When recreational cannabis was first legalized in Colorado in 2012, many of us were excited by the prospect of easier access at a lower price. However, even though recreational marijuana is now legal in 15 states and the DC area, prices continue to soar. Naturally, many cannabis enthusiasts have found themselves asking: Why is weed so expensive?
The marijuana industry is a unique one when you consider the disconnect between state regulations and federal law. A lack of legislation and regulation by bodies such as the FDA means that the cannabis market can be tumultuous at best. There are several reasons for the inflated prices that consumers are seeing in dispensaries across the US:
- Limited payment options: Many dispensaries have trouble dealing with banks and are forced to operate as cash-only businesses. This passes additional costs onto the consumer.
- High taxes on recreational cannabis: Many states justify their bid to legalize cannabis by placing a high luxury tax on it. Tax rates can range anywhere between 10% and 40% depending on the state.
- More marketing costs: As a burgeoning market, it can be harder for dispensaries to get their foot in the door than other industries. Advertising can get expensive, and that cost affects the final prices in a dispensary.
- Overhead expenses: Operating a successful business in the cannabis industry requires a lot of capital, from the cost of running a grow operation to the cost of renting a brick-and-mortar space. This means the product must be more expensive to make ends meet.
Fortunately, it’s not all bad news for marijuana enthusiasts. There’s hope that we’ll begin to see prices dropping drastically within the next few years as legislation continues to catch up with the marketplace. Consider a few of the main reasons you can expect to see marijuana prices drop at your local dispensary over the next couple of years.
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Overproduction
As the demand for cannabis continues to rise, more and more entrepreneurs are taking the opportunity to break into the industry. The promise of quick cash has created a gamut of growers in states where weed is legal.
As high-quality marijuana continues to flood the market in high amounts, the lower demand is expected to drive prices down for consumers. We’re already seeing this in California and Oregon, where cannabis surpluses have forced growers to liquidate large volumes of product. This trend isn’t going anywhere anytime soon, as large-scale operations are how growers secure lucrative deals with retailers.
More Competition
As it continues to grow, the marijuana industry is becoming increasingly competitive for growers and dispensaries alike. To stay afloat, they have to set themselves apart from the crowd with higher-quality products at a lower price point.
Marijuana users can expect to benefit from these price wars as numerous businesses look for a foothold in the industry. Availability in more states will also drive down prices, as it will stamp out any artificial inflation from black market sales.
Further Legalization
If you’re wondering why weed is so expensive, a large part of it is poor regulation. However, this is changing fast. Although only fifteen states currently recognize legal recreational marijuana, this number is expected to keep climbing. Several more states are expected to join the bandwagon in 2021, including New York, Connecticut, and Pennsylvania.
As more states legalize marijuana, the federal government will have no choice but to take up the issue, as these localized markets have national implications. For example, the prohibition on interstate commerce is crippling markets with poor grow conditions.
Once the federal government steps in and loosens some of these laws, there will be fewer risks and legal hurdles driving up prices.
More Efficient Production Methods
Back when marijuana was sold for exorbitant prices on the black market, part of the reason for those sky-high prices was that grow operations had to stay small.
While many people still grow small for personal use, in states where weed is legal, you can find large-scale agriculture dedicated to producing quality marijuana. This high-volume production style saves on growth costs, and these savings can then be passed on to consumers. As the industry continues to expand, we can expect to see advances in agricultural technology drive down end costs.
In addition, prices are being driven down by the development of new, more efficient extraction tools like rosin presses by PurePressure, which allow brands to create potent extracts without the use of volatile solvents.
The Bottom Line
The simplest answer to why weed is so expensive is that it lacks sufficient regulation. As we continue to see more states embrace recreational marijuana, legislation will begin to catch up with industry growth. With any luck, cannabis users can expect to see prices at their local dispensaries plummet in the coming years.
