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1. Drug Lords
Capacity expansion is in overdrive, and that’s not necessarily a good thing.
These are exciting times for marijuana stock investors. For the first time in history, a developed country stands on the verge of legalizing recreational marijuana. By this coming summer, in either August or September, it appears likely that adults aged 18 and over in Canada will be able to legally purchase cannabis from licensed dispensaries. In doing so, Canada will be opening the door to an additional $5 billion in annual sales, if not more.
The table is clearly set for Canada to succeed. Medical marijuana has been legal in our neighbor to the north since 2001, with Health Canada overseeing the licensing process ever since. In addition to already having key infrastructure in place, the federal government has worked out a two-year tax-sharing agreement with all but one province, paving the way for an orderly launch of recreational weed sales within the next couple of months.
But while these are exciting times for green-rush investors, they’re also somewhat worrisome. In the wake of an expected recreational legalization, pot stock valuations have headed into the stratosphere. While this has made money for investors, and allowed cannabis companies to raise capital via bought-deal offerings, it’s also led to the growing possibility of a supply glut.
You see, no one has any real clue what demand might look like once Canada gives the green light on adult-use sales. Various government- and province-based reports, along with estimates from Wall Street, have estimated that annual demand could come in around 800,000 kilograms, with perhaps slow but steady growth from there. However, based on fully funded capacity from some of the largest Canadian weed growers, a domestic glut looks increasingly likely.
Just over a month ago, I contended that Canada was headed toward “an epic glut of marijuana.” Since then, those oversupply concerns have only worsened due to ongoing capacity expansion activity. Here’s a brief look at what the six largest growers could now bring to the table annually.
Mind you, this doesn’t include players like Cronos Group, Supreme Cannabis Company, Sunniva, and Emerald Health Therapeutics (NASDAQOTH:EMHTF). The former three might produce between 30,000 and 50,000 kilograms annually, while Emerald Health has the capacity to eventually push north of 100,000 kilograms.
The biggest changes are seen at the top, with Canopy Growth and Aurora Cannabis pushing production ever higher.
Earlier this week, Aurora Cannabis announced that it was acquiring 71 acres of land in Medicine Hat, Alberta, to build the “Aurora Sun” facility. This high-technology hybrid greenhouse should be capable of growing 150,000 kilograms of dried cannabis a year over its 1.2 million-square-foot facility. There will be 850,000 square feet devoted to flowering space, which is larger than its previous flagship project, Aurora Sky. Management anticipates the first planting will commence in the first half of 2019, with completion of the facility in the second half of next year. In short, the 240,000 to 270,000 kilograms Aurora Cannabis guided to just two months ago is now around 430,000 kilograms in fully funded capacity.
Then we have Canopy Growth Corp., which announced on April 13 that BC Tweed, its majority-owned subsidiary, had received growing licenses for two of its British Columbia greenhouses. In total, it now has 2.4 million square feet of licensed grow space, and is on its way to an estimated 5.6 million square feet of capacity. Despite being tightlipped about its annual production capacity, 400,000 to 500,000 kilograms seems reasonable based on its fully funded growing space.
There’s nearly 1.5 million kilograms of annual capacity alone between the top six growers. Once the mid-tier players are added in, along with the dozens of other licensed producers in Canada, we could see annual production hit 2 million to 2.2 million kilograms per year by 2020 or 2021. That would translate into 1.2 million to 1.4 million kilograms in annual oversupply.
The good news is that exporting this oversupply to foreign markets that’ve legalized medical cannabis could abate some or all of this purported marijuana glut. But things could still get worse.
The fact of the matter remains that a number of cannabis growers are just sitting on owned acreage and waiting to pull the trigger on further capacity expansion. Given Aurora Cannabis’ latest move to acquire 71 acres in Alberta, this could be the tipping point that pushes other large and mid-tier players to expand as well.
As an example, MedReleaf recently acquired 164 acres of land in Ontario, 69 acres of which contain the Exeter facility, which it plans to retrofit to grow cannabis. Already with 1 million square feet of capacity from Exeter, MedReleaf has suggested that the adjacent 95 acres could house a 1.5 million-square-foot facility. With “only” 140,000 kilograms in fully funded production, MedReleaf may have little choice but to push forward with this additional facility.
