Street price of pot a risk to stores?

The News TribuneMarch 16, 2014 

— Colorado has freed the weed, but it doesn’t come for free — not even close.

After taxes, one Denver store charged recreational customers $411.81 for an ounce of marijuana last month, more than twice what many patients pay for medical marijuana.

And that’s at one of the largest stores, Medicine Man, that can take advantage of economies of scale and a relatively cheap location on the outskirts of town.

Price is important, and not just for customers trying to keep their bong hits on a budget.

Too-high prices could drive people to the black market, leaving legalization to fail in its stated goal of putting the drug cartels out of business. Too-low prices could encourage people to consume it, and not everyone thinks that is a good thing either.

Denver lawyer and legalization advocate Brian Vicente estimated street prices are around $300 to $400 an ounce, similar to recreational marijuana. On the other hand, the website priceofweed.com, which taps anonymous consumers to “crowdsource the street value of marijuana,” and which Washington state consultants used in their estimations, listed prices lower.

High-quality marijuana in both Colorado and Washington is selling on the street for less than $240 an ounce, the website’s contributors reported this month. (Anyone can post, risking the possibility that some of the prices are inaccurate or describe purchases at dispensaries.)

It’s early yet in Colorado’s experiment to know how drug dealers — the illegal kind — are faring.

“Really what we’re hoping is that we’re going to pull so many of (the drug cartels’) customers away from them that they become a nonentity,” said Elan Nelson, a consultant for Medicine Man. “And we’re seeing that happening, definitely. We’ve got a line every day at 5 o’clock when people get out of work.”

Arrests by Denver police for illegal distribution of marijuana dropped off in 2009 and 2010, around the time Colorado embarked on its experiment with state-licensed medical marijuana. (The drop also came after Denver voters called for making the drug the police’s lowest priority.)

One might expect full legalization to cut further into those numbers.

Time will tell.

In 2013, the first year of legalized possession, arrests for distribution spiked. That continued in the first month and a half after retail stores opened to all adults Jan. 1, with six arrests in that period.

It’s not clear if black-market sales really are increasing, and if so, why. One possibility: Unlike Washington’s Initiative 502, Colorado’s legalization Amendment 64 allows people to grow their own marijuana at home for their personal use. Some people might illegally sell or trade from their personal supply.

State regulators worry about these personal grows, which lie outside their authority and allow for people to grow up to six plants.

“You could supply your whole neighborhood,” complained Rachel O’Bryan, an advocate for stricter regulations.

If prices in retail stores eventually are low enough, they could make black-market sales less appealing.

The recreational prices are sure to drop, just as they have for medical marijuana since the medical dispensaries and producers were licensed, said Nelson, who is also vice chairwoman of a state trade association, the Marijuana Industry Group.

The price of medical marijuana in Colorado fell nearly 30 percent in the last two years, according to ArcView Market Research, owned by a national network of marijuana investors.

Medicine Man was selling marijuana to patients last month for as low as $21.54 per eighth of an ounce, or $32.32 in the case of one popular strain. The same amount sold to recreational users for $56.93.

Medical patients also have the benefit of being able to buy twice as much marijuana at a time. But they must sign up for a state registry, while recreational users can remain largely anonymous.

Stores doing both medical and recreational sales said they are seeing similar numbers of patients as before Jan. 1.

“Recreational has really taken over as the bread and butter of the organization at this moment,” Nelson said. “There is still, and always will be, a market for medicinal marijuana. There are many, many people that this product can benefit, so that’s always going to remain.”

Colorado taxes recreational marijuana at 12.9 percent in sales taxes and 15 percent in excise tax; some local governments add more, such as Denver’s 3.5 percent tax. Medical marijuana is subject to a much smaller state sales tax and no excise tax.

Washington will levy a 25 percent excise tax each time recreational products change hands — at least twice — plus the usual sales taxes that approach 10 percent in parts of the Puget Sound region.

With higher taxes in the Evergreen State, the price might be higher, too.

Then again, Colorado made recreational sellers decide in advance how much pot they needed to convert from their medical marijuana inventory, and some didn’t grab enough. It’s possible that has made early prices artificially high in a way that Washington doesn’t have to worry about.

Another price factor is the amount of competition. Denver already has far more stores than the 21 the state plans to allow in Seattle. Both states are seeing local bans multiply.

Regardless of price, the black market will diminish, said Mason Tvert of Denver, communications director for the pro-legalization Marijuana Policy Project. Customers won’t deal with the hassle of calling friends hoping to negotiate a deal when they can stop by a store on the way home from work, he said.

“People don’t say, those bastards at Coors are overcharging me,” Tvert said, drawing a comparison with beer. “They just say, that’s what it costs. And at this store it costs more than that store, and therefore I prefer store X over store Y.”

Jordan Schrader: 360-786-1826; jordan.schrader@thenewstribune.com

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