“Lean and mean” is the current approach at Lake County, Calif., cultivator Napa Valley Fumé, company founder and CEO Eric Sklar tells Cannabis Business Times.

The company is pivoting from a partnership with Eaze to more brand development. “Eaze has picked up those delivery dispensaries as they’ve gone vertical, and our entire focus is on our brands, both fumé and LAKE GRADE,” Sklar said.

Photo courtesy of Napa Valley Fumé

The company plans to launch more brands this year, Sklar said, adding, “And [we’re] really excited because that was the goal from the very beginning, was to be a house of brands—a small handful of really super-high-quality brands. Whatever the price point, we want the quality to be one of the best in that niche.”

RELATED: Napa Valley Fumé: Chicken Soup & Camaraderie Part of the Company Culture Recipe

Changes at the company mirror some of the predictions that Sklar has for the wider cannabis industry in 2022—sustainable growth for businesses and more product development. But Sklar has additional hopes for the industry, both as a whole and specific to the Western U.S.

CBT caught up with Sklar, who has been involved in national, state, and local politics, and serves on the California Fish and Game Commission, to discuss his cannabis industry predictions for this year—from M&A to banking to possible California tax abatements.

1. Slow and Steady Industry Growth

Sklar said he envisions a continued decline from the "rollercoaster-y boom-and-bust growth" that the industry has seen in the past, including in Napa Valley Fumé’s home of California, and Colorado and Washington, the first states to legalize cannabis for adult use.

“There was a slowdown in growth in California after a really, really hot 2020,” Sklar said. “I think that COVID really pushed things up, and now it’s leveled off and is now growing at a more sustainable rate.”

2. Continuing M&A Activity

Sklar said he sees a consolidation in the number of brands providing the products and experiences that consumers come to expect. While this could play out over a multiple years, it will be facilitated in part by M&A activity, he predicts, which will continue to look similar to how it did in 2021.

“I think we'll continue to see an increased investment in the industry—probably lower valuations still, like we've seen the last year,” Sklar said. “But that's all good. Healthier valuations end up being better for the industry. Again, boom-and-bust bubbles don't really serve the industry, or most businesses, well. A few folks will do really well in a bubble, but most people will do badly.”

3. More Product and Packaging Development

As companies increase their footprints and their brands become more established with consumers, those companies will distinguish their products by including novel combinations of minor cannabinoids and terpenes, as well as unique strains and packaging, Sklar predicts.

“Do they come up with really memorable packaging, memorable looks, memorable feels, along with the really consistent and memorable use of the product?” he asked. “So, I think that’s all going to be a steady march. I think this year is going to be a real advance on it, but I think we’re going to see that happen over a multi-year period.”

4. Movement on Cannabis Banking

A bill addressing Section 280E of the U.S. federal tax code, which restricts tax deductions and credits for cannabis businesses, could pass Congress and be signed into law this year, Sklar said.

“I think the fact that [U.S. House] Republicans are putting forth their own [cannabis] bills for the first time ever is a really big deal, because I think it says that there's a hunger to do something,” he said. “I think it's because they all want to go home to their constituents and say, ‘I did something on cannabis this year.’ And so, I think that may result in something.”

5. Interstate Commerce in the West

Sklar highlights that Alliance for Sensible Markets founder Adam Smith and others are spearheading an effort for the U.S. Department of Justice (DOJ) to allow cannabis interstate commerce. The non-profit group is calling on the governors of multiple Western U.S. states to contact the DOJ for guidance on commerce of cannabis between states that have legalized for adult or medical use.

For his part, Sklar said: “I really am encouraging Gavin Newsom to get on board with this, and for them to write a joint letter, really asking the Justice Department to say, ‘Hey, listen, we’re not going to mess with this. These states have legalized it. And if those legislatures, governors, and residents of those states are okay with it, we are, too.’”

6. Tax Relief and Other Efforts to Fight Illegal Cannabis in California

California’s illicit cannabis market has continued to thrive, despite legalization of adult-use cannabis in the state. But, Sklar said, a multi-pronged approach could lead to significant changes as soon as this year.