A similar story is seen from Emerald Health Therapeutics. It has a 50-50 strategic partnership with Village Farms International (known as Pure Sunfarms) covering a 1.1 million-square-foot facility being retrofitted for cannabis production, as well as 1 million square feet in wholly owned capacity that’ll also house its headquarters in Richmond, B.C. However, the Pure Sunfarms partnership is also sitting on 3.7 million square feet of land that could be further used for capacity expansion.
Make no mistake about it: This glut could get even worse. And if it does, cannabis prices may suffer, along with margins. This is a major worry that investors absolutely must be aware of if they’re going to put their money to work in marijuana stocks.
Hewlett-Packard, a computer industry pioneer, is cashing in on the marijuana “green rush.”
In a first for the fledgling marijuana industry, HP will start providing registers preinstalled with software made for marijuana businesses.
The $35 billion enterprise company, which sells and installs complex tech products for other companies, is partnering with the marijuana startup Flowhub on the first-of-its-kind retail offering. HP will manufacture the hardware, while Flowhub will handle the software side and sell the machines.
These new registers are designed for marijuana dispensaries, and their software aims to help licensed business owners track sales and inventory, create reports, and comply with state regulatory agencies by sending reports to them automatically.
There was a time not too long ago when a person using medical marijuana could buy their legal cannabis with only cash, as federal law prohibits banks and credit unions from taking money for marijuana. Even when dispensaries started accepting debit and credit cards, some people still paid with cash or refused receipts because they didn’t want to create a paper trail.
But times are changing. Nine states and Washington, DC, have legalized marijuana, and more than one in five Americans now live where they can legally use the drug recreationally. Legal marijuana sales hit $9.7 billion last year, a 33% increase over 2016.
As legal marijuana becomes increasingly prevalent and the stigma against the drug decreases, tech companies have set out to solve one of the biggest problems facing the industry: compliance.
The marijuana industry opens up a new revenue stream for the PC giant.
Kyle Sherman, who founded Flowhub in Denver the year after legal marijuana sales began, said HP approached his company about working together last year.
“They read about us,” Sherman told Business Insider. “Obviously, we knew about them.”
In December, Flowhub welcomed representatives from HP’s retail solutions department to Denver for a tour of some large-scale marijuana dispensaries. Sherman said that the experience showed HP employees how regulated and “really legit” the marijuana industry had become.
Earlier this year, HP started manufacturing the hardware for these point-of-sale systems. Flowhub installs its software and sells the machines to marijuana business owners. A few of HP’s systems have been in beta testing at select dispensaries since the start of the year.
Aaron Weiss, HP’s vice president and general manager for retail solutions, said in a statement: “HP is delighted to be a key part of the solution in this exciting new regulated industry.”
The machine is metal and built to last, according to Sherman. His hope is that the system could someday replace iPads and computers that some marijuana businesses use as registers.
While iPads and computers might be cheaper than some point-of-sale systems, “you’re getting a device that’s going to break after six months or a year,” Sherman said.
“These machines are doing a big job — an important job — so you want quality,” he added.
Founded in 2015, Flowhub makes software for marijuana growers and sellers that allows them to monitor marijuana from “seed to sale.” It collects and crunches data to ensure every leafy bud and marijuana product is handled in compliance with state law and federal guidelines.
In practical terms, Flowhub helps marijuana businesses show the government that products aren’t coming in from illegal cultivation sites or disappearing into the black market.
During a typical transaction at a dispensary that uses Flowhub’s software, customers order with an employee and pay using cash, credit, or debit at the register. The point-of-sale system logs the transaction and tracks what inventory comes in and leaves the store.
If there’s a discrepancy between the recorded inventory and what’s actually in the store — known as shrinkage — a business owner can search the seed-to-sale platform to figure out a product’s last known position in the supply chain and which employees handled it.
Flowhub creates a sort of audit trail for all the product managed — something a business owner can provide if authorities seek proof of compliance.
When business owners sync their registers to the cloud, the Flowhub platform sends sales reports automatically to Metrc, a database company that works with government agencies that regulate legalized marijuana.
Flowhub serves marijuana businesses in Colorado, Oregon, Alaska, California, Michigan, Maryland, Massachusetts, and Nevada, which all use Metrc.
Flowhub says it processes over 1 million transactions every month. With help from California’s recreational marijuana market, Flowhub projects that its revenue will top $5 million this year.
HP is the first major tech company to produce hardware for the marijuana industry, and it joins another computer industry pioneer in tapping into the “green rush.”
In June 2016, Microsoft said it would start making seed-to-sale software from the marijuana startup Kind Financial available through a cloud-based software suite that it distributes to state, county, and municipal governments.
