Price and convenience driving consumers to the illegal cannabis market

Recreational cannabis is legal in Canada and many US states but people are still buying from the illegal cannabis market. A new study indicates that higher prices and inconvenience could be the reason.

Despite the legalisation of cannabis sales in Canada and many US states, an illegal market still exists. A new study in the Journal of Studies on Alcohol and Drugs suggests that higher prices and inconvenience associated with legal sources could be among the barriers that encourage consumers to seek out illegal providers instead.

A goal of recreational cannabis legalisation has been to displace the illegal market, but as people continue to buy from illegal sources finding out the reason why is important and only a few studies to date have examined this potential disconnect.

Researchers at the University of Waterloo in Ontario sought to find the answer by looking at data from the 2019 and 2020 International Cannabis Policy Study, which collected information from cannabis users between the ages of 16 and 65. Participants were asked how much of the cannabis they used in the past 12 months was purchased from legal or authorised sources. Those that purchased from illicit sources were prompted to choose from a list of reasons for purchasing illegal cannabis.

“Legal sources had higher prices” was the number-one answer for respondents in Canada in both years (35.9 per cent in 2019 and 34.6 per cent in 2020), as well as in the U.S. (27.3 per cent in 2019 and 26.7 per cent in 2020). Convenience was high on the list as well, with the percentage of respondents who named these as reasons ranging from 10.6% to 19.8%.

Other possible reasons—such as low quality, the desire to stay anonymous, delivery speed, and loyalty to a dealer—were selected less frequently by respondents as being factors in choosing a purchase option.

“We also observed differences across jurisdictions and changes over time—many reasons decreased in later years, which reflects changes in the number of stores and the price of cannabis in Canada and U.S. states that have legalised adult cannabis use,” says study co-author David Hammond, PhD, professor and university research chair at the University of Waterloo’s School of Public Health Sciences.

Interestingly, COVID-19 restrictions may be behind some of the changes between the 2019 and 2020 survey responses. More than 10% of respondents in both the U.S. and Canada said the pandemic restricted their ability to buy recreational cannabis legally in 2020.

“Cannabis legalisation is one of the most notable substance use policies in several decades,” Hammond says. “Transitioning consumers from illegal to legal retail sources is a primary goal of legalisation.

“Indeed, many of the potential benefits of legalisation—including product standards, revenue for legitimate businesses, reducing burden on the criminal justice system—depend upon shifting consumers to legal cannabis sources. Given the importance of this issue, there is surprisingly little empirical evidence on the factors that determine where consumers source their products in a legal market.”

Hammond and his colleagues write that future research should focus on how perceived barriers to legal markets change as markets evolve.

“As markets mature, the number of stores per capita tends to increase, and inconvenience is expected to become less of a hurdle,” the researchers conclude. “Regulators will need to balance public health and criminal justice priorities in order to establish a competitive market for legal cannabis that encourages legal purchasing.”

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