5 Reasons Why Grey Market Cannabis Is Still The King
Embrace The Grey
We’re 3 years out on federal legalization here in Canada, and there have been a lot of changes to the atmosphere surrounding cannabis during that time. This past year alone has seen a significant shift in terms of how we smoke, where we can smoke, and who (if anyone) we share our weed with. The pandemic saw Canadian dispensaries rake in a record share of capital as citizens of this fair nation were instructed to remain indoors, doubly so throughout Ontario once they were able to provide delivery services across large swaths of the province.
As much as the legal cannabis market has thrived this past year, though, the so-called grey market appears to be quietly outperforming the licensed side of the industry. While actual figures are hard to come by when it comes to that side of the business, as a consumer it’s hard not to notice the countless new services opening up across town with little more than a used Subaru, a WordPress website, and a dream they had after ingesting an edible.
It ain’t much, but it’s apparently enough to make some decent money. Given how hard it is to get a license from the government to buy and sell the products they approve, most budding dispensaries are opting to go the old-fashioned way. There are advantages to that, despite the dangers of catching a charge. Today, I want to look at the advantages grey market services can offer that their legal counterparts cannot. By doing so, I hope to better understand the reasons why grey market services have persisted despite cannabis being legalized, and what changes to the legal market might allow them to compete better with that side of the industry.
1. It Comes Down to Delivery
It sounds a bit silly, but I do believe that laziness is an enormous factor in the dominance of grey market cannabis businesses. Stoners are lazy! It’s a stereotype that’s been around for decades, and honestly, I think it’s pretty accurate. If I can stand as an example for all stoners, I am quite aware of just how lazy I can be. I’d rather have my weed delivered than get dressed, go all the way outside, and then wait on the curb for a budtender to put my order together. That’s a lot of time and effort in the moment, given all I really wanna do is smoke.
Delivery resolves that issue!
Honestly, the fact that cannabis dispensaries across Ontario were forced to give up doing home deliveries has finally driven that nail through the coffin for me. The legal side of the industry had a golden opportunity to compete with the black market on what I believe to be the single most important factor in the success of their business: ease of access. If you have to walk somewhere to get the thing you want, then that becomes a barrier to doing it. That’s assuming you’re not stoned, though, at which point that barrier might start to look a little insurmountable. If I have the choice between delivery and picking up my food, I’m probably going to have it delivered. The same goes for weed.
That’s assuming the price of delivery isn’t too steep, which is a nice transition into my next point:
2. Grey Market Pricing is Gold
It’s really, really tough to beat the prices that unlicensed growers sell their product for. As a licensed dispensary in Canada, the products you have access to are strictly quality-controlled and supplied by licensed growers or producers. The government’s extremely high standards for quality means that those growers are forced to spend more money through the cultivation process of their flower, which in turn results in them having to sell that product at a higher price.
The grey market, on the other hand, has no quality control or really any regulations whatsoever. This has its own downfalls, of course, as just about anyone with enough room in their house for some plants can grow weed these days. Home-grow laws have really opened up the market to whoever has an enterprising mind and a few bucks for seeds. While the quality of grey market cannabis can be a little dodgy, there are lots of newer growers trying to compete with the emerging craft cannabis market that’s been gaining steam on the legal side. In the years since federal legalization, grey market businesses have had to compete with the many high-quality products from licensed cannabis dispensaries.
The legal market still can’t quite compete on price, but it seems like the grey market is beginning to compete on quality. That doesn’t bode well for the legal dispensaries.
3. Getting a License is, Like, Hard
Especially in Ontario, the woes of the licensing system have been written about at length. The rollout of licenses to applicants has been, at best, chaotic, and at worst it’s been kind of a nightmare.
It’s effectively a lottery system, in the interest of fairness, where candidates don’t get the opportunity to pay their way or fast-track through the application.
As a result, however, there’s a short list of legitimate contenders for a cannabis license buried beneath almost infinite ranks of bottom-barrel businesses.
I’m sure you’ve seen a few of those, yourself- they’re popping up everywhere! The government seems to have sorted through whatever organizational holdups were limiting them from distributing licenses freely, so we’ve seen a sort of spike these past few months of new dispensaries opening. If you take a look at any decent cannabis directory, you’ll see this fact reflected in the sheer amount of pins that represent new businesses appearing on their map. Compared to how it was even a year ago, it feels like the floodgates have finally opened.
That being said, it took a long time for those pathways to open themselves. Grey market cannabis has made a lot of leaps and bounds while legal services were clambering over a license. Even after you get licensed, you still have to order product through the government, so you’re basically condemned to their supply side management. If your only competition comes from other legal entities, then that won’t be a problem, but there are lots of people working in the grey market that know their shit as far as distribution.
4. Licensed Dispensaries Can’t Offer Everything
The products you can purchase at a licensed dispensary vary wildly from province to province. In Quebec, for example, the SQDC doesn’t sell any vaporizers or high-dosage edible products. Most dispensaries have edible products available, but their THC content is restricted by the government. Grey market services can offer far more potent edibles at a similar price point (if not a lower one), and that’s the way the government prefers it. Better safe than sorry, in their eyes. They’re not risking any lawsuits when a customer inevitably takes too much and passes out at a less than ideal time.
As a result, however, legal services can’t really compete when it comes to their edible potency. Playing it safe is probably a good call, especially with all of the new products out there, but it’s keeping them from being able to attract potential customers that need a bit more kick from their cannabis. There are Canadians who have been smoking their entire lives, for whom the legal dosage limit means that they won’t be getting high unless they spend $100 or more on gummies. That’s not cost-effective, either!
5. Legal Cannabis Services Can’t Market Their Product
Neither can grey market services, but they have other ways of marketing their products. Grey market services aren’t hurting for a lack of traditional advertising. The legal industry, however, is.
You would think that after going through the months, if not years, of waiting to obtain a license, you would at least be allowed to advertise your fledgling cannabis company.
That’s largely not the case, however, as legal cannabis dispensaries are still beholden to the same restrictions as the grey market as far as advertising. They’re not allowed to market products using claims of potency, through use of research data, claims about THC content, or through use of customer reviews. That doesn’t leave a lot of room to talk about their weed!
The grey market faces the same restrictions, of course, but they’ve had decades to find ways to market their product. Most of them would say the product sells itself, besides.
Is That It?
I feel as though I’ve made a pretty damn convincing case!
Both sides of the Canadian cannabis industry have room to grow. Both have lots of room to make improvements to their services, not only in the terms discussed above but in a lot of other ways that might improve the quality of life for their respective customer bases.
Honestly, the competition between the two sectors has driven a lot of that change. The legal market has made strides in terms of lowering their prices and allowing deals and discounts to compete with the grey market, while the grey market has seen a rise in product quality across the board as they seek to compete with the high-quality products offered by licensed dispensaries.
With so much room to grow, only time will tell which side comes out on top!