Friends – have you been to New York City lately? It’s still a mess of unlicensed cannabis dispensaries. We talked about this a while back, and I was reminded of the problem last week when Jeremy Berke’s very excellent Cultivated newsletter (to which you should subscribe) reported on the slow rollout of dispensary licenses and openings.
To me, the whole reason we’re here is to build an industry where adult consumers are able to purchase a wide array of known, tested cannabis products in a safe environment. It’s why we put up with all of the mishigas. At the same time, there’s still a thriving unlicensed (illicit) cannabis industry competing for those same consumer dollars, and NYC is currently the epitome of that fact - you can’t swing a dead cat in Manhattan without hitting an unlicensed store or truck selling cannabis products.
Layered on top of all of this is the legacy of the War on Drugs. We talked a bit about that history a while back. Part of what drives the licensed side of the industry, particularly the push for appropriate social equity measures, is to counter the stain of that legacy. As a result, there are voices from within the licensed cannabis industry that are against criminal crackdowns on those unlicensed storefronts in NYC. (I hesitate to call out anyone in particular, hence no links.)
How does this dialectic play out, one that isn’t just limited to NYC? How do you encourage companies and entrepreneurs to spend money and time building out licensed operators, who are required to comply with regulations and only offer tested products at a material price premium, when there’s someone around the corner selling either untested or untracked product at a fraction of the price? And yet, how do you shut down the latter without considering what the War on Drugs did to so many people and acting accordingly?
I for sure don’t know the answer to that question, but I suspect that the industry ultimately won’t be able to have it both ways. At a macro level, one of the very many main reasons that the licensed industry is still so distressed is that it has a very large competitor that holds a very unfair advantage. What other product or service has that kind of problem?
I just don’t think that the licensed industry can thrive like it could or should while the illicit market is still so robust. Although lowering taxes, reducing costs, etc., would help mitigate that edge, the illicit industry would still have a major price benefit. No one needs to return to the destructiveness of the War on Drugs to solve this problem, but I don’t see it going away on its own.
I recognize that I could be completely wrong about this (hence this newsletter never being legal advice), but I think the industry can’t have its infused cake and eat it too.
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Hauser Advisory provides advice and strategy on business lifecycle events and cannabis industry navigation, tapping into a deep, national network
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© 2023 Marc Hauser and Hauser Advisory. None of the foregoing is legal, investment, or any other sort of advice, and it may not be relied upon in any manner, shape, or form. Subscribe to Cannabis Musings at hauseradvisory.com.