How to eliminate the black market in three easy steps (part 1)

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The black market lowers the prices of the pot, it is to be expected. The question is: how far is he willing to go to keep their customers? We say that this is the new Kale?!?

Annabelle Blais

Wednesday, 28 February 2018 11:13

UPDATE
Wednesday, 28 February 2018 11:27

Look at this article

The black market in pot is a dude with a hoody and black robot voice.

Since Justin Trudeau announced that the pot would be legalized, men in black hood with the face blurred and voice hacked have appeared in the media.

It is the voice of the BLACK MARKET. The one who comes to tell us that she is going to retaliate, counter-attack, fighting for survival a brief to do a price war. And for once, all the media agree: the gram already costs cheaper than a year ago, or approximately 6.85$ instead of a 7.50 or 8 $.

The dealers agree to show off anonymously in the media to send the message that the legalization, it does them no fear. Thug the same.

However, it is difficult to ferret out the leaders of drug cartels to discuss their business strategy, performance indicators, MLM (Multi-level Marketing). Ok the last term, I’ve just found on the internets to make it more professional, but you understand the principle.

Then everybody wonders if Justin will truly eliminate the black market by legalizing the pot. Because that’s the goal, right? Right? Parenthesis here to underline that it’s almost weird to talk to Justin without any reference to his outfit indian.

In short, the federal government gives itself 5 years to pick 75% of the market and $ 220 million in taxes. It is, in any case, what he provides in his budget presented yesterday.

The State of Colorado, where cannabis recreational has been legalized since 2014, is estimated to control today 70% of the market. The State of Washington controls about 50% to 65%, but it has had to lower its prices. They realized that$ 30 a gram, it was not exactly competitive (no shit, Serlock!). It is now 8 to$10.

The price, the distribution and quality

It is necessary to take into account several criteria to better understand how the black market can be eliminated. There is the price, the distribution and the quality of the product. First I will talk about the price and I will discuss the distribution and quality in my next posts.

The first response of the black market is to lower prices, nobody is surprised. The question is: how far is he willing to go to keep its customers? We say that this is the new Kale?!?

The black market has the advantage that it does not have to charge taxes. And in Quebec, the prices are among the lowest in the country because the production is important.

I discussed it with Sebastien St-Louis, CEO of Hydropothecary, the largest producer of pot in Quebec approved by Health Canada. He assures me that he does not fear a price war.

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Sebastien St-Louis, CEO Hydropothecary

“Yes the black market will have a margin to lower the price. But it must be remembered that when you’re in the organized crime and you take a risk, you don’t do illegal activities in the aim of making profit margins of 30% to 40%”, he explains.

It’s still a good margin, if you ask me my opinion, but who am I, with my degrees in soft sciences to assess the statistics?

“I produce less than organized crime and I am able to live with a profit margin lower than them,” adds St-Louis. They can lower their price to how much…$ 3 a gram? I have products that are already selling at this price in the medical.”

Already in one year, Hydropthecary has managed to reduce by half the cost to produce a gram. It is past of 1.79 to 0.89 cent, and that is thanks in part to the improvement of their processes of culture, ” he says.

Well, that is the base cost and must be added to the distribution. The producer has just won a contract with the SAQ to provide 22 000 kg of pot, or the 1/5 of its planned production capacity in the December 2018.

He will probably be able to do a wholesale price, but for the moment nobody wants to reveal how much the Company will pay to buy the pot that she will sell to Quebecers.

I can already imagine the reactions of CONTRIBUABES. “WHAT?! My taxes were used to purchase the pot and during this time, the government refuses to pay for a 3rd link to Quebec or our Nordic?” “With all the money that cities will seek with the drug, how it Valerie Plant always increases our taxes?! It goes all in the pink line, I bet?!”

But in short, the idea is that if the black market at a margin of manoeuvre to lower its prices, the licensed producer has a also.

This is the scene the government. He will have to tax it enough to be able to fight more fiercely against the black market and invest in prevention programs.

If they tax too much, and the temptation is always great, it will not seek to share in the black market. A beautiful puzzle. A 3000 pieces with not a lot of different colors, kind.

Still, the power is in the hands of Quebec which determine its price. And as was said by the uncle of Spider-Man before dying lying on the pavement: With great power comes great responsibility. Well said, Uncle Ben. Well said. You did not die in vain.