MJBizMag August 2020 - 58

How to Compete With the Illicit Market
Flouting the Law
M
Scarce and expensive cannabis business licenses
keep underground operators from joining the legal market
By John Schroyer
arijuana growers have
prospered in California for
decades-and, more often
than not, they did so outside the law.
Two illicit cultivators agreed to speak
anonymously with Marijuana Business
Magazine about how they navigated the
legalization of medical marijuana and,
subsequently, adult-use cannabis.
One of those growers, referred to here
as KM, has been cultivating marijuana
outdoors since 1992. At last count, KM
had 2,000 sun-grown plants. " Each year
it gets bigger, " KM said of the operation.
A second grower, CL, has been
cultivating and selling cannabis for
38 years. Currently, CL's farm includes
about 600 outdoor-grown plants.
After the passage of California
Proposition 215 in 1996, the Medical
Marijuana Initiative, CL started selling to
medical marijuana patients.
" We didn't consider ourselves outside
the law, " CL said. " We always had cardcarrying
people who took our product. "
What price were you getting for a
pound of marijuana before legalization
compared to what you got immediately
after? How much has it changed?
KM: A pound of outdoor cannabis in
2000 sold for $3,500-$4,200. A pound in
2010 went for $2,800-$3,300. In 2018, a
pound went down to $800-and that's
AAA outdoor.
Now, (a pound sells for) about $950$1,500.
People seem happy at that range
for outdoor-grown cannabis, the buyers
and the farmers.
CL: I sold my first pound of Humboldt
County cannabis in 1990 for $6,400. I
only had to grow 20-30 plants to make
ends meet. Now, pounds sell for about
$800-$1,100-of which $500-$700 covers
costs, so I've had to grow more.
What does your production look like
now compared to pre-legalization? Has
demand changed?
KM: There's more of a demand for certain
strains. You have to figure out what
the buyers want before they want it and
grow those strains.
At harvest, the buyers have more
power; farmers need to pay their bills,
and the market is flooded with flower.
When it dries out, the farmers have
more power.
CL: Demand is less now-most likely
due to the number of cannabis sources
both inside and outside of California.
Did you ever supply any of the medical
marijuana dispensaries?
KM: I sold to some dispensaries in
Los Angeles. A few of them went to the
regulated market but didn't make it.
Some unregulated liquor stores in
New York, too, but they're not my
customers anymore.
CL: Not that I know of. I always go
through a middleman, so honestly, I
don't know where it went.
What do you provide that the state-legal
market cannot?
KM: Tax-free cannabis! Getting the
product straight from the farmer.
56 Marijuana Business Magazine | August 2020
CL: Better quality, new strains and
cheaper. Plus, the satisfaction of supporting
family operations, not conglomerates.
What does the legal market provide that
you can't compete with because of a lack
of investment and capital resources?
KM: Safety from jail and a bank account.
Mass production. There are definitely
still investors out there for the traditional
(illicit) market grows.
CL: A storefront and marketing.
Why are you growing and selling your
product in the illicit market instead of the
legal one?
CL: This market provides a better price
to farmers (because of the lack of taxes
and other regulatory costs). The logistics
are easier; I don't have to separate my
operations or hire other people to
transport and do data entry/reporting).
I want to continue helping others who
are not in the system-many can't comply
even if they want to.
MJBizMag August 2020

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