EAZE INSIGHTS | The high cost of illegal cannabis

Eaze Team
Aug 6, 2018

California’s legal adult use cannabis market — the world’s largest — is eight months old, but first quarter sales and tax revenues were lower than forecast. This Eaze Insights report reveals new empirical evidence that explores the corrosive impact of the illicit market on licensed retailers.

While cannabis consumers want to support and purchase from the legal market, high prices, taxes, and lack of access to legal cannabis continues to fuel a thriving illicit market. Simply stated, California has done a great job of telling consumers that cannabis is legal but has a long way to go in making it easy to get safe, legal and affordable cannabis.

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Unlicensed retailers do not have to comply with worker protection laws, test products for pesticides and processing chemicals, or remit taxes. That results in a large pricing benefit. However, in a trend that may play to the long-term benefit of the legal market, consumers who are increasingly focused on the wellness benefits of cannabis indicate a strong preference for products that deliver reliable results and high quality.

Here are some key findings from our analysis, based on 1,750 online surveys from California, Colorado, and Eaze cannabis consumers completed July 6-12, 2018.

  • The majority of Californians (84%) are very satisfied with the legal market.
  • 1 in 5 Californians have purchased cannabis from the illicit market in the past three months.
  • 84% of those are highly likely to repeat that behavior in the future due to the illicit market having cheaper products and no tax.
  • A 5% decrease in the overall tax rate in CA could drive 23% of illicit market supporters into the legal market.
  • Consumers purchasing most often from licensed businesses are highly satisfied with labeling (85%) and testing (75%), with their counterparts citing they’re less satisfied with the illicit market’s labeling and testing (57% and 45%, respectively).
  • 9 in 10 California consumers (90%) have some medical use for cannabis, indicating cannabis’ strong position as a wellness product.
  • Southern California consumers are more likely to purchase from an unlicensed source than Northern California consumers (21% vs 16%, respectively)

View the entire report in PDF form here.

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