These companies initially seemed to believe that regulators and law enforcement would drive out the illicit market dealers. That hasn’t happened.
The promise of legalization was that it would end the black market for cannabis. The theory was that cannabis consumers would prefer a civilized trip to the dispensary where they could buy well-defined products versus buying from a dealer with little information as to the cannabis purchased.
The problem is that legalization advocates didn’t account for the high taxation driving customers away from legitimate vendors. At the end of the day cheap prices won consumers over lovely dispensaries selling cannabis in fancy packages. Cannabis companies initially seemed to believe that regulators and law enforcement would drive out the illicit market dealers, but that hasn’t happened either.
Jonathan Rubin of Cannabis Benchmarks said, “Canadian cultivators and retailers have already been struggling ahead of the pandemic, as they compete directly with lower priced and more accessible illicit markets. The same goes for ancillary businesses – including processing, packaging, distribution, delivery, and maintenance – that rely on continuous business operation to keep afloat.” He noted the change in March prices as follows: The simple average (non-volume weighted) price decreased $26 to $1,565 per pound, with 68% of transactions (one standard deviation) in the $799 to $2,330 per pound range. The average reported deal size increased to 2.2 pounds. In grams, the Spot price was $2.99 and the simple average price was $3.45.
Looking at the most recent quarterly earnings, it looks like the companies have taken matters into their own hands. No, they aren’t busting illegal operators. Instead, they are creating value products and lowering prices. The companies might have other problems within the filings, but this is just looking at the comments regarding pricing and value brands.. [Read More @ The Street}