It’s a tough go for legal weed growers. Today, the Canadian federal medical cannabis system, or Marijuana for Medical Purposes Regulations (MMPR) is struggling to compete with the unregulated dispensary supply chain.

Despite often lower prices, the tightest quality assurance in the world, and the draw of being able to offer cannabis purchased legally under federal law, the MMPR has been stymied as dispensaries have flourished over the last 18 months.

Some estimates suggest that dispensaries serve around 300,000 Canadians who categorize their cannabis use as medical, while the MMPR only serves around 40,000.

All told, dispensaries allegedly sell over 150 kg of cannabis per day through as-yet unregulated retail storefronts. The MMPR sells less than 40 kg per day through mail order exclusively. Consumers have spoken in word and deed, and today retail cannabis locations are preferred over mail order.

The MMPR is languishing as companies struggle with high expenses and massive inventories. If it is to survive as the legal production mechanism for medical cannabis in this nation, it could benefit by adapting to offering cannabis at the retail level.

The Duffel Bag Supply Chain is Anticompetitive

One problem is that dispensaries are not exactly playing on an even field. They are virtually unregulated, and as such their supply chain is duffel bags full of weed (from sources unknown), and wads of cash.

Make no mistake, the cannabis that is sold by dispensaries today is purchased illegally, and is largely grown in basements and garages. It self-evidently pays black market growers, and it would be hard to disprove that it pays organized crime as well.

Stifling the Infant Industry of Legal Canadian Cannabis

This obviously catches the ire of Licensed Producers, who are obligated to meet stringent regulations for security and quality assurance. They complain that dispensaries cannibalize their business through lack of regulation.

It might not be quite that simple.

If users overwhelmingly prefer storefronts, perhaps this lack of competitiveness is a microcosm of a larger issue: regulators and entrepreneurs need to listen and respond to consumer preference, rather than try to bottleneck it through suboptimal channels.

Mechanisms aside, the current ‘duffel bag supply chain’ of dispensaries certainly inhibits the spread of cannabis produced under federal license. Further, it flows revenues directly to the black market it is designed to disrupt.

Dispensaries are Bad for Business, Especially their Own.

The nature of the duffel bag supply chain hurts dispensaries as well. There are a handful that strive for long term participation in the future of cannabis retail in this nation. They have implemented self-governance, and are begging to be regulated participants in an evolving industry.

These exemplars must look at the opportunists who capitalize on the short-term cash grab of regulatory pandemonium with disgust. The dispensary community is surely stratified, and some are looking to offer products that stand beside the best in the world in the context of quality assurance, testing, and reliability.

Most of all, it hurts the end user. Many justifiably complain of lack of product transparency. Smoking pesticides is dangerous at worst, and unsettling at best. It also begs a question in a dispensary customer’s mind, “who am I paying when I buy this product, and is it organized crime?”