Sky high: Mass. marijuana is among the most expensive in the nation
Nearly four years after legalization, Bay State cannabis consumers still pay top dollar
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Ask Massachusetts marijuana consumers what they think of the state’s legal cannabis market, and one complaint comes up over and over: It’s just too expensive.
But is pot here really more pricey than in other states?
Massachusetts marijuana products consistently fetch around double the price of their equivalents in the most mature recreational markets, according to a review of dispensary menus around the country and new data provided to the Globe by several analytics firms. And in most cases, cannabis in Massachusetts is even pricier than in other states that legalized the drug more recently; only the nascent and heavily taxed Illinois market approaches the Bay State’s exorbitant prices.
An eighth of an ounce of decent-quality marijuana flower — the familiar, smokable buds of the cannabis plant — retails for $50 to $60 on the Massachusetts recreational market before adding an effective 20 percent combined state and local tax. Compare that with $20 to $30 for an eighth of an ounce of exceptional cannabis in Oregon, the state with the cheapest legal weed.
For many consumers, the persistence of dispensary sticker shock nearly two years after recreational sales began in November 2018 has kept them loyal to the illicit market, where products are cheaper, untaxed, and untested.
“Most of the people in my network stick with their illicit market partners just because it’s so much more affordable,” said 33-year-old Dorchester consumer and advocate Dishon Laing. “It’s the difference between paying $50 for an eighth plus tax, or getting double that [quantity] for the same price with no tax.”
An average of all available sizes of marijuana flower in Massachusetts stores in August was $41.78, the most of any state with recreational sales tracked by Seattle-based cannabis industry data firm Headset. That’s more than twice the same figure in Oregon, and pegs Massachusetts flower prices above even those in Michigan ($39.92), where recreational sales began a full year later.
Massachusetts especially stands out for the price of its marijuana vapes. According to BDS Analytics, vapes containing 500 mg of concentrate sold for an average of $54.18 in Massachusetts during the second quarter of 2020, but they cost under $30 on average in California, Colorado, Illinois, and Oregon.
Experts attribute the high cost in Massachusetts to the state’s steep cannabis taxes, seasonal climate (which forces most marijuana cultivation to take place inside expensive, climate-controlled facilities with artificial lights), and, most of all, a slow and onerous business licensing process that has limited the number of new producers and retailers opening for business. Four years after voters signed off on legal cannabis, there are just 36 cultivators and 70 retailers operating in the Massachusetts recreational market.
License applicants face particularly acute delays at the municipal level, with many cities and towns moving slowly on zoning and licensing for marijuana facilities, or else extracting large payments under the auspices of “host community agreements.” For many local, more homegrown entrepreneurs, the costs of complying with stringent state regulations and the difficulty of finding affordable property in a cannabis-friendly community make entering the legal market next to impossible.
In erecting such barriers to entry, analysts said, Massachusetts policymakers have effectively ensured a smaller, more expensive, and less diverse marijuana market dominated by investor-backed concerns that grow middling weed.
“Our market may be a few years old, but we’re still relatively immature and the supply is pretty constrained,” said David O’Brien, president of the Massachusetts Cannabis Business Association. “By the time you do all the go-arounds with the board of selectmen, the licensing process here always takes much longer than people think. And time is money.”
Another factor driving high prices: Most recreational producers operating today emerged from the state’s earlier medical marijuana market, which requires companies to grow their own cannabis and sell it at dispensaries they also own.
With those vertically integrated operators now converting their retail dispensaries into “hybrid” stores that also sell large quantities of recreational pot, most have little flower left over for wholesaling after satisfying in-house demand — and besides, margins are better on the retail side. That leaves the state’s smattering of newer, independent recreational retailers with few options and minimal leverage as they seek suppliers to fill their shelves. The high wholesale prices such independent retailers pay are passed on to consumers, who can sometimes purchase the same strain offered by an independent shop from a dispensary owned by the strain’s producer for less.
While marijuana firms are reluctant to disclose exact figures, Massachusetts industry insiders said a pound of flower at wholesale typically ranges from $3,600 to $4,200. But independent retailers might be quoted $5,000 or more for top-shelf strains, a price that on the West Coast would be considered either an insult or a joke.
“A lot of the medical companies are only geared up to meet their own [dispensaries’] demand,” said Kobie Evans, co-owner of the Pure Oasis marijuana store in Boston’s Grove Hall neighborhood. “If you’re lucky, they might have 10 percent [of their crop] left over for wholesale.”
Meanwhile, Evans added, investors have been reluctant to back stand-alone growers, whose businesses cannot depend on retail markups and are highly subject to wholesale price fluctuations.
There’s also the question of experience. David Abernathy, the lead researcher at the national cannabis consultancy Arcview, said some producers in states with longstanding marijuana markets such as California and Colorado have fine-tuned their procedures such that they can reliably grow marijuana for as little as $300 to $400 per pound, even indoors. In Massachusetts, production costs of $700 to $800 per pound would be considered a triumph, he said.
“Any time you have licenses that are harder to get, especially in states that don’t have much of a history of large-scale cannabis cultivation, then there’s a much slower production ramp and the demand tends to outstrip the supply for longer,” Abernathy said.
Some relief may be in sight, however. The Massachusetts Cannabis Control Commission this year has dramatically increased its pace of licensing, approving dozens of new marijuana companies every month. Although those businesses may take some time to build out and open — especially in the case of complex cultivation and processing facilities — the pot pipeline is nonetheless growing, a trend that should eventually increase supply and bring down prices.