Kind’s software helps regulatory agencies keep tabs on sales and commerce and gives entrepreneurs the comfort that comes with compliance.
David Dinenberg, the founder and CEO of Kind, told Business Insider that it wasn’t easy persuading Microsoft, a 43-year-old company, to foray into marijuana.
Kind appealed to Microsoft because it doesn’t “touch the plant” or have direct ties to growing or selling marijuana, Dinenberg said. There’s less risk involved for companies that provide ancillary products and services, even when the customer ends up using marijuana.
“At the end of the day, we are a technology company that provides services,” Dinenberg said. “We happen to cater to the marijuana industry, but we don’t grow marijuana.”
The same thinking applies to HP’s deal with Flowhub. Though the hulking enterprise company is getting involved with the marijuana industry in a tangential way, it still marks a major milestone for the technology and marijuana industries.
What would you do-o-o for a Klondike Bar?” sings the commercial, a nod to the epic discovery of gold in the Yukon in 1896. In the ensuing gold rush, after news of the Klondike’s riches reached the outside world, tens of thousands of would-be gold-diggers giddy’d up and headed for Canada’s north.
News of Justin Trudeau’s election win in 2015 on the back of his campaign promise for recreational cannabis legalization inspired the same starry-eyed fever in Canadian entrepreneurs. For those swapping traversing vast planes on horseback for navigating rigid government regulations, one thing is sure: Green is certainly the new gold.
As Canada flings itself towards cannabis legalization later this year, Nova Scotia growers and producers—late bloomers they may be—are trying their best to bulldoze through the bureaucracy. Thirty Nova Scotia companies have spent some part of the last five years in licensing limbo. With 2,000-page applications, a federal regulator wielding god-like power, the looming presence of money—lots and lots of money—and no map to guide them, it’s a miracle half are still standing.
Back in 2001, the year Canada legalized medical cannabis, Andrew Robinson enrolled in one of the first cannabis agriculture programs in the country at Dalhousie’s Agricultural Campus in Truro. He thought he was too late, that the federal government would permit recreational pot hot on the heels of allowing medical, and commercialization would take off before he graduated.
Luckily for Robinson, now president and master grower of Robinson’s Cannabis in Kentville, rec legalization is taking its sweet time. Canada didn’t have any medical cannabis licensed producers (LPs) until 2013; Nova Scotia’s first license wasn’t issued until November of 2017; and with the original goal of July 1 becoming politically unfeasible, there’s still no official date for national recreational legalization.
According to Health Canada, as of April 5, Nova Scotia has three LPs—a measly three percent of the national total. (Newfoundland and Labrador, and Nunavut, Yukon and the Northwest Territories, are Canada’s only jurisdictions with none.) Robinson’s Cannabis is one of Nova Scotia’s 13 would-be producers stuck in licensing limbo, and a similar number of NS applications have been rejected.
The province’s slow start is surprising if you consider the fact that Nova Scotia has the nation’s highest per capita consumption of cannabis, according to StatsCan. It’s less surprising if you consider that fro-yo took off in Nova Scotia about five years after every other province in the country, and there’s still no Uber.
In Canada’s easygoing Ocean Playground, the government is often hesitant to dive into new things. Myrna Gillis, CEO of Aqualitas, Nova Scotia’s third LP, says the province’s attitude is similar to the way she likes to introduce new cannabis consumers to the product: “Low and slow to start, and it will evolve.”
“The way I look at it is that this is incremental,” Gillis says. “The desire is to take a slow and cautious beginning, and that’s fine.”
But just across the border, Nova Scotia’s provincial frenemy is moving quickly. New Brunswick has planned a fund to support cannabis research and the development, is getting into the recreational pot retail market with 20 “stand-alone” shops separate from existing liquor stores and, in 2016, invested $4 million in Zenabis’ weed growing facility, which received its license last year.
To Andrew Robinson, these initiatives are “fantastic,” and leave him all the more “puzzled” by the Nova Scotia government’s hesitation to join the green rush. “I really don’t understand why they are so in the dark, so behind the times,” he says. “They are just so stubborn.”
It’s hard to know what the market for weed will look like on legalization day, whenever it arrives. (The most-repeated refrain coming out of Ottawa has changed from “by July” to “before October.”) But Robinson thinks Nova Scotia, with only nine retail stores planned so far, has vastly underestimated demand.“In the United States after legalization there were lineups down the road—and they had stores on every block,” he says.
