Having the freedom to walk into a store and legally buy weed in broad daylight is the stuff every pot lover's dreams are made of. But a sizable percentage of cannabis customers are choosing to reject legal stores in favor of old-fashioned, illegal drug dealers. In Canada, as many as 85 percent of the country's weed shoppers are still buying black market weed, despite nationwide legalization.
The reason for the ongoing black market sales comes down to simple economics: Canada's legal weed is, on average, about twice the price of illegal product. For 42 percent of the country’s pot shoppers, price is the main factor influencing their decision to buy legally or not, according to a recent survey by Statistics Canada. Law enforcement have been working overtime to shut down illegal weed sellers by brute force, but one Canadian weed company has decided to fight the black market on purely economic terms.
Canadian cannabis company HEXO Corp. has just launched Original Stash, a new brand of discount cannabis that will sell for less than black market weed. The brand's first product, OS.210, is a dried hybrid sativa flower containing between 12 and 18 percent THC content. This discount weed will go on sale in Quebec this week at the price of C$125.70 per ounce, or $4.49 per gram.
Statistics Canada currently reports the average cost of legal weed at $10.23 a gram, while back market products sell for an average of $5.59 per gram. HEXO is able to undercut these costs by making this product available in a bulk one-ounce size, allowing them to save on packaging. The company was also able to cut prices by increasing its production scale in Quebec, where hydroelectric costs are lower than other parts of the country.
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“Our aim with Original Stash is to disrupt the illicit market, educate consumers about the value of a regulated and tested product, and drive them to purchase their cannabis legally,” said HEXO CEO and co-founder Sebastien St-Louis in a statement. “We’re now competing directly with the illicit market and providing consumers with an affordable, controlled, quality product. Moreover, we are giving consumers the option of less packaging in a 1 oz format, which we know is a priority for so many.”
“That 51 percent of Canadians that buy illegally, when they walk into their dealer, they don’t pay tax… HEXO is absorbing that cost for them,” St-Louis told the Canadian Press. “We’ve listened, we’re removing their reason for not shopping legal.”
The price difference between legal and illegal weed is also a major factor contributing to the strength of black market sales in adult-use US states. In California, where legal sales began in 2018, the black market makes roughly three times as much revenue as the legal market. Like in Canada, state law enforcement is fighting to bust illicit growers, but some pot producers are also beginning to offer discount weed brands, using bulk sales or exclusive membership deals to create price incentives that will hopefully encourage buyers to support the legal market.