When California kicked off legal adult-use sales in 2018, industry leaders expected the Golden State to surpass every other legal weed market in the country. But, two years into legal sales, California's sales are lagging behind other adult-use states, most likely due to excessive taxes and regulations that make it difficult for legal businesses to remain competitive.
In 2019, California's per-capita cannabis sales amounted to only $70 per customer, according to a new sales report by Marijuana Business Daily. This figure lags far behind the second-year sales figures of other adult-use states: Colorado's second-year sales reached $99 per-capita, Oregon's sales hit $97, and Washington state made $89 in year two per-capita sales.
California's legal weed industry made nearly $2.8 billion in sales last year, around double the $1.5 billion sold during the first year of legal sales. These sales figures have fallen far short of expectations, though, some of which predicted $4 billion in sales in 2018 and $3.1 billion last year.
But, if the Golden State's per-capita sales were on par with other adult-use states, the pot industry could have matched these expectations. For example, if California's per-capita sales were at $98 last year, legal retailers would have sold nearly $4 billion of weed.
The state's thriving black market is largely to blame for stifling the success of California's legal weed industry. Last year, it's estimated that illegal dealers moved nearly $9 billion worth of black market pot, more than triple the amount of legal weed sold. State officials have partnered with the National Guard to crack down on illegal weed farms across the state, seizing millions of contraband weed plants in the process, but the black market endures.
Industry leaders blame state taxes and regulations for preventing them from effectively competing with the black market. California collects tax from every stage of production, from seed to sale. At the store, customers are being forced to pay 30 percent or more in taxes, and wholesalers must pay an additional $9.65 an ounce — a cost that is also usually passed down to the customer.
But even if Californians are willing to support the legal market, many of them don't even have convenient access to legal weed. The state's adult-use law allows individual governments to “opt-out” of allowing legal pot businesses in their communities, and around 69 percent of all Golden State municipalities have chosen to do so. And out of that remaining 31 percent, many municipalities only allow medical marijuana. Because of these bans, nearly 40 percent of all Californians live 60 to 120 miles away from a legal adult-use retailer.
According to a new report by Marijuana Business Daily, California only has 993 licensed retailers and delivery services, amounting to 1.4 stores per 100,000 residents. In comparison, Oregon has 15.5 stores per 100,000 residents, Colorado has 9.8, and Washington, 6.1. The lack of access to legal weed is another factor that helps the black market thrive. It is estimated that there are 2,835 illegal retailers and delivery services in the state, nearly triple the number of licensed sellers.
Some local and state lawmakers are gradually realizing that the state must address its own taxes and regulations in order to allow its legal market to prevail. A few companies have even tried to combat the black market by unveiling exclusive memberships that allow customers to buy discount weed in bulk. And even though the state just raised taxes on legal weed, individual cities and counties like Oakland and Monterey County have lowered their local weed taxes. Maybe more municipalities should follow suit.