The provincial government hopes that online sales—akin to the way patients buy cannabis in the tightly regulated medical cannabis market—will make up for any lack of stores, while it waits for the smoke to clear before making further infrastructure plans.
Meanwhile, the small team of Nova Scotia Liquor Corporation staff assigned to the cannabis file appears to be doing the best they can with what they have to get ready for legalization. In January, they reached out to growers in the province and across Canada, and have 35 producers—licensed or in processing—interested in selling pot in Nova Scotia.
“We are enjoying a very collaborative relationship with licensed producers,” says the NSLC’s Beverly Ware, “highlighted by open and transparent dialogue on both sides.”
With only three LPs, all of whom are still waiting for their retail license, there’s not going to be much—if any—local bud on NSLC shelves, though Bill Stanford of Breathing Green Solutions, the first producer in the province to get its production license, is confident his company will be ready. “We’ll beat the recreational date,” he says. “I’m not worried about that.”
As the Cannabis Act, Bill C-45, makes its way through the gauntlet of politicians debating and deciding and then deciding differently, Health Canada has emerged as the department responsible for pot production. The department’s almighty power has given plenty of producers reason to worry, but not enough to stop the willing from giving it their best shot.
Of the 1,861 applications for a cannabis production license Health Canada had received by February 1, half of the best-shots weren’t enough to make it past the first checkpoint. Of those that made it into the queue, 38 percent were subsequently either refused or withdrawn.
In a nationwide experiment of the blind leading the blind, growers are surrendering the power, holding on tight and hoping to make it through to the other side. Crossing their fingers, hoping to find the gold of pot at the end of the rainbow.
“Unlike many other businesses where you control your own destiny in terms of how quickly you can get things done,” says Breathing Green’s Stanford, “you don’t control your own destiny in this case.”
As the pressure mounts to get ready for recreational legalization this summer, Health Canada has been—as you do when you’ve never
done something before and there’s great urgency to perform—winging it.
Producers are trying their best to keep on top of the fast-developing rules and regulations, and the regulator keeps trying to meet them in the middle. “Just when you think you’re getting everything finalized, things change and you have to keep constantly improving,” says Andrew Robinson.
Robinson’s Cannabis is just one of 476 Canadian growers wading through this licensing layaway. It’s just recently received a “confirmation of readiness notice” giving clearance and the go-ahead to build its facility. A Health Canada inspector will come do security checks, and if everything is perfect, give the cultivation license.
This is a new step, part of the fluctuating rulebook balancing due diligence and demand. “They used to not give the cultivation licence until the first inspection, but now because of so many companies and so few inspectors, they’re giving the cultivation licences in advance,” says Robinson.
The regulator’s list of requirements is incredible. The 2,000-page application tomes require details on security clearances for anyone who will be in a room alone with cannabis plants, intricate explanations about planned cultivation method and notices to local government, police and fire authorities, to name a few. And that’s just step one.
Once a producer is licensed to grow, it has to do two separate “crop runs” and have its product inspected by Health Canada before it’s granted a license to sell.
Breathing Green Solutions’ official application was submitted to Health Canada in 2015, but to save time the company gambled and built the facility before approval. The risk paid off and Stanford credits the completed high-end facility with helping Breathing Green move up in the licensing queue.
“Inside the building you see this incredibly pristine environment with more doors than you’d ever need,” says Stanford. “If you go inside the growing rooms with the lights turned on you’d think you were in a huge sun-tanning bed.” The growing rooms have 1,000 plants getting their glow on right now, and will have up to 1,500 at full capacity.
Aqualitas started the application process in March of 2015, and also “caught up very quickly,” says Myrna Gillis. Meticulous work and passion has carried her team this far. “There’s no one piece,” she says, “but the symphony of pieces that came together that made it work.”
Aqualitas had a robust team of academic experts from Dalhousie and Acadia universities working with its subsidiary Finleaf Technologies, Inc. to ensure its fascinating aquaponics technology—a growing system that teams up large koi fish with plants, so the fish and the cannabis essentially feed each other in a mutually beneficial cycle—was first class.
Like Gillis, Stanford also credits Breathing Green’s star-studded team with helping navigate the process. That team includes a former RCMP SWAT team leader heading security, an ex-Health Canada quality assurance person, a PhD as the chief science officer, a pharmacist and an experienced family doctor.
