Are US retailers and cannabis businesses cut out to supply locals and foreigners?
This guest op-ed was submitted by Isaac Bock, Managing Director at Alpharoot
The national and international trade of cannabis has become a stable global trend over the years, but one key competitor is MIA. With multiple countries competing on international grounds and racking up millions, USA’s absence may cost it numerous missed opportunities.
Although it seems like the US could generate a significant amount through exporting, that may not be the case at all. With restrictive laws, tricky businesses, and a high-risk environment for entrepreneurs, the US cannabis industry might not be cut out for more.
What Makes the US Suppliers Inconsistent?
It’s not to say that the US cannabis industry is underperforming, but it has significant potential that it isn’t actualizing.
We’ve seen the terrible outcome of a cannabis market left unsupported in the aftermath of the Emerald Triangle, a region that was once California’s and the country’s largest cannabis producer. As it slowly edges towards closure, the concern of stakeholders in the industry legitimizes further.
The main question running through everyone’s mind is, what’s happening to our cannabis supply? But the answer is a lot more complex than one would think.
By now, most of us aren’t strangers to the paradoxical dynamics of the US cannabis industry. In a nutshell, Federal law categorizes cannabis as a Schedule I Drug, banning its use, but states may choose to legalize it (which is what 40 states have done as of 2023) for medicinal or recreational use.
State laws provide a guideline for producers and consumers to indulge in cannabis-related businesses safely, but there are limitations and some absurdities that can’t be overcome.
For example, Tennessee is a state where medical and recreational marijuana are illegal. However, hemp-derived THC is permissible for patients with predetermined illnesses.
Still, there are no state provisions to help patients access these THC products, so they’re sourced from other states, which can cause patients to run into legal troubles.
Some states also legalized cannabis and delayed providing licenses to retailers for multiple years. This hindrance angered voters and stunted the growth of these markets.
The waiting periods weren’t used to write up reforms or plan the markets, so when the proper operations began, there were multiple pitfalls and contradictions in the legal framework. The uncertainty of regulations made buyers and sellers anxious about possible legal repercussions.
The mistrust in state laws was the number one reason people avoided establishing businesses in the cannabis industry during its early years.
Producers Vs. Consumers
All cannabis markets aren’t made equal in the states, and the burden of this truth falls on the consumers. Many states either can’t keep up with the demand or are turning away users due to their policies.
Whether it’s taxes or the producer’s choice, areas such as Washington, D.C., are lowering their demand because of the high cost of cannabis. The District sells the most expensive cannabis in the entire country, which incentivizes its residents to buy from nearby states for cheaper alternatives illegally.
Plus, in states where legal suppliers are hindered or keep higher prices, buyers also swiftly turn to their local black markets for better deals and easier access.
One alarming example is NYC, as it faces one of the most sophisticated under-the-table sales operations, with regulators at their wit’s end. With tens of thousands of illegal operators, the legal market is behind on production and sales by a devastating margin.
Although producers and retailers in such states may argue that they’re putting in their best effort considering the legal circumstances, buyers are less than impressed.
The average buyer is looking for affordability and convenience, which unfortunately aren’t being provided.
Shortages and Surpluses
The reliability of supply in different state markets is one of the most questionable aspects of the industry.
At times, the amount of crop production and availability of products are two completely separate discussions. Just because a state cultivates a high cannabis yield doesn’t mean the increase will translate to the products available in the market.
Some states have happier cultivators than retailers because the farmers are able to sell their crops, but the actual cannabis products the latter stock up aren’t sold as much.
Sales by adult-use retailers may be reduced due to restrictive laws or lack of demand. Where medical marijuana dispensaries have been open for years, initially, recreational sales are only possible through the same sellers.
By the time adult-use retailers can acquire their licenses and establish their businesses, buyers are already getting their products elsewhere. It takes time to build their clientele, and fluctuations in the market prices can force them to sell at a lower rate than what is profitable, discouraging businesses.
On the other hand, some states produce more than what they use and cannot sell to other states or make use of the surplus. These instances would be great opportunities for inter-state or international sales, but federal law has outlawed both possibilities to a great extent.
As the US cannabis industry is growing, it’s allowing regulations to be restructured and better access for buyers and sellers to resources.
With the tug-of-war between federal and state law, it seems unlikely that the country will be open to robust international cannabis trade anytime soon.
However, collaboration between states has a higher chance and better potential impact on the national industry.
This article was submitted by a guest contributor to GreenState. The statements within do not necessarily reflect the opinions of GreenState, Hearst, or its constituents. The author is solely responsible for the content.