantage of these products and reap the economic benefits. When the government does finally bring these products to market though, they’ll have another bear to tackle.

Lift the potency cap

Recreational users with a medical cannabis license often complain that the highest THC products are not as strong compared to what they can get from their dealer. The government has not established a THC limit on dried flower but oils are not allowed to exceed 30 mg of THC per milliliter of bole, less than half the potency of grey and black market cannabis, which go as high as 70 mg. Most importantly, the products that do have the highest THC are often the most expensive. For heavy users, the demographic that comprises the bulk of demand, this is a considerable restriction.

Price reduction

Pricing will be the biggest disincentive for recreational users to buy from the white market, especially if they already have a trusted and reliable source. In the black and grey markets, the more you buy the less you pay. Statistics Canada reported an average price of $8.36 a gram but that drops to $5.48 when buying in bulk. [EF1] Not only will bulk discounts be non-existent with recreational cannabis, they’ll also be taxed. Recreational prices will vary between provinces. There will be a federal excise tax of $1 per gram (or 10% of the final retail price) on top of the usual 13- 15%. Even though some dispensaries charge tax, your neighbourhood dealer certainly doesn’t. There’s a chance that post-legalization demand could exceed supply, resulting in stable prices. When more LPs come onto the scene, supply will be able to catch up with the demand and the average price per gram will start to decline.

All in due me

As it is, October 17th is an exciting opportunity for new users who are curious and interested to try cannabis legally. But for the serious stoners and connoisseurs, you’ll have to be a little more patient. The government will have to exceed the illicit markets in product diversity, potency, and price in order to capture and retain repeated business from heavy users and secure the bulk of demand. When these barriers are overcome, experienced users will start to favour regulated outlets, bringing Ottawa closer to their goal of eradicating the grey and black markets!

See original article here.

About High! Canada

Our content is exclusively about Cannabis as it exists in both Canada and its new place around the world. We provide news on current trends in Marijuana, reviewing pertinent products and informing the public about ongoing legalities of both medical and recreational cannabis use. Our High! Canada Magazine is printed in an easy to distribute (8.5” by 7“) full color format, monthly.

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