The Berkeley Patients Group team celebrates the legalization of adult-use cannabis in California on Jan. 1, 2018.
Photo courtesy of Berkeley Patients Group
Berkeley Patients Group Turns 20: Settling Into California’s Legal Cannabis Market
In Part II of a three-part series, BPG Co-Founder and Vice President Etienne Fontan discusses how the state’s cannabis industry has changed post-legalization and how the dispensary has overcome the growing pains.
Berkeley Patients Group turns 20 this October, and the past two decades have dealt the dispensary its fair share of challenges, with California’s post-Prop.64 landscape perhaps one of the most daunting.
Here, BPG Co-Founder and Vice President Etienne Fontan shares how the state’s cannabis industry has evolved since legalization and how the dispensary is navigating the market’s inevitable growing pains.
Editor’s Note: Read Part I of this series here and Part III here.
Cannabis Business Times: How has California’s cannabis industry changed post-legalization?
Etienne Fontan: When the laws changed with Prop. 64, we saw a significant change [in] our demographic. [We were] dealing with 18 years of patients that had seen the trends [and] these products come through. They knew what they wanted and what they didn’t want. On Jan. 1, 2018, all of us that were in the legal corridor were overwhelmed for a time by a new era of customer, one that wasn’t a patient and that wasn’t familiar with 18-plus years of products that we had in our stock. Other states had done it, so we knew it was possible here in California; however, California is unlike other states that have [legalized], just due to its large size. California wanted to embrace the regulatory aspect of it, so they spent a year or so speculating [on] different aspects of the law, which were challenging to us as the retailers because we were no longer wholesalers or distributors anymore. We were now retail [only].
Regulations have opened up to allow for advertising. But at the same time, good luck finding a bank. The challenges are still there. They have changed somewhat, but at the same time, due to the federal prohibition, we are still all illegal.
CBT: What kinds of challenges has BPG faced in its 20 years of operation?
Photos courtesy of Berkeley Patients Group
The BPG leadership team beat the federal government in an asset forfeiture case in 2016.
EF: In 2011, the federal government came. We had spent the first 12 years in a location that was over 1,000 feet from a private French school. The government came and tried to evict us, saying that as the crow flies—which is corner to corner, property to property—we were within 980-some-odd feet. They basically went to our landlord and to the landlord’s bank and said, “If you do not evict Berkeley Patients Group, we’re going to take your bank.” So, we were forcefully evicted in 2012. We closed down on May 1 as a retail location and by the end of the month, we opened up as a delivery service. That delivery service kept us going, and we found a new property. In December 2012, a mere six months later, we would open up at our location where we currently are.
The federal government then changed its rules and wrote to us and tried to forcefully evict us, saying we were now within 1,000 feet of a daycare center or childcare facility. The law stops at K-12. It has nothing to do with pre-K or anything like that. So, we sued the federal government and after four years, we won. In 2016, the federal government threw in the towel against us, and we ended up winning our case, allowing us to exist in our current location.
CBT: Has the new regulatory landscape in California caused new obstacles for the company?
EF: Prior to [Prop.] 64, we had to buy our cannabis [and] we had to store that cannabis for three weeks because we had to get it tested. Once it’s tested, it either passed or failed. If it passed, then it could go to be weighed and dealt with. If it failed, it was given back to the farmer. Now, [in] the post-[Prop.] 64 situation, we no longer deal with the farmer directly. We deal with distributors and manufacturers. Manufacturers, of course, make the products and they have to be sold through distribution centers here in California. They have sort of a separation of church and state now. Where we used to deal with every aspect of it, now we just receive product, so things have just changed in the past two years with how we deal with product. We have to store a great deal of product to have on hand.
CBT: How is running a 20-year-old dispensary in a legal marketplace different than the first five years or so of operation?
EF: Back then, in the first five years, we were only hiring activists. We were not hiring retail people because, again, we were all expecting to be arrested. We went through raid scenarios. We had raid drills. We would have dispensaries that were raided, and we organized and sent people with signs to be active and stir up the media so that people could see what was actually going down.
The reality is, you had to put your absolute freedom on the line to be a dispensary person. Every person that we hired, we made them aware that we could be arrested today—that was a reality. Over time, in 2009, when the Obama presidency stated that they were going to leave state’s rights to their realities, we then started to reach out to real companies and start to look at, how do we look at our inefficiencies and how do we improve every aspect of what we’re doing? We started to hire real consultants to come in.
