MJBizMag August 2020 - 60

How to Compete With the Illicit Market
Did you try to get a license to grow legally at some point? If not, why not?
KM: I had an investor/partner that went through with the paperwork for a
permit. At one point in 2018, I had an acre of canopy permitted. I sold my
property with the permit that year.
CL: Yes, and it took too much time and money-that's not where I want to
spend either (of those resources).
Do you think the legal market in California is ever going to supplant the
illegal market?
KM: No, not in my lifetime. The regulated California market will supersede
the traditional (unregulated) market, but the traditional market will never
go away completely. There are too many outlaws in California-especially in
Humboldt County, where the best cannabis is grown.
There are plenty of traditional-market folks out there making a good
living on growing and even packaging cannabis. There are too many folks
out there that will never want to pay taxes on their crops.
How do you think things will change for you once cannabis is legalized at
the federal level?
KM: I think the California markets (both illicit and regulated) are a good
indication of how things will look on the federal level. The government will
excessively tax interstate cannabis commerce.
CL: Corporate entities will just get bigger and eat up smaller operators.
What are your biggest business hurdles right now, and how much of a profit
are you generally making on your harvests?
KM: My biggest business hurdle right now is getting fair market value.
Brokers out there want to add their take, and buyers want the lowest price.
I have to hold out on the product sometimes to get the price I need to
cover my costs and make a profit. You run the risk of losing out on a deal
completely by holding out for a higher price-but if all farmers did that, we
could raise the price.
The hard truth is we have bills; we've got to pay the trimmers and get ready
for next season. Sometimes you have to take that lower price.
CL: (The biggest hurdle is) not making any profit. But I am earning a
living wage. We're having to consider moving to indoor growing because
(law enforcement) is now invading our privacy from the sky, and I risk
losing my land.
How easy is it to grow and sell on the illicit market? What are some of the
risks you've faced in doing that?
KM: We still are on the lookout for helicopters; that hasn't changed. People
who want to rob you. Taxes. Honestly, it's hard out here.
CL: I risk my land every year cultivating. My freedom is at risk every time
I drive to make a sale. I don't prefer indoor growing, but I may have to for
economic reasons.
I feel my freedom of working outdoors-in the sun and on the land-slowly
slipping away. It's pretty heartbreaking. I was able to transition from hiding (pre1996)
to being open with what I do (1996-2014), which was pretty validating on
a personal/social level. I am now feeling the pressure to begin hiding again.
These interviews were edited for length and clarity.
58 Marijuana Business Magazine | August 2020
Illicit Dealer:
Legalization Didn't
Change Much
It's difficult to quantify how much cannabis
legalization cuts into the illicit market.
But according to some marijuana dealers,
regulating the industry has done little to lure
longtime buyers away from underground
distribution.
One such individual (an illicit seller in
Boston whom we'll call MG to ensure
anonymity) has been selling cannabis since
before Massachusetts legalized medical
marijuana in 2012. Initially, MG exclusively
sold flower. A few years ago, vape
cartridges were added to the offerings
along with branded edibles products.
Cannabis is not MG's primary business. Still,
he makes " decent " money from marijuana
and hopes to get a cannabis business
license eventually. MG applied for three
licenses under Massachusetts' social equity
program last year but was unsuccessful.
MG said only a small number of his
customers have defected to the legal
market, but most stay because of price
and loyalty. Some illicit dealers have seen
small decreases in business because of
customers getting medical marijuana cards,
but overall, MG believes legalization has
had little to no impact on the illicit market.
Before the coronavirus outbreak, MG was
paying $1,500-$2,000 per pound for midgrade
cannabis; the same product now
costs $2,400-$2,800 per pound. Premium
cannabis currently costs MG $3,800$5,000
per pound, or about $500-$1,000
more than pre-coronavirus prices.
MG typically sells ounces of midgrade
cannabis for $150-$200, while premium
product goes for $300-$400 per ounce.
Wholesale prices for vape cartridges have
gone up in recent months, but not so much
that MG has had to raise his prices (currently
$40 per cartridge). By comparison, most
cartridges from licensed dispensaries in the
Boston metro area cost $55-$65.
MG said two of his associates received
initial approvals for social equity licenses
and are in the licensing pipeline. MG wants
to apply for a cannabis business license
again at some point, but for now, buying
real estate is the focus.
" It's expensive. You need a team of people, "
MG said of applying for a license. " It's not a
walk in the park. "
- Omar Sacirbey

MJBizMag August 2020

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