A brand of marijuana named after one of the world’s most famous stoners has withdrawn from California as state cannabis taxes kill legal operations and allow the black market to thrive.
Garcia Hand Picked, founded by the relatives of Grateful Dead guitarist Jerry Garcia, removed its products and operations from California as state laws coupled with federal taxes have left legitimate producers paying up to 80 percent in taxes.
As companies overcome obstacles to producing and selling marijuana, black market operations and illegal farms have managed to operate without legal barriers and undermine the efforts of legitimate markets.
Garcia Hand Picked’s withdrawal comes as experts have predicted that dozens of marijuana businesses could go bankrupt in California as years of operating at a loss to stay ahead of regulations come to a head.
Grateful Dead guitarist Jerry Garcia smokes a joint. He was a noted weed smoker in his day.
Marijuana sold by Garcia Hand Picked, a brand run by relatives of Jerry Garcia
California legalized the production and sale of cannabis in 2016, but since then the path to profit has been crisscrossed with regulatory red tape.
The required retail licenses can cost up to $100,000 per year to maintain, and businesses are taxed up to 25 percent per retail sale.
Federal laws also prevent businesses from deducting business taxes from federal taxes, leading to exorbitant tax payments across the board.
From 2017 to 2022, California also levied a crop tax billing farmers by the square footage of their farms instead of the actual yield of their produce, allowing big corporate farms to thrive on gutted small growers.
Since cannabis became legal in California, the state has raised at least $4 billion, according to Marijuana Moment.
Garcia Hand Picked pre-rolled joints. The brand recently left California
A Garcia Hand Picked grinder filled with marijuana. The brand is still available outside of California.
Family members of Jerry Garcia started Garcia Hand Picked. The singer died in 1995.
While brands like Garcia Hand Picked have struggled to play by the rules, illegal operations have been able to steal much of the market in California.
Operating without the costs of regulatory fees and taxes, black market marijuana growers and shops have been able to sell their products at a very low price compared to their legal competitors.
In the years after legalization, up to 80 percent of the marijuana sold in California was still purchased from illegal sources, according to Forbes.
Illegal storefronts have operated with near impunity, as the repercussions of getting caught are often no more severe than petty offences.
Sheriff’s Department Narcotics Bureau Lt. Howard Fuchs told the Los Angeles Times that authorities don’t bother prosecuting much if the crimes are limited to selling cannabis.
“There’s this attitude: It’s just cannabis, we’re not going to jail people for it,” he said. ‘Well, you’re just saying to the legal market, ‘Good luck.’
An illegal marijuana shop in Los Angeles. Stores have thrived since marijuana was legalized
Shoppers check out marijuana products at a legal store in California
Jerry Garcia was born and raised in California, and throughout his life became a pivotal cultural figure in normalizing marijuana use. For his family, establishing his cannabis business in California was natural.
“This was a tough decision for them, they love California,” cannabis consultant Andrew DeAngelo told SFGate. They were born and raised here. This is very painful for them, I guarantee it.
DeAngelo said the departure of such a prominent celebrity brand as Garcia Hand Picked was a grim sign of the times in the California market.
“You can’t make money in this market,” he said. “Not only Garcia is leaving, many people are leaving.”
United Cannabis Business Association president Jerred Kiloh made a grim prediction for the future of California’s cannabis market, arguing that years of debt taken on while keeping up with taxes and regulatory fees was coming to a head.
In the years after legalization, up to 80 percent of the marijuana sold in California was still purchased from illegal sources, according to Forbes.
United Cannabis Business Association president Jerred Kiloh made a grim prediction for the future of California’s cannabis market, arguing that years of debt taken on while keeping up with taxes and regulatory fees was coming to a head.
“It’s probably shooting up fast now, because people don’t have dollars left, and there’s no light at the end of the tunnel, and no one is investing,” he said, according to Green Market Report.
The president of San Francisco distributor Grizzly Peak, Matt Yamashita, made a similar prediction in stronger terms, saying, “There’s going to be a mass extinction event here before long.”
‘In the next 12 months, I think half the retailers will be in business. I think 80% of the people in business will be gone. It is unavoidable. The bubble is going to burst,’ he said.
Other markets, such as New York City, face similar barriers to success due to regulation and threats to their market share from black market sellers.
Although fully licensed stores have only just begun to arrive in New York City, countless storefronts have already begun operating and taking advantage of legalization.
Like the illegal operations in California, those storefronts have been able to offer their product at a much cheaper price than normal stores can compete with.
In December, a researcher at cannabis intelligence group New Frontier Data, Amanda Reiman, said that illegal shops were already “grabbing a pretty sizable percentage of the potential market share”, even though no legal shops had ever had the chance. opening.
“When you have dispensaries and distribution systems that largely mimic regulated markets, it can be really difficult to get people to move,” he said, adding that taking out illegal businesses without hard legal recourse was like “whacking a mole.” .
“If one goes down, another one just shows up,” he told CNBC.
New York Mayor Eric Adams has vowed not to let black markets ruin legal trade.
“We will not let the economic opportunities offered by legal cannabis be taken advantage of by unlicensed establishments,” he said last month.
