In a move at allaying concerns that legalized marijuana is too expensive for many consumers -- a situation that allows the black market to thrive -- cannabis company HEXO (NYSE:HEXO) has rolled out a line of relatively low-priced marijuana flower products.
HEXO, a well-known marijuana stock based in Canada, is calling this "value brand" Original Stash. A 1-ounce bag of the flower will retail for 125.70 Canadian dollars ($95.18) including sales tax in HEXO's home province of Quebec, the company said in a press release trumpeting the new products. This price equates to CA$4.49 ($3.40) per gram.
The Original Stash line's first product is called OS.210. It is a hybrid of sativa strains that collectively contain 12% to 18% tetrahydrocannabinol (THC), the substance that gets users high. It was to be made available for purchase on Thursday, and the company is promising that a wider launch throughout Canada will occur "soon after."
In the press release, HEXO emphasized the black-market-busting potential of a fully legal, budget-flower offering.
"Our aim with Original Stash is to disrupt the illicit market, educate consumers about the value of a regulated and tested product, and drive them to purchase their cannabis legally," the company said. "We're now competing directly with the illicit market and providing consumers with an affordable, controlled, quality product."
HEXO cited statistics from government researcher Statistics Canada showing that around 40% of the country's cannabis consumers buy product on the black market. The research indicates that price is a key factor in such decisions, the company said.
HEXO added that off-market product can be difficult to distinguish from aboveboard offerings. "Illegal cannabis websites are well built, allow consumers to purchase online, and products are delivered to their doors," HEXO wrote in the press release. "But we know that illegal cannabis products can -- and often -- contain heavy metals, pesticides, and other contaminants."
In announcing the Original Stash rollout, HEXO made no mention of the U.S. market, which in certain places shares a similar dynamic to Canada. In U.S. states that have legalized recreational marijuana, many consumers complain that excise and other taxes make cannabis products expensive, which in turn encourages black-market purchasing.