The World’s Largest Cannabis Market Doesn’t Have Enough Product To Meet Demand

Written by Neil Juneja, Founder & Managing Partner at Gleam Law, PLLC.

Will California have enough cannabis to keep up with the incredible Adult Use demand?

California voted to legalize the Adult Use of cannabis in the 2016 election with the law taking effect in January 2018. The California recreational pot market is expected to be worth nearly $7 billion by 2025. If this projection comes true, California will be the largest cannabis market in the world bringing in more annual revenue than every other legal marijuana state in the US combined.

For a complete snapshot of just how large the California cannabis market is, check out our previous article on the topic.

Now that Adult Use laws are up and running, demand is soaring. The lucky handful of dispensaries that have been granted a license for Adult Use sales are experiencing lines wrapped around the block and customers are more than willing to suffer the extended wait times to be served. But there’s one problem: lack of supply.

In California, cannabis businesses must obtain both state and local licensing to operate legally. Without a local license, a business cannot obtain a state license. Many cities across the state are still scrambling to grant licenses to marijuana producers, leaving dispensary owners to deal with a kink in the supply chain. Only 1,900 licenses total have been granted in California so far, which is small potatoes when you consider there are at least 15,000 marijuana farms in Humboldt County alone waiting for their chance to become compliant.

Without enough licensed marijuana producers, there will not be enough supply to meet the demand of Adult Use buyers. This is reminiscent of the first few weeks of Nevada’s Adult Use program, in which the state’s Governor declared a State of Emergency over the lack of legal cannabis supply to meet demand. By designating it an official “emergency”, state legislators were given the opportunity to pass emergency rules that would ease the marijuana shortage. California has yet to designate their marijuana shortage an emergency.

Some dispensary owners have expressed concern that the lack of legal supply may lead potential consumers to turn to the black market. In an interview with the LA Times, Lori Ajax, the top cannabis regulator in the state, shared concerns of black market diversion but did not give a path forward for solving the supply chain issues.

If you are a California cannabis business owner and have questions regarding licensing, feel free to contact Gleam Law.

Photo Credit: Mercury News