California: One Year After Cannabis Legalization

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It comes as no surprise that since January 1st of this year, California has seen a significant rise in cannabis sales. Within the state, the current $2.7 billion industry is predicted to nearly double by 2020.

Part of this has to do with the number of people trying to make a buck off the new market. Within the first six months alone, California saw an increase from 1,272 licenses to 6,421. Yet, the more important factor is the evolving perspective of cannabis happening across the country. Just two decades ago, only 31 percent of Americans felt the plant should be legalized. In 2018, that number doubled—making the support for recreational weed at an all-time high.

Businesses are taking note of this new wave of opinion.  Although many are in favor of legal cannabis, not everyone knows how cannabis really works.

The Apothecarium, a San Francisco dispensary, is a prime location for newcomers to discover these answers. As Elliot Dobris, chief marketing officer, informed us they are focusing on chipping away at the stigma through education. “We’re working every day to change people’s impressions of what a dispensary could be,” he says. “We hope others will do the same.”

These efforts are to create a one-on-one service which seeks out exactly what the customer is looking for in their cannabis. Instead of having a display of cannabis and oils, the Apothecarium offers what looks like a restaurant menu which gives as much information about their products as possible. Furthermore, they offer free educational classes to the public about how cannabis can be used for the sake of medicinal purposes.

With that in mind, we can begin to see that the industry isn’t growing simply because there were a bunch of potheads waiting around to legally get high. Rather, there was a market hidden beneath the stereotypes previously attached to marijuana. A market which Dobris says, “we’ve only scratched the surface of.”

A New Market for Cannabis

California: One Year After Legalization

Paul James/ High Times

It’s often forgotten that behind the great counterculture which pushed for cannabis legalization were a number of people suffering from a variety of illnesses and diseases, desperately seeking answers. For many, cannabis offers this answer and more. Inevitably, these are the people who will continue to drive the industry to the $5 billion prediction mentioned above.

Dobris explains that the idea for the Apothecarium came about when the co-founder, Ryan Hudson, walked into a medical dispensary for an illness he hoped to alleviate through cannabis. An older woman in front of him was also seeking relief. The two were in awe about how daunting just the sight of it all was; jars upon jars of grass sided by various smoking accessories.

It was overwhelming, especially because the people behind the counter didn’t know much about what ailments each strain actually helped with. They only knew how stoned it made you. So, seven years ago, the Apothecarium was founded in hopes of changing perspective. And the wave of legalization made that easier. Not only have many people suffering from an array of medical issues opened their eyes to cannabis, but so have those with a sense of curiosity.

“We were one of the first of three dispensaries in San Francisco to open to the public for recreational sales on the first day it was allowed,” says Dobris. “We saw a huge jump in the number of people coming in and the number of sales.”

The Apothecarium has seen a steady rise since that jump.

New Generation, a dispensary in Santa Ana, Orange County, had a similar experience. Justin Shivley, the dispensary’s CEO, said they saw an initial jump in business during January and a couple months after, followed by a steady rise. As with many dispensaries in California, however, income changed when the new lab testing laws went into effect in July.

“In July, when the new regulations set in—with labeling, packaging, distribution—when we were actually allowed to have our own product in-house,” Shivley says, “it really changed dramatically for us and [our business] actually started to regress.”

The regulations which came this past July have hit both businesses and consumers alike. “It really dictated what product we had because it had to be repackaged,” Shively says. “Now, with the repackaging, it took our eighths to $50- $60 and they’re charging us $30. Prior to July, my eighths were $35.”

So, what does this mean for new businesses trying to make a name in this industry?

The good news is Shively sees the industry “going nowhere but up.” Despite the issues we’ve seen since legalization, Shivley sees the positive in it all. “We got to remember when we’re talking about something that comes with regulation, you’re gonna have more exposure as a business. With more exposure, you’re going to have more eyes and more people believing that [cannabis] is okay.”

This goes hand-in-hand with what Dobris told us about the entire purpose of his dispensary: to reach out to a new market– one of which wouldn’t have smoked pot prior to legalization. And like the Apothecarium, New Generation is seeing (and seeking) to continue building out their business to reach a larger market.

It should be noted, however, that both of these company’s determination isn’t defined by the potential payout the legal industry can bring. Rather, it’s about reaching out to those who are uninformed about cannabis and to teach them the true benefits which have been hidden from the public for so long.

This is good news for future generations as they’ll most likely not have to face the same backlash we did for toking up. But, if most companies are aiming toward a market of primarily new canna-consumers, what about those who were smoking long before cannabis was legal?

An Old Market Beneath the Reports

There’s been little discussion about the black market which remains alive within California. Statistics and reports say that everyone in California has shifted to purchasing cannabis through a legal means. But veteran consumers beg to differ, as most believe the legal price isn’t worth it.