Both Breathing Green and Aqualitas are waiting on their retail license in order to sell their product. Gillis says this final step can take anywhere from six to 12 months.
Anybody who’s in the game at this stage got there with a lot of patience, attention to detail and the final green ingredient: Money. No Nova Scotia producer has yet to earn a dime on cannabis sales—medicinal or recreational—but the promise of gold at the end of the rainbow is proving to be promise enough.
Investors hungry for a slice of the pot-pie have made for a bit of a “wonky” market says Stanford. Andrew Robinson says they call it “the pot stock munchies.” Statistics Canada estimates the Canadian cannabis market was worth $6.2 billion in 2015, when medical patients were the only legal consumers. Deloitte released a study at the end of 2017 saying the market with legal recreational users could be worth $22.6 billion. Valuations are rising as legalization nears, and companies that have yet to earn a buck can be worth a billion dollars on paper.
“It’s kind of like the Wild West,” says Stanford.
For Nova Scotia’s companies already out of the gate, they’ve even had to turn people away.
“We actually do have people just sitting on the sideline with a million dollars waiting to invest,” says Robinson.
It seems unbelievable that companies would be turning away people waving million-dollar bills, but private companies are limited in the way they can receive investment, and many of those that already met their goals are waiting out the process before taking any more cash.
Part of Nova Scotia’s slow start in the industry comes down to lack of access to capital. Private companies can raise money three ways: Investment from friends and family, investment from accredited or “angel” investors and the little-known investment by offering memorandum.
Angel investors are people with a lot of money. (They either make over $200,000 a year or have $1 million in ‘liquid assets’ that aren’t property.) Angels who have money get to give money where they know they’ll definitely make even more money.
Aqualitas is one of only two cannabis companies in Canada that raised funds through an offering memorandum. It allowed investors to come from diverse backgrounds, and avoid what Gillis calls “a perpetuation of wealth.” By allowing people to invest as little as $10,000, Gillis says the money raising is more “organic,” just like Aqualitas’ plants.
From Nova Scotia, it’s easy to look to New Brunswick’s shining example and wonder if producers, and their investors, would be better off moving out of province. Robinson says that if Nova Scotia’s government supported the cannabis industry like New Brunswick does, “it would be a game changer.”
But true to form, producers concede to Nova Scotia’s final sticking point on progress: Stubborn Nova Scotian pride.
The majority of Breathing Green Solutions’ 80 friend and family investors are Maritimers. Gillis says Aqualitas “wanted regular Nova Scotians to invest in our company if they wanted.” Asked if New Brunswick would have been a better bet, Robinson answers: “I’m from Nova Scotia, I really love it here. But I’ll tell you one thing, my investor sure thinks so.”
Beyond the immediate rush to get laws and a retail pot system in place, Gillis, Stanford and Robinson are excited for what the cannabis industry will look like in a couple years. From oils to edibles, hybrids and “craft grows,” they’re taking inspiration from the province’s booming wine, beer, cider and spirit industries. They’re confident it will be worth the wait in green, and maybe even gold.
To read more visit: https://www.thecoast.ca/halifax/green-is-the-new-gold/Content?oid=13955329
With the Golden State’s temporary canna-business licenses set to expire at the end of the month, high taxes and limited local access have created a slow transition out of the black market.
It’s only been four months since California opened its doors to what is expected to be the world’s largest legal adult-use cannabis market, but the transition hasn’t been seamless. Despite many predicting that the state will see upwards of $4 billion in legal sales by the end of 2018, new research suggests that the start to this new, verdant era is moving slower than expected.
According to the Sacramento Bee, Colorado-based marijuana data crunchers at BDS Analytics have dug through California’s first two months of adult-use weed sales and found that business wasn’t quite as booming as industry insiders had predicted before January’s retail cannabis kick-off.
With around $339 million in total cannabis product sales in January and February combined, the Golden State is 13% behind BDS’ originally estimated $383 sales total. To understand why the marijuana market hasn’t swelled as quickly as many assumed, we have to consider a number of factors.
Beginning on New Year’s Day and continuing through April, California pot consumers have complained about the state-approved industry’s hefty state and local tax rates. Compounding those pricing issues with recent reports of a still-thriving black market, as well as huge swaths of legal weed access deserts, the semi-underwhelming start to retail sales begins making a little more sense.