It’s cultural change, which has been exponential. There has been a product change, which has [also] been significant and exponential. Not all of [the] products and product lines that were available prior to [Prop. 64] even exist anymore. Not many of them could afford to make the leap. It’s very expensive to go from an illegal operation to a legal operation. You have to do things like spend $100,000 on a camera system that has eight months back-up. It’s just incredible the type of impediments they put on progress for people who were bootstrapping. BPG was able to bootstrap all through the 20 years.
It was very challenging early on because you could not advertise. You had to rely on word of mouth. You had to build your reputation from the ground up. You take care of your reputation. You make sure your product is good. You make sure it’s consistent. You make sure it’s at price points that are available to every buyer that’s out there, or you will feel the wrath. The public are not afraid to tell you what they think, especially if you fall below the expectations or the criteria that you set. You have to live up to your expectations every single day, and you have to hold the standards that you believe in, from the start, and maintain them all through every aspect of your outfit. That’s the reality.
It’s just incredible the type of impediments they put on progress for people who were bootstrapping.
-Etienne Fontan, Co-Founder & Vice President, Berkeley Patients Group
Berkeley Patients Group made its first legal sale in California on Jan. 1, 2018.
CBT: How have BPG’s hiring practices changed over the years, especially post-legalization?
EF: You have to hire good people. As opposed to activists, we changed to looking at people who had retail experience because they could understand products [and] product lines, and [they could] educate people at a more concise level than in the past. That then requires us to be better educators. Berkeley Patients Group takes a week educating and training our people before they even go to the floor because there’s so much education that has to be imparted. There’s so much you can gain from on-the-job training, but at the same time, we have 20 years of experience that we’re imparting on people to help them get up to speed, to educate them on who we are, what they’re doing and what we’re dealing with on a day-to-day basis. For a business owner, it’s a significant change.
We used to hire for all departments. Berkeley Patients Group had a front desk. We had a store, which was basically a little head shop where we’d give out free papers for people to sit and smoke. We had security, and then we had people behind the counter. So, originally, we would hire people and then see where they fit because we’re activists—there were no real job descriptions back in the day.
As we became more professional, we realized we have to have job descriptions. You have to have real breakdowns of what your expectations are of people. Then we started to look at things like benefits packages, doing things like 401(k) [plans], paying for the majority of [employees’] health insurance, looking at different ways to benefit our employees. When we were activists, no one was thinking about a 401(k). However, when you go to a regular job, these are aspects that people are looking [at], to save for their futures. So, we looked to other businesses for how to normalize and what benefits packages would be beneficial to our people—everything from payroll to banking to benefits packages and insurance. Those are all challenging.
Editor’s Note: This interview has been edited for style, length and clarity.
Former Patrón Spirits and Grey Goose Global Chief Marketing Officer Lee Applbaum Joins Surterra Wellness as New CMO
Former Coca-Cola international marketer Philippa Classey is also joining Surterra as its first managing director for Europe.
ATLANTA, Sept. 16, 2019 /PRNewswire/ -- PRESS RELEASE -- Surterra Wellness, one of the fastest growing wellness companies in the United States, has announced that Lee Applbaum has joined the company as its new chief marketing officer (CMO) and Philippa Classey has joined the company as its first managing director, Europe.
Applbaum and Classey are the latest talent the company has attracted to join its leadership team in building global iconic cannabis brands to improve the well-being of consumers.
With his expertise in the premier spirits and consumer goods businesses, Applbaum will lead Surterra's global marketing teams and direct product innovation, integrated brand marketing, retail brand and sales management initiatives reporting directly to Surterra Chief Executive Officer William "Beau" Wrigley Jr.
"Lee is one of the most extraordinary brand builders in the business and having him join our executive leadership team is a big win for Surterra. As an accomplished senior marketing expert, Lee is exceptional at branding products in ways consumers connect with authentically, engaging with consumers at the right moments, and making the complex simple – all critically important in the cannabis business," said Wrigley. "Lee also shares our consumer-first mind-set, our values, and our aim to be the gold-standard in the business."
Applbaum comes to Surterra from Bacardi Global Brands Limited where he served as the global CMO for Patrón Tequila and Grey Goose Vodka, the world's number one ultra-premium tequila and vodka brands. At Bacardi, he led two global integrated marketing organizations across more than 165 countries reporting to the global CEO. Applbaum also was CMO for Target Australia, and held leadership marketing roles at recognized retail and consumer goods companies, including RadioShack Corporation, Federated Department Stores and Schlotsky's. Applbaum began his career at the Coca-Cola Company. In 2015, Applbaum received an Adweek Brand Genius award for groundbreaking digital and social media efforts, and in 2018 he was awarded the Business Insider "Most Innovative CMO" award. Applbaum received a BBA from The University of Texas Austin and his MBA from The University of Massachusetts at Amherst.