As a college student in San Francisco, I can attest to this. The good majority of my weed-toking comrades are, in fact, avoiding dispensaries as none of them want to pay the 15 percent sales tax. To some, this might seem ridiculous. We fought for legal cannabis and now we’re not going to make the best of it? But not everyone feels that way. The cost of living in California is outrageous. When you work your ass off all day every day to hardly scrape by, smoking a fat blunt is sometimes the only way to forget the fact that you have to do it all over again the next day. And when you’re living this kind of life, you’re going to seek out the cheapest supply.

The illicit market is thriving in California to the point that Governor Jerry Brown recently distributed $14 million to “target illegal cannabis activity with an emphasis on complex, large-scale financial and tax evasion investigations.” This problem goes beyond the consumer. Many distributors are, likewise, finding it difficult to make such ridiculous tax payments. As Vice reported, many dispensaries create the allure of a storefront while making illegal sales in the back as a means of “supplementing their income.”

California: One Year After Legalization

Swami Chaitanya and Nikki Lastreto/ Courtesy of Amy Carr

Behind Every Product is a Cultivator

Still, it can’t be forgotten: all this weed has to come from somewhere. We know companies–such as Honey Dew Farms LLC and Central Coast Farmer’s Market Management LLC–have been replicating Big Agriculture’s production format to meet the legal demand. But if the illegal demand is just as high, where the hell is it coming from?

Swami Select, a legendary farm in the Emerald Triangle, is one of Californias prominent suppliers of legal cannabis. However, they’ve seen how legalization is impacting small businesses (read: farmers) and know the black market for cannabis is doing much better than the legal.

“An awful lot of people are having difficulty selling because there just aren’t that many dispensaries out there,” says Swami Chaitanya, founder of Swami Select. “There used to be maybe a thousand dispensaries in LA alone [when California was only medically legal] and now there’s only ten. So, the whole thing is totally topsy-turvy.”

The Grower’s Perspective

Playing into these legal issues is the fact the state has a long list of rules and regulations that must be followed in order to grow and/or sell cannabis. Furthermore, each of California’s 58 counties has their own set of rules and regulations regarding legal marijuana. And 40 of those counties don’t allow cannabis activities at all.

Combined with excessive taxes, it’s easy to see why many growers (especially new timers) are having a difficult time keeping a business afloat. Swami Select is lucky in the sense that they already have an established brand. Thus, no one is complaining about their price, which Chaitanya says is at a premium.

Still, that isn’t to say they haven’t had their own set of legal hurdles to jump through since California flipped to a legal state. In January of this year, there was a huge crash in cannabis production due to two key factors: the demand was through the roof and dispensaries were suddenly required to only sell weed with a permit, which very few growers had.

Swami Select was a victim of this sudden change. Though the farm had plenty of cannabis to supply an eager market, they weren’t allowed to sell any of it until they acquired a permit, which they did in March.

Chaitanya says it’s impossible to convey the depth of complexity in regards to getting a license.  As the months rolled on, dispensaries did eventually get their product back. In July of this year, however, they were hit with another regulation: new labeling and testing requirements. “When July came around, there was nothing on the shelves and dispensaries were supposed to destroy it all.”

California: One Year After Legalization

Courtesy of Jim Olive

So, how did this impact growers? In the traditional market, prior to adult-use legalization, there were tens of thousands of licensed growers. That number dropped significantly to around 3,500 licenses.

The jarring truth is that California’s licensing authorities are making it extremely difficult for businesses and growers to have a chance at the market.

“Everything is more extreme, more harsh, more particular, for cannabis than any other agricultural demand,” says Chaitanya.  “For example, if I have a chicken coop, I can put it three feet from my neighbor’s property. If I’m growing cannabis, I have to be 50 feet from my neighbor’s property.”

As for a more extreme example, some cannabis farms have been denied access to the amount of water necessary to cultivate.

Farmers are now unifying to figure out how to survive the legal industry. One organization, the Mendocino Cannabis Industry Associations, seeks out farms to come together in order to create a community and thriving region of success.

With organizations as such, smaller farms like Swami Select feel less threatened by Big Agriculture attacking the cannabis industry. “We aren’t threatened by the corporate grows because what they’re gonna grow is something totally different than what we offer,” says Nikki Lastreto of Swami Select. “Cannabis has to be organic, but it’s not going to be living in soil outside full of sun, nutrients and all the wonderful conditions we have. The corporate grows are growing [flower] for the masses. Up here in the Emerald Triangle, we grow for the connoisseur.”

A Final Word

California: One Year After Legalization

Courtesy of Sarah Johnson

So, what’s California looking like after its first year of legal weed? The major differences are in both regulations and new perspectives. Businesses and growers are seeing a high-levels of difficulty in terms of keeping up with the legislative adjustments. Yet, new people are opening up to cannabis and accepting it for what it should have always been.

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