The legalization of marijuana in New York has brought significant changes to the industry, but it has also brought a hefty price tag. A 3.5-gram jar of flower, a popular strain called 91 Octane, costs $60 at a licensed dispensary in Queens, compared to around $40 to $50 from unlicensed shops.
The high price is due in part to the costs of running a legal business. Terp Bros, the dispensary where the jar is sold, has spent over $200,000 on security measures, including cameras and reinforced walls, to meet state requirements. The store also pays a higher tax rate than traditional businesses, with 52% of its income going to federal, state, and local income taxes.
In addition, the dispensary has to pay a higher sales tax on cannabis, 13%, compared to 8.875% on alcohol. The store’s owners, Jeremy Rivera and Alessandro Cottone, have also had to invest in marketing and advertising to attract customers, with prices varying based on quality, availability, demand, and seller discretion.
To stay afloat, Terp Bros sells every product for about twice the wholesale price, a common industry markup to defray the costs of running a legal business. The store’s customers, however, seem willing to pay the premium, with one customer, Mike Flefleh, saying he prefers the security of buying from a licensed dispensary.
Despite the challenges, sales have risen at licensed dispensaries, and regulators have proposed easing bans on discounts and loyalty programs to help attract customers. The state has also expanded licensing beyond the initial pool of people with cannabis convictions and business experience.
As the market continues to evolve, dispensaries like Terp Bros are trying to find ways to lower costs and stay competitive. Rivera, the co-owner, is negotiating discounts with suppliers for large orders and is focused on maintaining a lean operation to stay afloat.
