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.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 pot for growing marijuana 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 Weed maps, an internet platform 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.Weed maps 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 Weed maps listings to study the industrial organization of cannabis retailers in California.Weed maps listings do not collectively represent the full California retail landscape.
We found no reliable estimates of the percentage of California retailers listed on Weed maps.But because retailers may add or remove listings from Weed maps for business or marketing reasons other than opening or closing, Weed maps provides incomplete and constantly changing coverage of California’s retail cannabis market.Bierut et al., another study that uses Weed maps data, finds that Weed maps includes about 60% of retailers in Colorado and 40% of retailers in Washington, but does not analyze California retailers on Weed maps.This uncertainty should be kept in mind when interpreting our data.We began gathering price data from Weed maps 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 maximum 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 packaging were often specific to individual retailers, and measures of specific brand or product characteristics were not consistently available on Weed maps.Considering that not all retailers list prices on Weed maps, and that some retailers who at some point listed prices on Weed maps 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 Weed maps.In particular, we turned to Leafly when Weed maps 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 Weed maps 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 Weed maps and Leafly average minimum and average maximum prices in a sub-sample of non-overlapping retailers, controlling for package size, and we found no statistically significant differences between Weed maps 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 prepackaging 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 Weed maps 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 demographics 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 per capita 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 Weed maps or Leafly.In order to continue tracking as many of the original 542 retailers as possible, we attempted 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, container for growing weed we searched for other listings under the same name or phone number.When we found the same retailer or a branch of the same retail chain elsewhere in the same county, we kept the retailer in the data set.If a retailer disappeared and then reappeared in a later round of data collection, we kept it in the data set.
If a retailer removed its online price list, or moved its only location outside the original seven counties, we removed it from the data set for that data collection round.Between January 2017 and August 2017, we observed significant attrition from the initial group of 542 retailers in the October 2016 seven-county sample.By August 2017, 389 of the original 542 retailers remained in the data set.As shown in tables 2 and 3, average prices for these retailers changed little during this 11-month period.We call this “attrition” because the data collection method was consistent over this time period.In our 2018 rounds of data collection, we impose the additional condition that retailers must be licensed, thus changing the data collection method.Thus, for 2018 data collection rounds, the percentage of retailers dropping out of the data set from the original October 2016 sample of 542 retailers should not be thought of as “attrition.” Some retailers may have removed their online price lists from both Weed maps and Leafly but continued to operate.Attrition from the initial 542 retailers thus should not be interpreted solely as a measure of how many cannabis retailers left the legal cannabis segment.In January 2018, mandatory licensing laws went into effect, thus rendering illegal under state law any cannabis retailer without a temporary license from the Bureau of Cannabis Control.We verified licensing status by cross-referencing all Weed maps and Leafly listings in California with the publicly available lists of temporary licenses granted by the Bureau of Cannabis Control.If both a Weed maps and a Leafly listing were found, we used the Weed maps data and dropped the Leafly data.In computing averages for our last three data collection rounds , we calculated “legally marketed” minimum and maximum price averages at California cannabis retailers that listed prices on Weed maps and that had obtained temporary licenses to sell cannabis in compliance with state regulations at the time of each data collection round.For comparative purposes, we also collected a sample of about 90 unlicensed retailers in 20 counties from Weed maps or Leafly, distributed similarly to the licensed retailers.We chose these retailers from within a set of 20 representative counties, approximately in proportion to the relative populations of those counties.We selected retailers for this “20-county unlicensed sample” arbitrarily from the first page of search results on Weed maps for retailers in each of the 20 counties, but we did not use mathematical randomization to select the counties or the listings we chose within counties.These data may not be fully representative of legal cannabis price ranges for several reasons.First, as discussed above, not all legal retailers use Weed maps or Leafly, and prices may not be representative of all prices.The price data we collected also may not fully represent the range of products in the market, which may have varied in different rounds of data collection.As is suggested by the changing prevalence of 1-ounce flower packages and 500-milligram oil cartridge packages, product assortments may have changed within each of these categories.This problem plagues price data in many different industries, but changes in product assortments and price listings may have been especially rapid in the emerging cannabis market.