"Surterra is creating the blueprint for leadership in the cannabis space based on a strong ethos, which I immediately identified with having come from brands with a heritage of ethos. I'm excited to make the leap from luxury spirits to the dynamic cannabis industry because of Beau Wrigley's vision for Surterra and the industry. I'm honored to join a team of the most experienced and game-changing leaders of global iconic companies and brands to create innovative cannabis products and authentic brands that will make a big impact on the well-being of consumers," said Applbaum.
Classey, who will be based in London and report to Wrigley, joins Surterra as its first international executive leadership team member, signaling the company's readiness to expand into Europe and other international markets. Prior to joining Surterra, she was the CMO of Harmless Harvest where she reported to the CEO and oversaw the growth expansion plans of regulated coconut water. She also led the commercial launch of SmartWater and Vitamin Water in Europe for the Coca-Cola Company, having worked at the company in its water and juice divisions for two decades. Classey has a BA from Brunel University in London.
"Philippa will be our first executive leader based outside the U.S. and will spearhead our efforts to expand into international markets and to complement our South American footprint in Colombia, beginning with the EU marketplace. As an entrepreneurial leader who has led successful launches of consumer and regulated products across Europe, Philippa is a strategic addition to our leadership team," said Wrigley.
"I couldn't be more excited to lead the expansion of Surterra into Europe and to build our international cannabis business across the rapidly growing EU cannabis market," said Classey. "Surterra offers the big thinking and leadership of an established global player with the entrepreneurial opportunity to write the playbook for how to be an global leader in this space."
Flower One Announces Official Launch of Nevada Cannabis Extraction and Production Facility
The new lab is to produce a wide range of cannabis products including full spectrum oils, distillate, cannabis-derived terpenes, concentrates and branded products such as vape pens, edibles and topicals.
LAS VEGAS, Sept. 16, 2019 /CNW/ - PRESS RELEASE - Flower One Holdings Inc., a cannabis cultivator and producer in Nevada, has announced the official, operational launch of its cannabis production lab, which will operate alongside the company's 400,000-square-foot greenhouse.
The new production space encompasses approximately 55,000 square feet and can readily consume between 3,000 and 5,000 pounds of biomass per week – with distillate processing from its ethanol extraction train in the 100 to 150 liter per week range. Today's announcement enhances Flower One's ability to generate product from its more than 140,000 pounds (62,500 kg) of dry cannabis flower and trim expected annually from the greenhouse.
Thomas Rosengren, director of extraction and production, reported: "The launch of Flower One's bulk distillate process train has been a resounding success – with early lot potencies already testing in the 90-plus percent range."
Flower One's production lab has been intentionally designed for large-scale product fulfillment. By leveraging multiple extraction methods – namely ethanol, LPG, and CO2 – that run in parallel, Flower One has access to three upstream extraction channels, granting it the flexibility to leverage the specific extraction techniques needed to produce a wide range of cannabis products. Beyond extraction, the lab will engage in refinement, compounding and commercial-kitchen-related activities, including ongoing optimization via data-driven continuous improvement processes.
"The product and test results coming out of the lab mark another huge milestone for Flower One and our ability to produce premium quality cannabis products" said Kellen O'Keefe, chief strategy officer at Flower One. "Flower One is thrilled to bring some of the nation's leading cannabis brands to Nevada's retailers and consumers."
Courtesy of Solari Hemp
Solari Hemp Launches in Colorado
MMJ America founder Jake Salazar leads the team behind Solari’s innovative approach to cultivation.
Jake Salazar is taking what he’s learned in the legal cannabis space and applying it to his new venture: Solari Hemp, a vertically integrated hemp and CBD platform in Colorado. Salazar has been in the cannabis space for 11 years, helping to craft legislation in Colorado and founding MMJ America in 2008.
The rest of the Solari team includes Colin Gallagher (former director of operations and business development at Smoker Friendly International) and Myorr Janha (former CMO of Rush Communications). Salazar has drawn lessons from Janha’s expertise—namely, that the power of engagement is as important as the power of well-informed cultivation technique.
“What I learned along the way is the product is amazing, but you’ve got to let people know about it,” Salazar says. “[Focusing on] that marketing angle is just as big of a deal to us as making sure all of our … harvesting techniques and all the equipment that we’ve specially built [can] harvest a large crop without destroying it. There’s a whole array of things—we view everything as equally important, and we pay attention to everything.”
