Sales in illicit markets still exceed legal transactions, even though more than half of Americans have legal access
A recent report highlights the persistence of illicit cannabis sales compared to legal transactions, highlighting that price and convenience are driving consumers to the black market.
The Predominance of the Illicit Market
According to New Frontier Data report, illicit market cannabis sales still exceed legal transactions, even though more than half of Americans have legal access to high-THC cannabis. In 2022, illicit cannabis sales reached $74 billion, far surpassing legal sales of $28 billion.
The projection is clear: Illicit sales are expected to exceed legal sales through 2030, even in states where cannabis is legal.
A Crucial Competitive Landscape
The competitive market could make the difference to the survival of licensed operators. The report offers advice for expanding the legal market and closing the gap with its unregulated counterpart.
Reaching Customers Where They Are
The report highlights the need for factual and transparent information on the cannabis aimed at potential users, particularly older adults and women who have expressed interest but remain hesitant. Educational initiatives could include debunking myths, explaining safety and legal aspects, and highlighting medicinal benefits.
The use of various platforms, such as social media, community outreach or Reddit forums, has also been suggested to reach a wider audience more effectively when traditional advertising is not guaranteed.
Improving Access to Legal Channels
Improving access to legal cannabis channels is another crucial factor, including establishing more convenient retail outlets and user-friendly online platforms.
“Frequent users who obtain their supplies primarily from dealers disproportionately live in urban areas, where they may or may not have convenient transportation to dispensaries,” the report states. “They tend to have lower incomes and purchase cannabis in smaller quantities than in-store buyers, but they consume very often and therefore would need to be able to make frequent trips to a dispensary.”
In states that only allow medical use, simplifying the process of obtaining medical cannabis cards could encourage greater participation in the legal market.
The Price Factor
However, price remains a determining factor. The report suggests that offering a wide range of products, from different varieties to diverse forms of consumption such as edibles and oils, could attract a more diverse consumer base. This range should also include a variety of price points.
“Consumers who rely on dealers to obtain cannabis in recreational markets have significantly lower incomes on average than consumers who obtain cannabis from friends/family, and both groups have lower household incomes in average to in-store shoppers,” the report said. “Retailers should aim to offer products at various price points and offer loyalty promotions or discounts where possible.”
Collaboration with Regulators and Health Professionals
Collaboration with regulators and healthcare professionals is also cited as a key strategy. This type of collaboration could lead to more informed policies and regulations, promoting market growth while considering public safety. Involve health professionals in education about cannabis can also lead to more informed recommendations to patients, thus increasing the number of medical cannabis users.
The report also highlights the benefits of transparency and compliance. Adherence to strict quality control standards, ensuring transparency in product provenance and labeling, as well as compliance with regulatory standards, are essential to building consumer trust and supporting long-term growth.