Should black market weed cost as much as legal weed?
Yes. Here’s why.
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Dear Friend & Subscriber-
One of the most common questions about cannabis is why is it so expensive?
Up until recently, cannabis was compared to precious metals by value per ounce.
Currently, the average price of gold is ~$1900/ounce. (Google)
The U.S. average price of cannabis is $319/ounce, ranging up to nearly $600 in D.C. (Statista)
Concentrates vary widely; I’d say $60-75/gram or $1000-2000/ounce is a fair average for concentrates (with a WIDE range in quality).
For a while, hash enthusiasts were saying “invest in hash” as it was selling for more than its weight in gold.
With legalization, many question why cannabis still costs so much?
There is a lingering belief that the largest cost of producing cannabis is the illegality of it. This is not incorrect, but it is also inaccurate. There are plenty of costs associated with producing cannabis, and legality is surely one of the biggest, but is not the sole driver of of the market.
Even in legal situations, cannabis is expensive to grow, especially when compared with other agricultural goods.
60% of cannabis grows are indoors (Cannabis Business Times). In most markets, indoor grows are responsible for the majority of premium smokable cannabis. And indoor grows require a significant amount of equipment and resources to produce that flower.
For infused products (concentrates, extracts, edibles, etc.), there's an additional expense involved in processing harvested cannabis into consumer goods.
You need in-house experts. You need sterilizable surfaces. You need advanced equipment.
The reason cannabis is so expensive is because good cannabis takes a significant amount of resources to produce.
The cannabis plant does not know or care whether it was grown legally or illegally.
For years, the legacy market (formerly “black market”) supplied the world with cannabis products at the cost of countless hours and dollars.
People assumed that the prices were correlated with the illegality of the plant, but then it went legal, and the prices stayed the same.
The problem with cannabis pricing is threefold:
It’s easy to sell constituents on legalization when there’s a giant sum of tax money to be had based on average street pricing.
Because tax money is attractive, regulators ensure that there are plenty of fees and taxes involved in starting and operating a legal cannabis business, on top of all of the standard costs of running a business, most of which are not tax deductible due to cannabis being a controlled substance.Price ≠ Quality.
In mature, regulated markets like refrigerator sales, it’s easy to assume that the most expensive item is the most desirable. But, even in legal markets like whiskey, the neighborhood shop will 3x the price of a “rare” bottle that they are trying to upsell.Any given thing is worth what someone will pay.
You know how your parents always said that you never pay sticker price at a car dealership? And the dealership still sold them the car? That’s because the actual value is whatever someone is willing to pay for, not necessarily what it’s “suggested” retail price is.
Should legacy market cannabis cost as much as legal market cannabis?
Sure. No. Yes. Maybe?
“Should” is subjective.
“Should” assigns a principle that has been agreed upon as the standard. There is no should; there is and is not.
The question is not whether legacy market cannabis should cost as much as legal cannabis; the question is whether or not a $100 of legacy market product has the same value as the equivalent amount in the legal market.
The more interesting question is why do legacy market prices hold their own against the legal market?
To answer that question, I made a fancy cannabis bell curve chart.
As you can see, the legal market and legacy market continue to coexist at a rate of about 2:1 in purchasing power.
2/3 of the market will always buy whatever is accessible. If it is legal and perceived to be reasonably priced, that’s the audience. But 1/3 of the market falls into the category of partial or full-time legacy buyer.
The legacy market services two audiences that the legal market cannot alone satisfy: the bargain shopper and the connoisseur.
Yes, there are bargain ounces, and yes, in most cases, you will find cheaper weed on the legal market. That’s a result of the split in legacy market demographic.
The legacy market offers the cheapest products possible, and products that are unique to their producers.
If you’re buying off market, you’re trying to beat the prices or you’re trying to find something that isn’t readily available.
You’re looking for something that was grown in a situation where all costs were cut (gross!) allowing for the cheapest possible price, or you’re searching for a flavor, variety, or specific person’s work.
You don’t give a damn about quality, or you care more about quality than anything else.
Legacy market cannabis costs as much or more than legal market cannabis because it is produced with a love, attention to detail, and pure motivation to represent a plant as truly as possible that simply cannot be replicated at scale.
Yes, there are boutique growers operating in the legal market who produce high-quality, connoisseur-grade offerings. But they are not the majority, and they never will be. The majority of any market is dominated but the products found at the intersection of quality and efficiency.
The reason some legacy ounces fetch $600+ each is because not a single sacrifice was made.
Maybe it’s a genetic that has intersex traits and each growth node has to be checked daily but the bud is unlike anything else.
Maybe it’s a plant whose terpenes are rare and distinct but yields a third of anything that would be commercially viable.
Maybe the grow only produces a limited amount.
In the legacy market, the price of cannabis is determined by its quality and value, rather than the costs of production.
Sadly, this is not the reality in most situations. There are exceptions, and the future offers hope that these costs will continue to come down as a whole, but there will always be sought-after products that carry a higher value, regardless of what market they were produced on.
Regardless of market, the best approach is to judge products based on quality before price.
Until next time,
Ben “Quality > Price” Owens
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And with inflation, that $50 eighth from 20 years ago would be worth $100 in todays funny money. You tend to get what you pay for. Great article.