“Medical marijuana killed the black market. This is bringing it back,” an anonymous customer told reporters from Marijuana Business Daily on January 1st after leaving a Bay Area dispensary with a $13 gram of hash that he said cost only $10 before recreational taxes. “I almost didn’t even buy this,” the customer said.
Those sentiments were reiterated by Kristi Knoblich, the board president of the California Cannabis Industry Association. “Sales are happening but they’re not happening in the regulated market,” Knoblich told the Sacramento Bee this week.
But before potential ganjapreneurs and legal weed investors pull their funds from California’s green rush, BDS analysts were quick to hedge their dark cloud predictions, suggesting that warm weather months and continued licensing could right the ship before the fiscal year is out.
“I’m not overly concerned at this point,” Greg Shoenfeld, vice president for operations at BDS, explained to the Bee.
And in some parts of the state, like San Diego, observers are still confident about the success of the nascent market. Plus, with only 600 or so licensed cannabis operators serving nearly 40 million California residents, it’s expected that increased access to legal weed will spread throughout the Golden State as regulators continue granting permits. Next month, the California Bureau of Cannabis Control will begin handing out permanent canna-business licenses, ending four months of limited temporary permitting.
By the end of the current fiscal year, BDS Analytics still expects California’s legal weed businesses to rake in over $1.15 billion in total sales. Not too shabby, Cali.
Cannabis growers are swooping in to buy warehouse space in Lompoc. “I get multiple calls a week,” said realtor Tom Davidson. He recently brokered the sale of an 18,000-square-foot warehouse for $1.5 million. A 50,000-square-foot building recently sold for $3.1 million. Another is in escrow and is expected to close next week. Several other warehouses are on the market. “It’s probably the hottest thing that happened for Lompoc since the Space Shuttle,” said City Councilmember Jim Mosby.
The Lompoc City Council adopted a cannabis ordinance considered favorable to the industry: There is no limit on the number of retail storefronts allowed within city limits. Amsterdam-like lounges, rare in California, are permitted. And councilmembers recently sweetened the deal by refraining from levying city taxes on cannabis businesses. Joe Garcia, president of the Lompoc Valley Cannabis Coalition, estimated that as many as 500 new jobs will be created in Lompoc. But there is a finite number of properties where growing or extracting operations can take place. “If there are 100 people who want to go there, there are not 100 different locations,” Davidson said of warehouse space in the city of 42,000 people.
While Lompoc has a tradition of conservative values, a majority of councilmembers has a libertarian attitude toward cannabis. In contrast, nearby Santa Maria banned all cannabis businesses. Davidson estimated that more than $20 million in agriculture properties sold last year went to cannabis growers west of Highway 101. Though that is not in the city limits, they are going to need a place to sell the product.
To read more visit: https://www.independent.com/news/2018/apr/05/green-rush-comes-lompoc/
Less than 24 hours after the Cannabis Control Commission activated its licensing portal on Monday, more than 200 hopefuls have begun their applications for recreational marijuana businesses.
It’s the first major step toward the opening of the first adult-use cannabis retail stores on July 1.
Shawn Collins, executive director of the commission, told commissioners Tuesday morning that 218 applications were started, and that the new online system was working well.
“There were no blips. There was no stress. So we are very confident that as folks continue to interact with our system, it will perform as expected,” Collins said.
The commission is rolling out licensing in a tiered format, with active and provisional registered medical dispensaries (RMDs) as well as so-called “economic empowerment” applications, from businesses located in mostly minority communities disproportionately affected by the war on drugs, allowed to apply first. Other applicants will be able to apply throughout the spring, with the entire licensing process open by June 1.
Of the 218 applications that were submitted, 129 were economic empowerment applicants, and 89 came from existing and provisional RMDs. Twenty-eight of the 218 applications were withdrawn.
Collins speculated those 28 applications were from curious individuals who wanted to have a first-hand look at the new licensing portal, and he even confessed one of the withdrawn applications was his, as he wanted to make sure the system works. Twenty-two applications are now complete and are awaiting commission action which should come in the next few weeks.
Commission Chair Steven Hoffman said he is generally pleased with the initial rollout.
“We were trying hard not to set expectations,” Hoffman said after the commission’s weekly meeting. “I thought it was a good number, but I did not have a specific number in mind. I’m just happy that it’s substantial, and the system has performed as expected.”
Applicants seem pleased as well with the portal and its unveiling.
“Our members thought that the portal was accessible, open and transparent,” said David Torrisi, executive director of Commonwealth Dispensary Association, which represents several RMDs, many of which are planning to co-locate a retail dispensary when adult-use sales are allowed.
