We report average maximum and minimum prices for three common types of cannabis packages: one-eighth ounce of dried cannabis flower, 1 ounce of dried cannabis flower and 500-milligram cannabis-oil cartridges. In our first 11 months of data collection , we collected prices from retailers in seven representative counties around California. Next, in November 2017, we collected prices from all retailers in California that listed prices on Weedmaps, while continuing to track prices in the representative counties. After mandatory licensing began in January 2018, we collected three more rounds of prices from all retailers that listed prices on Weedmaps and that had received temporary licenses to operate legally from the Bureau of Cannabis Control, a state regulatory agency. Despite differences in coverage among our rounds of data collection, the data seem to represent a wide swath of cannabis retail prices for retailers that posted prices openly and were part of the legal medicinal or adult-use cannabis segments during a period of unusual change for the cannabis industry.Under California law, medicinal cannabis patients have been able to legally purchase a variety of cannabis products since the Compassionate Use Act of 1996. However,hydroponic rack system state regulation of the industry was minimal for the two decades following the passage of the Act. The legislative process that finally introduced regulation and taxation to the California cannabis market is summarized in Goldstein and Sumner and covered in greater depth in Sumner et al. and UC Agricultural Issues Center .
Here we will review only the major regulatory changes that occurred between 2016 and 2018, when we were collecting price data.Proposition 64, a voter initiative, decriminalized adult use cannabis in November 2016, the month following our first round of price data collection. The proposition — the Adult Use of Marijuana Act — eliminated criminal penalties for possession, by adults 21 and over, of up to 1 ounce of cannabis flower and/or six cannabis plants. Changes to criminal penalties took effect almost immediately, but state regulatory agencies were given until January 1, 2018 to write regulations for licensing, safety and taxation for all legal cannabis. This left a period of about 13 months, from November 2016 to December 2017, during which California’s 20-year-old medicinal cannabis industry was able to continue operating largely as it had before AUMA: permitted but unregulated on the state level, partially and inconsistently regulated at the county and/or municipal levels and mostly untaxed on any level. During this 13-month period, medicinal retailers continued selling cannabis to state residents with up-to-date recommendations from physicians. However, some medicinal cannabis businesses faced unusual local challenges in 2017 as some cities and counties that were opposed to the establishment of an adult-use cannabis industry restricted or banned all cannabis operations from their jurisdictions . On January 1, 2018, all cannabis businesses that had not applied for temporary licenses from state agencies became illegal from the point of view of the state.
The Bureau of Cannabis Control, the California Department of Food and Agriculture, the California Department of Public Health and other state agencies propagated regulations that implemented most parts of a regulatory structure that merged AUMA with previous medicinal cannabis legislation . As of January 1, 2018, licensed distributors were required to pay a 15% state excise tax on all medicinal and adult-use cannabis sold at retail, and licensed growers were expected to pay a cultivation tax of $9.25 per ounce for any cannabis that entered legal market channels in 2018. In some counties and cities, additional local taxes were imposed. All licensees were also required to follow costly new regulations governing security, age verification, handling, labeling, child-proof packaging, inventory storage and “seed-to-sale” tracking — but not yet mandatory testing, one of the costliest elements of the new regulations .On July 1, 2018, the Bureau of Cannabis Control began enforcing regulations for pesticide and contaminant testing. After this date, cannabis could not be sold legally in California unless it had passed a stringent battery of laboratory tests, which added about 5% to the cost of supplying cannabis to the legal retail market . Because not all retailers update their prices immediately with every change in wholesale costs, we expect that testing effects were not fully reflected in our July 2018 data. In addition, some testing requirements were not implemented until Janu ary 1, 2019 .A final regulatory point worth noting is that since the launch of adult-use sales in January 2018, the California cannabis retail environment has drawn little distinction between medicinal and adult-use cannabis, and we do not distinguish between the two in our reporting of retail prices.
There are some differences between the medicinal and adult-use systems: Retailers need separate medicinal cannabis permits to sell medicinal cannabis; the minimum age for purchasing medicinal cannabis is 18 instead of 21; the maximum quantity that may be purchased is 8 ounces instead of 1 ounce; and purchases are exempt from sales tax if the customer has a medicinal recommendation and a county-issued medicinal ID card. However, the cannabis supply for adult-use and medicinal sales is interchangeable. Medicinal and adult-use cannabis are subject to the same testing, labeling and packaging standards. In general, the only substantial cost faced by a medicinal cannabis retailer who enters the adult-use market is an additional license fee. Meanwhile, the potential market for medicinal retailers is severely limited because consumers of medicinal cannabis, if they wish their purchases to be exempt from sales tax, must obtain county identification cards for medicinal cannabis in addition to medical recommendations — at a combined cost of up to $100 per year. With adult-use cannabis now widely available, many consumers who participated in the medicinal market in 2017 chose not to renew their medicinal recommendations in 2018. From an economic perspective, the 2018 California cannabis market is thus more usefully viewed as a single market than as separate adult-use and medicinal markets. The leading source of publicly available data on U.S. cannabis retail prices is Weedmaps, an internet plat form that enables retailers in California and other states to publish and update their price lists, locations and other practical information on a standardized consumer-facing website and app. Weedmaps has operated since 2008. Researchers have used it to study the California cannabis industry since well before the autumn of 2016, when AIC researchers first gathered information from the site. For instance, Freisthler and Gruenewald used Weedmaps listings to study the industrial organization of cannabis retailers in California. Weedmaps listings do not collectively represent the full California retail landscape. We found no reliable estimates of the percentage of California retailers listed on Weedmaps. But because retailers may add or remove listings from Weedmaps for business or marketing reasons other than opening or closing, Weedmaps provides incomplete and constantly changing cover age of California’s retail cannabis market. Bierut et al. ,rolling tables grow another study that uses Weedmaps data, finds that Weedmaps includes about 60% of retailers in Colorado and 40% of retailers in Washington, but does not analyze California retailers on Weedmaps. This uncertainty should be kept in mind when interpreting our data. We began gathering price data from Weedmaps in October 2016. We recorded prices by product type and also collected information on retail sales locations and whether retailers were storefront or delivery-only operations. We collected only the minimum and maxi mum listed price for three of the most common cannabis products.
