You’d be forgiven for believing this myth, because back in the early days of California’s green rush, growers and retailers were, quite frankly, ballin’. Pounds were selling for upwards of
$6,000, retailers were doubling that, and there was no regulatory framework in place to tax the living daylights out of it. Entire communities relied on the quasi-legal cannabis industry. Even then-sheriff of Mendocino, Tom Allman, was famously quoted as saying that, without weed, the county would be in a recession.
But that landscape has changed. Today, cannabis communities are
in a recession. No longer are legal growers able to pay for their kids’ education, help out their aging parents, or support small, local business. Shockingly, some are literally not getting paid at all.
Those $6,000 pounds? They’re down 95% in price. And while that’s great for the consumer, it has decimated the small family farms that built this industry.
Indeed, the industry is so different now that many consider it completely unsustainable, with most growers finding it impossible to make a living at all. The numbers simply don’t add up. For countless boutique and small-batch growers, it costs more to produce than the cannabis can fetch in today’s market. They simply can’t compete with the massive corporate grows that are producing low-quality bud at higher margins. Add to that, rising rent prices, exorbitant taxes and fees, and skyrocketing PG&E costs, and a lot of people who once made a comfortable living growing cannabis in the legal medical market now can’t earn enough to cover their costs, much less pay their personal bills.
The lower price of cannabis is mostly a simple matter of supply and demand. California is producing
four to five times more cannabis than its residents can consume. It’s a race to the bottom as growers struggle to compete, selling their product at a loss in many cases, or worse, selling their farms and being forced out of the industry altogether.
It’s easy to assume dispensaries are the exception – how could a business that’s selling product for twice or more what they paid for it be struggling in a weed-hungry state like California? Turns out, many of them are having a hard time keeping the lights on.
Retailers are also being hit hard by the regulations. The Bureau’s overzealous approval of permits has resulted in an excess of dispensaries, even in communities whose population doesn’t create that level of demand. So, the Bureau rakes in a ton of money in taxes and regulatory fees, but the retailers themselves are forced to increasingly cut their margins to compete with an endless number of rival dispensaries all vying for the business of the same few customers.
You might be wondering, if the cost of cannabis is down 95%, then why aren’t you paying 95% less to buy it at the dispensary? The answer is simple: while retailers may pay growers less for their product, they are nonetheless required to pay an exorbitant amount to the Bureau in fees and taxes, not to mention sky-high state and local taxes. By the time all of these costs are factored in, margins have all but disappeared.
