A first of its kind study comparing the reasons for purchasing unregulated weed has found what industry experts heard anecdotally: The most commonly reported barriers to purchasing weed legally are: high prices, inconvenience, and location of legal dispensaries.
The study, “Reasons for Purchasing Cannabis From Illegal Sources in Legal Markets: Findings Among Cannabis Consumers in Canada and U.S. States, 2019–2020”, was published in the Journal of Studies on Alcohol and Drugs in May.
Though there’s still debate about how much of the total addressable market is made up of underground sales, regulated cannabis sales numbers continue to increase in most states.
The study’s objective was to get data on factors that predict consumer’s transition from the unregulated to the regulated market and to examine the reasons for purchasing illegal cannabis. The data are from the 2019 and 2020 International Cannabis Policy Study, a cross-sectional survey conducted for people from the ages of 16 to 65.
“One of the goals of nonmedical cannabis legalization in Canada is to displace the illegal cannabis market with legal, regulated retail sources,” researchers said in the report. In mature markets like Washington state and Oregon, reports about demand suggest that legal supplies exceed demand estimates, which have led to low prices.
The survey, conducted by the Nielsen Consumer Insights Global Panel, consisted of online surveys conducted between September and October 2019 and 2020, recruited through email invitations to a random sample of panelists. The surveys were in English in the United States and in both English and French in Canada.
Price of Cannabis
Price points matter when it comes to transitioning people into legal cannabis sales: Another study researchers pointed to found among cannabis users in both Canada and the United States showed that given the chance, when legal cannabis cost the same or slightly higher than illegal cannabis, consumers chose regulated cannabis, and the demand for unregulated marijuana was lower.
“Consumers viewed legal cannabis as a superior product to illegal cannabis, suggesting that even a slightly higher legal price than illegal could still encourage consumer transition to the legal market,” researchers found. However, researchers said, another study found that the price of legal cannabis should be lower than the illegal price in order to be competitive. Though cannabis prices decrease after legalization, high taxes can lead to a price disparity that “deters consumers from transitioning to the legal market.”
Accessibility and Convenience
Another factor influencing a customer’s transition to the regulated market is retail availability, researchers wrote. Municipalities opting out of retail stores can result in unequal access across localities. In states with high municipal control over licenses, like Michigan, Washington State, New York, and New Jersey, this has resulted in a high concentration of licenses in limited areas – and potentially long travel times to purchase cannabis.
“Two years after retail stores opened in Washington State, 30% of residents lived in a community that had temporarily or permanently prohibited retail sales. At the same time, availability of online and delivery services may improve access to cannabis for consumers who cannot access physical stores. The availability of online services differs in Canada and the United States: all Canadian provinces permit online sales and delivery, whereas only four U.S. states currently allow delivery services for nonmedical cannabis,” researchers said.
Reactions from the cannabis industry
Matthew Hawes, vice president of the Maine Cannabis Industry Association and CEO of Novel Beverage, said convenience is more of a factor in his state than price at this point.
“The price is one component of it, but prices are getting close to being corrected. There is more work that needs to be done. For me, it's a convenience factor,” said Hawes. “In order for the regulated market to completely displace the unregulated market, cannabis is going to have to have availability equivalents to products similar to beer and wine.”
“If the prices are equal then the only factor will be convenience. If it's less convenient, then the price has to be considerably better to make up for that. Whereas if it's more convenient, people might even be willing to pay a little bit more for it,” Hawes said.
Regulated sales in Maine should be much, much higher than current numbers, Hawes added.
Sean Hope, co-founder of Yamba Market, Cambridge, Massachusetts’ first adult-use market, believes that as more retailers open in his state, the regulated market will become more attractive to consumers.
“You're now seeing that shift towards convenience and access. You're gonna continue to see more people who maybe not weren't part of the initial market start to enter in. And as you see the volume increase, you're going to see a leveling of prices. Prices now between the gray market and the retail market are coming into closer alignment,” Hope said.