Many retailers listed a price schedule with just two levels for each product type: entry-level and “top-shelf” prices. Some retailers maintained three to four price levels, but during the first year of data collection, we rarely encountered more than five levels . With or without intermediate prices, we had no access to information about quantities sold and could not construct quantity-weighted average prices. Moreover, cannabis strains and forms of pack aging were often specific to individual retailers, and measures of specific brand or product characteristics were not consistently available on Weedmaps. Considering that not all retailers list prices on Weedmaps, and that some retailers who at some point listed prices on Weedmaps might have removed their listings while continuing to conduct business, we supplemented our data set with prices from Leafly, a competing cannabis portal whose functionality and business model are similar to those of Weedmaps. In particular, we turned to Leafly when Weedmaps price information was not available for retailers whose prices we were already tracking — or, in later rounds of data collection, from retailers that had obtained licenses from the Bureau of Cannabis Control to operate in the regulated 2018 environment. Coverage provided by Weedmaps and Leafly is partly overlapping: Some retailers list prices on both portals whereas others list prices only with one service or the other . To test for bias that might result from the inclusion of Leafly prices as part of our data set, we compared Weedmaps and Leafly average minimum and average maximum prices in a subsample of non-overlapping retailers, controlling for package size, and we found no statistically significant differences between Weedmaps and Leafly average minimum and average maximum prices.All retailers listed prices for one-eighth ounce of packaged flower. Not all retailers listed prices for 1 ounce of packaged flower or 500-milligram oil cartridges. In later rounds of data collection, the share of retailers listing prices for 1 ounce of flower was smaller and the share of retailers listing prices for 500 milligrams of oil was larger. For instance, in October 2016, 90% of the 542 retailers listed prices for 1 ounce of flower and 57% listed prices for 500 milligrams of oil. In August 2017, 91% of retailers still listed prices for 1 ounce of flower and 82% listed prices for 500 milligrams of oil. By July 2018, only 49% listed prices for 1 ounce of flower and 89% listed prices for 500 milligrams of oil. The decrease in prevalence of 1-ounce packages might be associated with the introduction of regulations in January 2018 requiring that all cannabis be pre-packaged and pre-labeled, such that after January 2018, retailers might incur extra inventory risk by pre packaging cannabis in 1-ounce packages. The increase in prevalence of 500-milligram oil packages, on the other hand, might be best explained by the opening and expansion of the adult-use market. Vape pens, which are comparatively easy to use and do not require additional paraphernalia or prior experience with cannabis , may have greater appeal to “cannabis novices” than dried flower. In the interest of space, we do not list individual sample sizes for each price average in each round of data collection.During the first two weeks of October 2016, we collected prices, retailer locations and other information from each of 542 cannabis retailers on Weedmaps in seven counties around California. We chose these counties to serve collectively as a reasonable approximation of the statewide market. We call this initial group of 542 retailers the “seven-county sample.” The seven counties cover a wide range of geographic and economic conditions in California. According to the U.S. Census Bureau , their basic demo graphics as of 2016 were in the aggregate similar to the demographics of California as a whole. The seven counties are shown in table 1. Summary statistics provided in table 1 support the notion that the demographic and economic characteristics of the sample are similar to those of California as a whole. Within the sample, the collective population is 42% Latino, 33% non-Latino white, 16% Asian and 8% black and the percapita income is about $30,600 . Collectively, as of 2016, the seven counties included approximately half of the state’s population. In January 2017, March 2017 and August 2017, we collected three new rounds of prices from the seven county sample. In each of these three rounds, we collected prices from all of the retailers in the original October 2016 group that still listed price data on Weedmaps or Leafly. In order to continue tracking as many of the original 542 retailers as possible, we at tempted to follow businesses that moved to new locations or that temporarily closed and then re-opened. We coded retailers by county, city and phone number. When a retailer’s listing disappeared, we searched for other listings under the same name or phone number.