As pretty much everyone expected last New Year’s Day, 2024 has turned out to be a challenging and in some respects horrendous year for cannabis in California.
The biggest hurdle to a thriving pot market in the state and nationally remains the continued illegality of cannabis at the federal level. With the election of Donald Trump as president and with the Republicans controlling both houses of Congress, it seems likely that this hurdle will remain in place for at least the next few years, though some reforms such as descheduling pot and allowing banks to do business with weed companies might yet come through.
But federal illegality means that California companies can neither export nor import pot, which makes them vulnerable to volatile prices for bud and concentrates.
Retail prices, meanwhile, have to remain high no matter what to cover the continued high costs faced by dispensaries. In particular, they must pay the ruinous taxes imposed by the state—and often also by local governments. Those taxes—15% in the case of the state excise tax—come on top of normal sales taxes. The resulting high prices send potential customers back into the arms of unlicensed pot sellers, resulting in what more than one observer has called a “death spiral” of the legal industry all along the supply chain.
California growers, who have struggled most of the time since they started selling weed legally in 2018, got a tiny bit of relief this year. Several previous growing seasons were harmed by bad weather, wildfires or both, and that didn’t happen this year, which has seen the “best harvest ever,” according to one Humboldt County grower who talked to MJBusinessDaily last month. But that good news comes on top of years of strife, and it’s estimated that only about a quarter of farms growing legal weed in the Emerald Triangle just a few years ago are still operating.
Outdoor growers, however, got a bit of boost from the pesticide scandal that erupted in the summer, when WeedWeek and the Los Angeles Times reported that there were “alarming levels of pesticides in pot products across the state,” despite the state’s supposedly strict testing regime. But that didn’t help indoor growers or anybody else in the legal-weed business, of course. Through 2024, a state industry that saw sales actually fall in each of the previous two years continued to sink, with many companies large and small going out of business, employment shrinking, and the number of separate brands store shelves diving to below one-quarter of their peak.
Much of this is thanks to idiotic business strategies and grotesque profligacy, as in the case of the large, national dispensary chain MedMen, which folded early this year.
But it’s also a result of policy. High taxes are just one issue. Another major one is the California constitution’s “home rule” provision, which allows localities to decide whether to allow cannabis businesses to set up shop. Large swaths of the state are still “pot deserts.” This situation has improved in recent years, but geographically, more than half the state is bereft of legal weed. Michigan, a far smaller state, has 8.7 dispensaries per 100,000 residents. California has just 3.2. Monthly sales per capita shows the problem even more starkly: monthly sales per Michigan resident are at about $23; in California, that figure is just over $9.
Perhaps the most dispiriting fact of all is that the state government doesn’t appear to be willing to take these issues on in any serious way. Several years ago, when the state was running big budget surpluses, there was a lot of optimism that the excise tax could be severely cut, and many bills were proposed. But then came deficits in the wake of the pandemic.
The budget is now supposedly “roughly balanced,” but Gov. Newsom has warned that it will likely go into deficit again with Trump promising to, for example, impose ruinous tariffs on imported goods and deport millions of immigrants, which would hurt governments across the country.
The most likely scenario for at least the coming year, then, is: more layoffs, more business exits, continued high retail prices, and an increasingly thriving illicit market.