“They felt that it was a pretty smooth process to get through,” Torrisi added, “and I think the commission has done a great job in getting this all up and running in such a short period of time.”
In other business, the commission set in motion procedures that will eventually place their permanent state headquarters in Worcester, with a satellite office in Boston.
Since late last year, the commission has been operating out of temporary quarters in a high rise office building in Boston’s financial district.
“This is a statewide agency,” said Collins. “It’s important that we operate around the state and are expected to be around the state, and having a location really in the central part of the state will allow us to get to every corner of the Commonwealth with relative ease.”
He also pointed out there are cost efficiencies associated with housing its operations in central Massachusetts.
How would you feel if you sold your home and used your father’s retirement savings to start a business, only to lose it all after years of grueling work?
For Rebecca and Bjorn Hartman, the co-owners of a legal weed farm in Yelm, the answer is: ecstatic.
“The first few days after we decided we were done, we were just giddy, just happy to not be a slave to it anymore,” Rebecca Hartman said.
That’s the reality facing a growing number of small weed farm owners in Washington. They lined up by the thousands to get the coveted licenses to legally grow weed, but four years into Washington’s “green rush,” they’re finding it might be nearly impossible to actually turn a profit. Faced with the plummeting price of pot, the huge burden of complying with state regulations, and the competition with big farms that sell the majority of the state’s pot, small farms are starting to give up.
Micah Sherman, director of operations for Raven Grass farm in Olympia, said structural problems in Washington’s market are likely leading to an exodus of smaller farms.
“I anticipate anywhere from 25 to 50 percent of growers will either drastically reduce or shut down operations entirely this year,” Sherman said. “People are currently dumping large amounts of product at seemingly liquidation prices. There are numerous stories of desperate attempts at selling product at any price to pay bills and a general sense of impending doom among growers.”
In many ways, this turbulence in the market is the natural outcome for any industry that goes from black market to legal overnight—capitalism always has winners and losers. But the cannabis industry in Washington faces burdens that are wholly unique.
Stephanie Boehl, an adjunct law professor at Seattle University and a co-owner of a pot farm in Okanogan County, said cannabis business owners are forced to pay more for every aspect of their business because of pot’s stigma and federal illegality.
“Every transaction in the industry usually comes with some sort of marijuana premium, whether we are dealing with an electrician, supplier, landlord, or private investor,” Boehl said. “So that has a cost. But we also have the weakened position of bargaining with zoning restrictions and zoning laws that are not fair, and we are not in a position to push back because we are regarded as an illegal industry, regardless of what state law is.”
With pot’s current low price (the average wholesale price per gram was just $2.51 last fall, according to TopShelfData.com), it doesn’t take too many of these additional costs to shave off any remaining profit for the farmer.
When the Hartmans decided to close their farm, they destroyed all the remaining weed, figuring it would probably cost them more to sell it than what they would earn.
While small farmers pack up, big farms are only getting bigger. This past October, the state’s largest producer, Northwest Cannabis Solutions, sold more weed ($2.647 million) than the state’s 500 smallest farms combined ($2.638 million).
Bjorn Hartman said he isn’t angry with those large farms, he just wants to see the market treat small farmers fairly. “I don’t want to make it seem like we are blaming anyone other than ourselves,” he said. “Ultimately, we are responsible for our failure because we could have done things differently.”
Their biggest flaw may have been simply being too small. They never hired another full-time employee.
But Washington’s market doesn’t appear to support such small-scale farming, which is a shame. Our state is well-known for tiny wineries, coffee roasters, and breweries. Some of the best breweries in Seattle have as few as one or two employees, and I love being able to buy weed from equally small businesses.
But as more farms like the Hartmans’ go out of business, shopping small for weed might be a thing of the black-market past.
Golden Leaf Holdings Ltd. is taking the first step to becoming the Starbucks or McDonald’s of weed, even though marijuana remains illegal across much of the U.S.
The cannabis company has opened a chain of marijuana stores in Oregon called Chalice Farms. And now venture firm BlackShire Capital has signed a letter of intent to franchise the model, setting the stage for stores across North America.
Startups in the fledgling — but fast-growing — industry are vying to create the first household name associated with marijuana. With investment bank Cowen & Co. seeing legal marijuana sales reaching $50 billion by 2026 from just $6 billion in 2016, investors have flooded the space in the hopes of riding the so-called Green Rush to riches.