In the meantime, studies suggest that of the 20 percent of Massachusetts residents who consume marijuana at least occasionally, a majority are sticking with the illicit market. Evans said that seems obvious from his store’s sales figures, even as coronavirus-related border and travel restrictions have somewhat increased illicit marijuana prices.
“When we know Boston has 700,000 people and a certain percentage of them consume cannabis — we’re only seeing a fraction of those people” in legal stores, he said. “There’s a large population that isn’t ready to pay.”
Some analysts warned, however, that Massachusetts marijuana consumers should be careful what they wish for. In Oregon, overproduction and attendant ultra-low flower prices have bankrupted many locally owned growers, or pushed them back into the West Coast’s vast illicit market.
Massachusetts regulations don’t cap overall cultivation in the state, but do limit the size of any one company’s cultivation area to 100,000 square feet, and require operators to apply for a new license in a higher cultivation “tier” before significantly increasing production.
“Obviously, Massachusetts consumers would love prices to go low,” O’Brien said. “But precipitous crashes aren’t good for anybody.”
In most cases, cannabis here is even pricier than in other states that legalized the drug more recently.
Why are Massachusetts marijuana users still buying on the black market? Cost and convenience, some say
2019 Seed to Sale marijuana expo in Boston
Jason Dick is a longtime marijuana user. For some time, the Hull resident grew his own supply. Now he buys marijuana from a “friend of a friend.”
Although Dick has registered with the state as a medical marijuana patient and a caregiver, he called the prices at dispensaries “absurdly high.” When he buys marijuana from the friend, it costs half as much.
Jesse Hayes of Boston also buys from friends, despite having a medical marijuana card. He said the prices are better on the black market. And even now that Massachusetts has legalized marijuana for all adults, the closest recreational store to Hayes is in Salem. Going there, he said, “does not make sense.”
In November 2018, the first legal recreational marijuana stores opened in Massachusetts, and any adult can walk in and buy a joint. Marijuana users have flocked to the nine stores that are already open, resulting in long lines. But many users have not yet made the switch. While some say they like the safety of knowing what products they are getting, others say buying illegally costs less and is more convenient.
“Until there are places within 20 minutes of everyone’s home, people will continue to go to the gray market,” said a cannabis user from Central Massachusetts who gave his name only as Will.
For now, Will said even though he would prefer to buy marijuana that is tested and regulated, he continues to buy on the illegal market. Going to a legal store “costs twice as much and you have to drive twice as far to get it,” he said.
State marijuana regulators have said they know it will take time for users to switch from buying on the black market to buying marijuana that is taxed and regulated. But part of the goal of legalizing marijuana was to eliminate, or at least lessen the influence, of the black market.
“Standing up a legal industry that is safe and accessible is the best defense against the illicit market,” said Cannabis Control Commission Chairman Steven Hoffman after a recent commission meeting. “I don’t have any expectation that it’s going to disappear overnight, but I certainly have the expectation, and I think we have the commitment of the state, to see that diminish significantly over time.”
Kamani Jefferson, president of the Massachusetts Recreational Consumer Council, said the decision about where to buy tends to depend on availability and pricing. So far, the only shop open in the Boston area — where much of the state’s population is centered — is in Salem. He said the prices in legal stores can be more than double what they are on the illicit market: $60 to $70 for an eighth of an ounce of cannabis, compared to $20 to $30.
Jefferson said it is likely that as more stores open, legal marijuana will be more easily accessible, and with more supply, prices will go down.
The Republican / MassLive interviewed several Massachusetts cannabis consumers at the National Cannabis Industry Association’s Seed to Sale show in Boston on Tuesday. They included recreational and medical consumers. While some had switched entirely to buying legal marijuana, others have kept their old suppliers.
Tim Mack, who is applying for a license to grow and sell marijuana, says he hears from people who visit his hydroponic shop, which sells plants and gardening supplies, that the legal price of marijuana, including the tax, keeps them going to cheaper black market suppliers. He thinks the legal market is attracting many consumers who want the novelty of buying marijuana in a store as well as those who do not know where to buy it on the street.
Justin Gallucci of Boston has cerebral palsy and is a registered medical marijuana patient. He prefers buying on the legal market, because marijuana is more readily available and easy to depend on. But where he shops depends on the variety of marijuana available at dispensaries when he wants to buy.
“If a legal dispensary does not have what I’m looking for, I might have to go back to a gray market source,” Gallucci said.
Others say they know what they are buying in the legal market. Melissa Nowitz, a medical patient from Franklin, said she feels more comfortable knowing that marijuana has been tested. Salesmen at the dispensaries can tell her what strains to use to treat her anxiety and depression, while on the black market, she did not know what she was getting.
David Helbraun, a New York lawyer, who bought from a Salem store while visiting Massachusetts, said as a lawyer, he has to buy marijuana legally. But more than that, he said, “If it’s legal, I know it’s a safe place to get it.” He added that the legal stores have more choice and better customer service than buying from someone on the street.
Steve Croteau, a medical marijuana patient from Uxbridge, said he used to buy marijuana on the black market, but registered for a medical marijuana card as soon as he could so that he could get products that are safe and tested. Buying on the black market, he said, “wasn’t worth my time or my health.”
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Why are Massachusetts marijuana users still buying on the black market? Cost and convenience, some say 2019 Seed to Sale marijuana expo in Boston Jason Dick is a longtime marijuana user. For