To the Editor:
A fascinating economic paradox is unfolding within Connecticut’s legal cannabis industry. We have witnessed a dramatic 700% expansion in retail dispensaries, yet consumer prices remain among the highest in the nation, and the corresponding growth in state tax revenue has been less robust than anticipated.
This situation presents a compelling case study in market structure and regulatory outcomes. The core issue does not lie with the retail sector, but rather with a foundational bottleneck on the supply side.
When the adult-use market launched, it was supplied by only four incumbent large-scale producers. This ratio of producers to retailers has created a significant structural imbalance. Even as the number of storefronts has climbed to more than seventy, the production capacity has not kept pace, leading to several critical market distortions:
Sustained High Prices: With a limited number of producers, wholesale price competition is virtually nonexistent. Retailers must compete for a finite supply, and the high wholesale costs are passed directly to the consumer. This negates the downward price pressure typically expected from retail expansion.
Capped Market Growth: The total sales volume, and therefore the total potential tax revenue, is ultimately limited by what the small pool of cultivators can produce. Adding more retail outlets cannot solve a fundamental lack of product supply.
This market structure creates powerful incentives for the incumbent producers to protect their dominant position. Any significant delay or barrier to licensing new cultivators, whether through regulatory complexity or lobbying efforts, directly benefits the existing players by preserving the supply shortage that guarantees high prices and secure market share.
For Connecticut to foster a truly competitive and thriving cannabis ecosystem, policy must focus on resolving this supply-side equation. Encouraging a more diverse and robust cultivation landscape is the necessary next step to unlock benefits for consumers, create opportunities for new entrepreneurs, and realize the full economic promise of legalization for the state.
