Supply and Demand Curves Gettin’ Tight in Cali as Mad Weed Growers Quit the Game

Supply and Demand Curves Gettin’ Tight in Cali as Mad Weed Growers Quit the Game

Yo, check it out, fam. The struggles of California’s cannabis game ain’t no secret. But listen up, ’cause this year we seen a major drop in the legal marijuana market. The California Department of Cannabis Control’s permit stats straight up say that the market shrunk by about 29%.

As of October 24, there was only 9,900 active business licenses in the state. That’s a decrease of 28.5% since July 2022, when we had a solid 12,719 active licenses, ya feel me?

Now let’s break down them numbers, so you can see what’s really goin’ on. During the COVID-19 pandemic, the weed market in Cali was poppin’. Them stay-at-home orders and emergency financial assistance had people puffin’ on that good green. In July 2021, the DCC reported that we had 11,335 active business licenses. And in just one year, that number grew by more than 12%.

But hold up, the cultivation sector took a hit. In July 2021, there was around 7,897 active cultivation permits. That went up to 8,453 within a year, but now it’s back down to 5,727 as of October 24. Shit’s gettin’ real out here for them growers.

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The manufacturers and distributors ain’t spared either. We had 877 cannabis manufacturers in July 2021, which grew to 911 by July 2022. But now we sittin’ at a modest 768 this month. And them distributors? Well, they went from 1,168 in July 2021, to 1,448 in July 2022. But now we at a lowly 1,297.

But wait up, it ain’t all bad news. Some sectors actually seein’ growth despite the decline. The retail, delivery, and microbusiness permit categories still on the come up. But don’t be fooled, the new stores openin’ be compensatin’ for the closure of some OG shops in overpopulated cities.

Look at Liberty Cannabis, for example. They had to shut down their shops in San Francisco and LA. And it ain’t just them, big players like Trulieve Cannabis Corp. and 4Front Ventures Corp. done left the Cali market too. Even smaller companies and brands are droppin’ out. It’s tough out here, ya’ll.

But hold up, the retail storefront permits be holdin’ steady. In July 2021, we had 774 of ’em. By the next year, that number skyrocketed to 1,056. And as of this month, we sittin’ pretty at 1,229, according to the DCC.

Delivery licenses ain’t too shabby either. We had 322 of ’em in July 2021, and that went up to 475 by July 2022. Now we chillin’ around 477. And them microbusiness permits? They includin’ retail operations, and they been growin’ too. Started at 297 in July 2021, hit 376 a year later, and standin’ strong at 402 right now.

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Now let’s talk about them tax struggles. The California cannabis industry in danger of an “extinction event” as these shops tryna stay afloat but can’t pay their bills. Debt been hangin’ over this game for a minute now, with estimates sayin’ the debt burden exceeded $600 million in 2022.

But here’s the kicker, fam. The state done changed up the tax regulations this year, makin’ it even harder for these businesses to survive. Payin’ cannabis excise taxes used to be the distributors’ problem, but now it’s on the retailers. And let me tell you, most of these retailers already strugglin’ to keep up with their finances.

According to the California Department of Tax and Fee Administration, over 13% of retailers, that’s 265 dispensaries, ain’t paid a dime in taxes. And now they facin’ a 50% penalty on what they owe. That’s a huge blow that could straight up kill off these shops, ya heard?

And it might get worse, my peeps. The state agency still got 581 tax returns on their desk, which could include more retailers who can’t pay up.

Michelle Mabugat, a cannabis attorney in LA, sayin’ this debt crisis gonna force a whole lotta shops to close down. She sayin’ this bubble been buildin’, and now it’s about to burst. Just like them cultivators last year.

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Ali Jamalian, owner of Sunset Connect, a cannabis manufacturer in San Francisco, sayin’ he seen shops with bills over $500,000. He think this new tax structure is gonna lead to an “extinction event” for retailers in Cali.

This debt problem ain’t just affectin’ the shops, either. Farmers ain’t gettin’ paid for their weed, distributors dealin’ with non-payment from retailers and blacklisting some shops. Shit even reachin’ the federal level, with the ten largest cannabis companies in the country owin’ over $500 million in unpaid taxes.

It’s a tough time for the Cali cannabis industry, my friends. We seein’ licenses drop and bills go unpaid. The future gonna depend on how we adapt to these challenges and what solutions the powers that be come up with.

So keep your eyes peeled and stay tuned. This game always changin’, and we gotta roll with the punches. Stay lit, fam.

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