bis consumer base, which now includes people with different goals beyond traditional flower use. Not everyone wants to smoke, and many are looking for familiar, approachable formats. This is why edibles are gaining momentum— and fast.

“ That’ s why beverages are currently the fastest-growing segment,” says Urmawm’ s Mariolis-Baker.“ Cannabis drinks are reshaping how people socialize, whether it’ s at a backyard BBQ, bar or wellness retreat. They allow consumers to enjoy cannabis in a format that feels comfortable, like holding a drink at a party. It’ s a gateway to reintroduce or introduce cannabis in a way that feels intuitive and socially accepted.”

As legalization continues to expand, Hanson is seeing more demand for low dose, microdosed products, and edibles that use natural ingredients or cater to specific diets.

“ Consumers are also looking for more fast-acting and effect-based products designed for specific outcomes like sleep, focus or relaxation,” she says.“ People expect more from edibles. Now, they want them to be consistent, tailored to their needs and easy to fit into their lifestyle, much like a wellness supplement.”

“ Consumer preferences have evolved as new products have emerged and consumer preferences evolve in response to the arrival of new products and product categories,” adds Fruit Slabs’ Dorsky.“ The arrival of beverages impacted product distribution within the edibles market, and the arrival of concentrates substantially changed the sales distribution amongst SKUs within the smoking category. This has opened up a portal to new consumers, and beverages have slowly inched their way into being a more significant portion of overall edibles market sales across the last several years.”

After legalizing recreational cannabis in 2016, the state has struggled to deflate the illicit market, and legal businesses are met with the difficulties of competing with their low prices. This situation has led to financial instability, with many businesses struggling or failing to pay their taxes.

Cannabis business owners told LAist they struggle to pay high taxes and fees while they watch illegal operations go unchecked. They say when they’ ve tried to talk to city officials, they’ ve been stonewalled and shut out.

“ The cannabis market in California has been distressed for a while and it’ s not getting any better,” says Oren Bitan, litigation partner at Buchalter.“ It’ s a confluence of a few different things: a proliferation of the illicit market where unlicensed players are in business and not getting shut down, the licensed businesses have to compete and are losing business share, and the prices in California have also plummeted over the last few years.”

A THRIVING ILLICIT CANNABIS MARKET

When prices of any product skyrocket, consumers look to where they can get it the cheapest. In the cannabis market, that means seeking out illegal stores.

Even though the consumers end up getting a discount, this process undercuts legal businesses and erodes their customer base, making it difficult for them to generate the revenue needed to cover their costs, including taxes.

“ There’ s really no penalties for illegal businesses now,” Bitan explains.“ They weren’ t necessarily that severe prior, but the penalties have been almost eliminated since there’ s not enough resources to enforce the law. So, even if regulators find an illegal store, they may get cited and even shut down, but there’ s nothing stopping the owner from opening another store across the street.”

Due to the lack of resources at the state level, these illegal storefronts are falling into the hands of local municipalities, who also don’ t have the resources necessary to handle the situation.

All in all, it’ s a recipe for disaster, and the legal cannabis businesses are the ones suffering. These businesses are being squeezed by high taxes and an inability to compete with the illicit market, leading to widespread tax debt and business failures.

WHAT NEEDS TO BE DONE?

According to Bitan, in order to start weeding out the bad actors in the cannabis market, additional resources and enforcement are needed.

“ If there is more enforcement to the point where the unlicensed market goes away, that will help the licensed market, because then they will be getting a larger share of consumer sales,” he says.“ An unlicensed store can pop up and go away, but a piece of property can’ t move. So, I think the tactic of citing a property owner for an unlicensed business would be an effective strategy.”

Until then, Bitan advises legal cannabis businesses to persevere through these difficult times.

“ There is some level of optimism at the bottom, but things can only get better from here. Hopefully that becomes a reality,” he says. • www. beveragedynamics. com Fall 2025 • Beverage Dynamics 35