RELATED: Gov. Newsom Calls For Cannabis Tax Reform, More Retail in Budget Proposal

The state’s illegal cannabis industry can shut down if the state does three things, Sklar outlined: eliminates the current cultivation tax in its legal industry and moves to “a more sensible tax structure” so legal businesses can compete with illegal prices, uses cannabis tax dollars to rid the state of illicit cannabis businesses, and grants amnesty to participants in the illegal cannabis space.

“It’s got to be a three-front effort, in my view,” Sklar said. “I don’t think any one of those alone really does it."

The CEO of Ohio-based medical cannabis cultivator and manufacturer Ancient Roots LLC has been cut off from his company’s facilities and record books by the state’s Department of Commerce (DOC).

David Haley, who founded the company in 2018, had his employee license suspended by DOC last week, roughly two months after department officials first began investigating accusations by regulators that Ancient Roots was giving out samples of cannabis grown at his facility, The Cincinnati Enquirer reported.

DOC officials allege that Haley provided free cannabis products to visitors at his Wilmington facility, just northeast of Cincinnati. The sampled product had been intended for retail distribution, and Ancient Roots’ records inaccurately showed those samples remained in the company’s processing inventory after Haley allegedly gave them away.

Under rules, regulations and guidelines set forth by Ohio’s Board of Pharmacy, and the Ohio Medical Marijuana Control Program—following Ohio voters’ approval of Issue 3 in the November 2015 election, and subsequent passage of House Bill 523 by the state Legislature in September 2016—handing out free samples of cannabis is prohibited. The sample ban applies to those licensed by the state program, but also to events, expos, job fairs, parties and the like.

After Ancient Roots passed its final inspection in November 2018, the company began operating as a tier-2 cultivation license holder—the smaller of two license types—meaning it was limited to 3,000, 6,000 and 9,000 square feet of cultivation space during its first three years of operation.

Under a proposed medical cannabis expansion bill in Ohio, tier-2 license holders would be able to expand their operation to 20,000 square feet, while tier-1 licensees would be able to expand from 25,000 to 75,000 square feet.

RELATED: Ohio Republican Aims High With Medical Cannabis Expansion Bill

As of November 2021, Ancient Roots was one of 27 Ohio operators to hold an annual cultivator license issued by the DOC’s Medical Marijuana Control Program.

The company’s licenses are still active, according to the Enquirer. Haley’s suspension is indefinite, but he can request a hearing to challenge the decision, the news outlet reported

For many outdoor cultivators and hemp growers, the winter season is a time for rest. Days are shorter, there’s less crop demanding attention, and you can warm your tired feet by the heat of a roaring fireplace. Recuperation is necessary, but there are many other aspects of business that can be cultivated during the “off-season” like networking, and marketing.

Leslie Hoffman is co-founder of Asheville Hemp Project, an organic hemp grower and product maker in North Carolina, and has more than 35 years of experience in the hemp industry. Co-founder of Asheville Hemp Project, she knows that slower seasons are an invaluable time to focus on important aspects of a business, outside of growing and product manufacturing. Hoffman purchased a small farm in North Carolina in 2015. When the hemp pilot program began in North Carolina, she saw an opportunity to obtain a license and cultivate hemp flower in 2017, supported by her partnership with friend and scientist, Scott Brinkley.

“When it comes to the winter, of course, as a longtime gardener, I always think winter is both a time to rest, and a time to dream and plan,” says Hoffman. “On the business side, it is a time to network, to be indoors, and to gather with people and share seeds, successes, and failures. It’s a time to find new business relationships or partners as well as focus on the communications and marketing side of the business.”

Winter Offseason is a Time to Dream and Plan 

When Hoffman and Brinkley were building Asheville Hemp Project, as with many new ventures, they had to work out some kinks. After their second year of business in 2019, they decided to move into the product maker space, sensing that the federal legalization of hemp would create a larger market for hemp products like CBD, gum, and hemp pre-rolls.