After selling his share of MMJ America in 2017, Salazar moved toward the opportunities in hemp that had first opened up through industrial pilot programs a few years prior. Seeing the success of growers working with the cannabis plant in a broader marketplace, Salazar decided to bring his expertise to this new challenge. Vertical integration in this marketplace, he felt, was key.
“What I learned through doing all of that was that I can trust the product a lot more when I know it’s coming from [my own business],” Salazar says now. “We had an opportunity that we saw to ultimately control our own destiny and not get priced out. We didn’t want to be pigeonholed on the business side.”
The most visible side of Solari’s business is the line of branded hemp-derived CBD products: tinctures, lotions, gummies and more. The company will also wholesale its hemp biomass on the newly legal interstate market and work with other companies on white-labeling hemp-based products.
“Our primary focus was to build a genuine seed-to-sale company,” he says. “That’s from the genetics and the intellectual property all the way through to our final products and distribution.” From his past work, Salazar is drawing on award-winning CBD genetics at a time when the nascent hemp industry is learning more about which chemovars will thrive in which climates (and for which end products).
Courtesy of Solari Hemp
To get the job done, Solari is partnering with fourth-generation hemp farmers in Colorado. The emergent industry is a buyer’s market, in many ways, and Salazar says he had to sift through offers from land owners and hemp growers to find just the right type of partner—a balancing act that often involves questions of water rights and soil quality. (“Everybody’s got a piece of land that they want you to farm now, right?” he says.)
But Solari is founded on more than just business acumen acquired from years in the cannabis industry. The hemp space is different—economically, demographically and agriculturally.
When growing and selling cannabis flower, for instance, cultivation businesses operate on the fundamental promise of making that flower presentable. “When you’re growing hemp outside, it’s completely different,” Salazar says. “How do you get that quality crop without sacrificing too many things to the elements? How do you get this stuff out of the ground without destroying it? That was a big challenge.”
Coming from a controlled environment, Salazar says a major challenge was found in mitigating risk outdoors. In working with farmers who’d grown low-cannabinoid hemp cultivars for fiber, the Solari team applies those cultivation and harvest techniques to CBD-rich cultivars that can withstand the elements. Crop uniformity is a fundamental part of hemp cultivation.
And the Solari team developed its own harvest head for a reconfigured eight-row combine in order to guarantee that uniformity. Rather than using corn harvesting equipment, Salazar says hemp requires a different touch. (Hemp’s fiber stalks behave differently under harvesting pressure than corn’s hollow stalks.)
“Not only do you end up destroying that [corn] equipment,” he says, “but you end up destroying a big chunk of your crop too by doing it that way.”
And that’s not an option in this highly competitive industry. With the long-running hemp knowledge of partner-farmers and the cannabis industry background of Salazar and the rest of the executive team, Solari is pursuing the vertical integration strategy to avoid those issues and make its mark in the emergent hemp space.
lazyllama | Adobe Stock
House to Vote on SAFE Banking Act
Lawmakers will vote later this month on the bipartisan bill, which would allow cannabis businesses to access the federal banking system.
The U.S. House of Representatives will vote later this month on the Secure and Fair Enforcement (SAFE) Banking Act, bipartisan legislation that would allow cannabis businesses to access the federal banking system.
House Majority Leader Steny Hoyer will bring the bill to the House floor for a vote, according to a CNN report.
“We're discussing it with members, but it hasn't been scheduled just yet,” Mariel Saez, a spokesperson for Hoyer’s office, told the news outlet.
The bill, which was introduced in the House in February by Reps. Ed Perlmutter (D-CO), Denny Heck (D-WA), Steve Stivers (R-OH) and Warren Davidson (R-OH), would prohibit federal banking regulators from penalizing banks that work with state-compliant cannabis-related businesses, taking action on loans made to those businesses or limiting a depository institution’s access to the Deposit Insurance Fund. The bill would also protect ancillary businesses from being charged with money laundering and other financial crimes, and would call on the Financial Institution Examination Council to develop guidance to assist credit unions and banks in serving the cannabis industry.
The House Financial Services Committee approved the SAFE Banking Act in March in a historic 45-15 vote; it was the first time legislation related to cannabis banking was approved by a congressional committee.
Sens. Jeff Merkley (D-OR) and Cory Gardner (R-CO) introduced a Senate version of the bill in April, and the Senate Committee on Banking, Housing and Urban Affairs held a hearing in July to get perspectives from stakeholders in the cannabis and financial industries on the need to pass the legislation. The SAFE Banking Act has yet to pass out of committee in the Senate, however.
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