“Like Starbucks is to coffee, we believe Chalice will be to cannabis,” said William Simpson, Golden Leaf’s chief executive officer.
While analysts agree the industry is full of untapped potential, the patchwork of state laws has prevented companies from expanding aggressively: Nine states and Washington, D.C., allow recreational use, and 20 states allow medical use.
The Chalice Farms dispensaries in Oregon were designed to create a warm, welcoming environment that would introduce new consumers to cannabis and dispel preconceived notions, Simpson said.
The public’s response has been favorable, Simpson said, with the most successful store averaging $400,000 a month in gross sales through the third quarter of 2017. The slowest location averaged about $100,000. The company said these figures would be higher in areas with a less-developed cannabis retail presence.
The franchise model, meanwhile, follows the same playbook as restaurant chains and coffee shops. But with marijuana prohibited from crossing state lines, every Chalice Farms won’t be able to offer the exact same products. Toronto-based Golden Leaf will attempt to work around this issue by manufacturing its own products locally, or developing a list of approved manufacturers and products in each state or region as necessary, Simpson said.
Entrepreneurs looking to become franchisees will have to pay a one-time $50,000 fee and 5 percent royalty fee.
BlackShire CEO Kevin Reed said the idea is to launch 35 to 45 stores in the next two years — first in Canada before moving to the U.S. The venture firm and Golden Leaf are in talks to create a management company for the franchises, which would be jointly owned.
BlackShire intends to invest C$25 million ($19.4 million) for potential Canadian and U.S. operations.
“We believe that we’re going to build something that will be around forever,” Simpson said. “It’ll be part of the household names when people think of cannabis in 20 years.”
Photo via Keith Cooper
A bipartisan group of high-profile senators has already signed on in support of the marijuana banking amendment, which could see a vote as soon as this week.
One of the cannabis industry’s biggest roadblocks could soon come tumbling down, as the U.S. Senate prepares to vote on an amendment that would allow state-legal ganjapreneurs access to federally-backed banks.
According to Forbes, Oregon Democrat Jeff Merkley introduced Senate Amendment 2107on Wednesday as a part of a larger bill aimed at reducing financial industry regulations of 2010’s Dodd-Frank Act, originally passed in the wake of the Great Recession. The new amendment would restrict federal regulators from “prohibiting, penalizing, or otherwise discouraging a depository institution from providing financial services to a cannabis-related legitimate business.”
Because cannabis is still considered a Schedule I narcotic by the federal government, banks that rely on federal insurance have for years denied accounts to state-legal weed businesses, forcing America’s growing green rush to largely operate in cash. With no place to store their funds, canna-businesses argue that a lack of banking options has brought the plant’s criminal past into the legal market, with constant worries of theft and seizure by law enforcement.
Only days after Merkley’s amendment was introduced, the legislation already has nine high-profile co-sponsors from both sides of the aisle, including Rand Paul (R-KY), Bernie Sanders (I-VT), Kamala Harris (D-CA), and Elizabeth Warren (D-MA).
Despite the groundswell of support for Merkley’s marijuana banking amendment, the same cannot be said for Senate Bill 2155, the larger bill in which SA 2107 is housed.
Seen by opponents as a severe reduction of the Wall Street safeguards imposed after 2008’s financial crisis, SB 2155 (formally titled the Economic Growth, Regulatory Relief, and Consumer Protection Act) would let banks with $250 billion or less in assets off the hook from Dodd-Frank regulations, among other pro-banking rollbacks.
After the bill passed an initial vote with support from 17 Democratic lawmakers, Senator Warren — a co-sponsor of Merkley’s canna-banking amendment — chided her party mates, calling the overarching banking bill an affront to the American public.
“People in this building may forget the devastating impact of the financial crisis 10 years ago — but the American people have not forgotten,” told Democratic senators this week, according to Mother Jones. “The millions of people who lost their homes; the millions of people who lost their jobs; the millions of people who lost their savings — they remember, and they do not want to turn loose the big banks again.”
Outside of SB 2155 and SA 2107, Forbes writer Tom Angell notes that a piece of standalone Senate bill for cannabis banking already has 15 bipartisan co-sponsors, with an companion bill in the House already ammassing 89 supporters.
With significant support from Senate Republicans and Democrats (despite Warren’s objections), legislators will vote on SB 2155 next week, where the marijuana banking amendment could very well serve as a liberal consolation prize in an otherwise conservative victory.