Though their basic concept was right, they had trouble finding the right papers and manufacturers. Winter months provided a much-needed time to think, plan, and refocus their efforts on problem-solving.

“We knew that the basic concept was right, but it was early enough in the industry that were a lot of fits and starts. We thought we had the right rolling technique, technology, and manufacturing partner once, twice, but it turned out, no, we didn't really,” says Hoffman. “We needed to go back to the network, if you will, and keep looking.”

Winter offered an invaluable break from the responsibilities in the field to redefine their business and dream and plan next steps for their growing business.

“There's been a huge amount of evolution in the industry and the winters when you're farming you really are hard at it out on the farm all the time,” points out Hoffman. “If you're looking for new relationships, or you need to travel to go look at a manufacturer's facility or something, winter offseason is a really good time to do that.”

Create an Authentic Marketing Strategy

The slower months of winter are also a time to think about the face of the business and the message you want to send to customers, says Hoffman. Brinkley and Hoffman used the winter time in the early seasons of their business to rebrand.

“We teamed up with a very experienced firm in the alcohol and tobacco industries based in New York. We spent a lot of time developing our message, image, reflecting who we are in a professional way. That’s something we’ve done during a slow winter season,” says Hoffman. “Whether it’s big and slick, or home grown from your kitchen table, the message doesn’t matter so much as its authenticity to you,” says Hoffman.

You don’t have to hire a marketing team either, starting a blog, hiring a graphic designer to update your logo, or updating your website are ways to keep your business relevant.  

“Our big goal was to get the help we needed to portray an authentic image of who we are. As farmers and as business people, we always try to refine and improve who we are,” explains Hoffman. “Not changing course or being different than who we are, however, being able to communicate to the public who you are and what you’re trying to achieve does matter.”

Networking

A grower can certainly keep themselves busy in the winter doing things like monitoring cover crop, but Hoffman warns that it can be all too easy to isolate yourself and your business. She reminds growers and business owners to step out of their bubble occasionally and meet other professionals in the hemp and cannabis industry. “It’s easy to get into a silo in your own work-life. Every once and while, you really do need to reach out and connect and see what other folks are doing and share, compare, and learn from each other.”

There are two main avenues through which hemp professionals can network successfully: local and national conferences and events. Major hemp and cannabis associations know that for outdoor growers, winter months leave more time for travel. This is when they tend to plan national and regional conferences where attendees can meet other cultivators, vendors, and leaders in the industry.

However, you don’t have to travel across state lines to network; there many states have local or regional networking opportunities that support growers on a local level, and Hoffman recommends taking advantage of those events, too.

“Meet the people in your area; there are 30 or more states that have programs of one kind or another for hemp. Meet the local folks who are makers, farmers, and the CBD shops, and retailers because that’s a whole piece of what you can do in the winter.”

Take Advantage of Opportunities, Especially the Chance to Share the Love and Health Benefits of Hemp

In a burgeoning and thriving industry, hemp professionals are continually thinking of ways to improve their business. Slower winter months provide much needed time for reflection to take advantage of ideas or opportunities that a grower may not have time for other seasons of the year.

“I think there are general feedback loops that a good business person is constantly cycling through and reflecting on,” notes Hoffman. “When I’m in the field, I’m thinking about strengths and weaknesses there. When I’m next to the fireplace, I might be thinking about other issues around the business.”

Hoffman says that especially this time of year, when we’ve been traveling to and from the hugs of our families within holiday gatherings, this season is a time for sharing and caring for others. Why not share with them your knowledge of cannabis, says Hoffman. “There is a benefit for so many people. Especially in the winter when people aren’t feeling great, it’s a friendly reminder that cannabis or CBD can offer some relief. Share the love, share the knowledge.”

Winter is a time to be thoughtful, Hoffman says. "This is a time when we’re thinking about others, when we’re sharing and giving and caring about people, I think it’s a good opportunity to share cannabis. It's also a time when you know, people are indoors. It's dark and people aren't feeling healthy as often. It’s just good to be thoughtful. Use winter to be thoughtful. Maybe that's part of all of this.”