California’s legal marijuana market appears to be heading toward a steep and steady decline.
Industry professionals have been feeling the crunch.
The CEO and co-founder of Nabis, California’s largest weed distribution company, Vince Ning, believes the situation will not improve anytime soon.
“We’re still not fully bottomed out,” Ning said.
Compiled data supports Ning’s argument. Sales of the drug dropped in the last two years. Even more alarming is that the number of legal growers and brands has declined by more than 70 percent since the substance first became legal. This compounds the problems caused by the emergence of fewer and fewer pot farms.
California’s Green Rush
These dire statistics significantly contradict the expectations economists predicted when the state entered its Green Rush in 2016. Numerous companies entered the growing and distribution markets, thinking such efforts would generate revenue left, right, and center.
One such entrepreneur is Nicole Skibola, who launched Cosmic View, a Sonoma County-based pot manufacturer specializing in various edible and medical products.
She and her mother invested much money and time into this undertaking.
Unfortunately, however, their vision was not rewarded.
Observers attribute the problem to the bureaucracy that ensued following marijuana’s legalization.
The 2016 legalization act awarded local officials control over regulations, giving city and municipal leaders governance regarding who they would grant licenses to. This resulted in expensive licensing fees and the surfacing of corruption.
“I think everybody got greedy,” said Dennis Bozanic, a former cannabis regulator in Santa Barbara.
California’s weed sales topped out at the beginning of 2021 and continue to travel southward. Currently, thousands of marijuana-related establishments have gone belly up, including Cosmic View.
“This is a conscious choice for us to no longer participate in what is a broken regulatory system,” Skibola said.
Weak Cannabis Sales
Currently, the state ranks 14th in statistics measuring annual retail sales per person, clocking in at only $129 estimated per resident. These bleak numbers have created notable market failures.
The declining demand for the product forced numerous pot farms out of business. In turn, distributors were no longer being paid because they had no product to give out. Struggles came full circle when many sellers found themselves either out of commission or teetering on the brink of disaster.
A recent report from the California Department of Tax and Fee Administration stated that 15 percent of all retailers and distributors stand in default on their tax bills.
The Future of California’s Legal Pot Market
Some argue that the pot market can be viable again if bureaucratic and financial problems are resolved, given the state’s size and potential to attract industry professionals.
The only good or sure thing is that marijuana is not going anywhere anytime soon.
Ning suggests that surviving businesses may survive over the long haul because they will face less competition than they did before.
“More people continue to adopt cannabis every day into their lives,” Ning said. “Someone has to serve them and, if there’s fewer operators out there to do so and times are getting tough, with consolidation happening there’s going to be only so many players that will last.”
