2016 was a banner year at the polls for marijuana. All anybody hears about today is the booming recreational marijuana market and how the fine people of California, Maine, Nevada and Massachusetts decided to end the mayhem and voted to legalize cannabis. It may come as a surprise that medical marijuana (MMJ) consumers outspend recreational (REC) users by a wide margin but it shouldn’t.
Figures provided by New Frontier Data’s Cannabis Industry Annual Report reports that in 2016, recreational purchasers shopped every two weeks and spent just $49 per transaction. Conversely, medical marijuana patients re-up every 10 days and spend $136 during their dispensary visits.
For a medical patient in regulated markets, cannabis is cheaper (i.e. less taxed) and larger quantities can be purchased in a single visit. From a purely economic standpoint, one who consumes a great deal of cannabis while living in a state with regulated medical and recreational markets is foolish to pay the burdensome taxes on REC items that can’t be differentiated from their MMJ counterpart save for the color of the RFID tag that tracks a plant from seed to sale.
In Colorado, recreational marijuana is taxed at multiple levels whereas medical sales are only subject State and local sales taxes. The Marijuana Sales Tax rate of 10 percent and an excise tax of 15 percent that gets included in the price of the product increase the cost of REC cannabis for the entire supply chain and ultimately is passed on to the end consumer. Costs run close to between 25-30 percent higher on the REC market across the board. Adding the C.R.E.A.M mentality of Wu-Tang Financial Services to this volatile brew sends heavy users looking for cheaper access to cannabis found on the medical market.
Severe Pain is a catchall term that allows many otherwise healthy individuals a way to qualify for state medical marijuana programs. A beer bottle accident from college or residual discomfort from botched surgery may be the cause of Severe Pain, but sitting in a shitty chair all day or having to type on a pre-ergonomic keyboard or lifting heavy objects repeatedly may also induce an unremitting state of anguish only made tolerable by near constant cannabis consumption.
Assuming those who suffer from Severe Pain make up the vast majority of medical marijuana sales is a safe bet. They need to consume more cannabis to relieve their ailments as they’re continuously suffering but not suffering enough that they can’t go to a dispensary and to purchase medication at their convenience. Severe Pain accounts for roughly 93 percent of MMJ cardholders in Colorado. They are the perfect patients.
Increased plant counts—which allow patients to grow more plants and access to securing larger quantities of medicine at dispensaries—are easily attainable when receiving a medical recommendation. Gone are the days of 99 plants for every home-grower or backyard blaster but if you’ve give it just a little finesse it is easy to come away from a Red Card appointment with the ability to buy more cannabis than most would deem necessary.
Let’s just say that a desire to have an extended plant count is mentioned during a medical marijuana evaluation. A doctor will ask a few routine questions. That conversation will probably will look like this,
Doctor: How many plants were you thinking?
You: 24 or 36
Doctor: Why do you want/require an extended plant count?
You: I grow my own cannabis and make edibles for myself.
Doctor: OK. That will cost some extra money. FYI.
You: Far out.
And Then What?
Conversations like these routinely occur with larger plant counts being discussed and upsold. The availability of this mechanism permits patient’s purchasing power to increase dramatically where recreational consumers are barred from buying large amounts of cannabis in a single visit to a retail outlet. As limits on REC purchases were set to dissuade diversion of cannabis product to other states via legal purchases, a loophole of this significance may help to explain increased medical marijuana sales.
The grey and black markets still thrive across the country and have been reinvigorated as new products with snazzy packaging and less conspicuous smells continue to flood the suburbs of Minneapolis and Kansas City and Iowa City while garnering brand recognition and consumer allegiance. Earning 2-3 times return on investment from packaged cannabis products like edibles, vape cartridges and concentrates purchased lawfully but distributed illegally is an easy way to make a little dough without much effort. The laws of supply and demand favor this arrangement for the risk averse.
What Does This All Mean?
The Pareto Principal observes that 80 percent of sales come from only 20 percent of consumers. As it is applied to the cannabis industry a trend emerges where huge orders for multiple pounds of cannabis are legally sold with zero regard for final destination or end consumer. Given the financial benefits and incentives built into making purchases on MMJ market, it is irresponsible to not consider why somebody may require 900 grams of individually packaged shatter.
The numbers never not lie but they might not be telling the truth either.