California is the world’s largest Cannabis marketplace. But it takes some know-how to thrive in this complex sea of policy, legislation and compliance hurdles.
The cannabis landscape in California is as exceptional as The Golden State itself.
The unique way in which the local industry grew and developed -- paired with the state’s social and cultural idiosyncrasies -- created a special set of challenges that must be understood before you’re able to not only break into, but conquer the biggest cannabis market in the world.
Here are three ways California’s cannabis market differs from other states across America.
Experienced Customers and Established Competitors
California was the first state to legalize medical cannabis back in 1996. However, marijuana was illegally available in the state decades before that. By the time Proposition 64 came through in 2016, a thriving recreational market was already afoot, based on loose and easily obtainable “doctor recommendations.”
This means that when the state registered its first legal adult-use sale in 2018, the average Californian was already a far more educated consumer when co mpared to other states. Thie California customer knows cannabis products and demands a high-quality consumer experience -- regardless of the product’s price range.
Companies who are aiming for the B2B sphere will run into a similar scenario. Given the state’s long track record with cannabis, many operators are industry veterans who know the cost, and value, of every aspect of the cannabis supply chain.
For these reasons, penetrating the California market has higher barriers to entry than other states where the industry is not as developed.
Low Rate of Dispensaries per Capita
California was the first state to see a decline in legal cannabis sales after making the leap to recreational, from $3.1 billion in 2017 to $2.5 billion in 2018. Adult-use legalization brought order and regulation to a vastly underregulated and lightly-taxed industry that had flourished for over 22 years. But it also brought taxation – and a lot of it.
After legalization, government crackdown on non-compliant operators strengthened, taxes were raised and requisites for operating legally became harder to obtain. This caused many previously legal businesses to close and others to continue operating in the black market.
As a result, the rate of legal cannabis dispensaries per capita is one of the lowest amongst legal states, with just 1.6 dispensaries per 100,000 people. This number falls way behind some states like Oregon and Oklahoma, who surpass the 15 dispensaries per 100,000 individuals mark.
A Strong and Competitive Black Market
As many companies decided to go rogue, the availability of illicit products became increased dramatically. Legalization also brought a rise in after-tax prices for legal products with a 77% tax and regulatory load imposed by the state, generating a higher demand for cheaper products. As a result, the black market flourished.
For some In a way, buying from the black market is not only more convenient price-wise, it’s also a naturalized behavior in consumer’s daily lives.
In fact, Californians prefer the black market to such an extent that in 2019, of the $11.8 billion dollars spent on cannabis, only $3.1 billion were made from legal purchases. Many of these illegal sales came from “grey market” stores, left over from the medical cannabis era.
But it’s clear the black market is not the future of cannabis in California.
And the current cannabis landscape poses a huge opportunity.
Legal vendors are thriving in a portion of the market that is not available in the black market -- which includes edibles, cosmetics, concentrates and branded products. And as the vape crisis continues to affect the industry more consumers are turning towards the legal market.
Most consumers would prefer to purchase cannabis products from trusted and regulated sources. And the massive growth projections over the next five years will be due to the canna-curious consumers who are not familiar or as comfortable with the black market.
There is no better time than now to get into the California cannabis market. And no better place than Headquarter to help you break into the world’s largest cannabis marketplace.
Headquarters is a team of highly-focused and seasoned experts who will get your product into California’s robust cannabis market no matter where you’re located.
Whether it’s compliance, distribution, marketing or product development, we can not only get you in the marketplace, but help you stand out from the pack. Drop us a line or sign up for our newsletter today.