Is California setting marijuana growers up to fail?

With the state’s adult-use cannabis market barely two months old, CalCannabis, a division of the California Department of Food and Agriculture (CDFA), has issued more than 2,000 temporary cultivation licenses, sanctioning 400-plus acres of pot gardens.

Collectively these state license holders could produce nearly 4.2 million pounds of weed per year — more than double the amount Californians are expected to consume, according to estimates by the CDFA. More licenses are being approved every day as aspiring growers up and down the state rush to get in on a $5 billion market.

And in Humboldt County, only a small fraction of our local growers have gained access to the legal marketplace.

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Britain is the world’s largest producer of legal cannabis, a new report from the United Nations has revealed. 

Ninety five tons of marijuana was produced in the UK in 2016 for medicinal and scientific use, accounting for 44.9 percent of the world total, its International Narcotics Control Board (INCB) found. 

The UK is also the largest exporter of the drug, with 2.1 tonnes exported in 2016 – roughly 70 per cent of the world’s total, the report stated.

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California’s cannabis czar issued a cease and desist order to Weedmaps, directing the Irvine internet company that maps marijuana dispensaries to immediately stop promoting businesses that don’t have state licenses.

“You are aiding and abetting in violation of state cannabis laws,” states the letter from Lori Ajax, chief of the Bureau of Cannabis Control.

If the company doesn’t immediately drop advertisements for unlicensed businesses, Ajax said Weedmaps could face criminal and civil penalties, including civil fines for each illegal ad.

The warning is the only cease and desist letter sent by the state to an advertising company, according to bureau spokesman Alex Traverso. 

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Top photo courtesy of Adobe Stock

Editor's note: Lincoln Fish, the CEO of the vertically integrated Southern California cannabis company OutCo (and Outliers Collective, its El Cajon-based dispensary), has been working in the legal cannabis space for three years. "The changes I've seen take place in this short time are nothing short of astonishing," he says. "We've had business challenge after business challenge, but through innovation and persistence, we have made real progress toward industry legitimacy." As 2018 unfolds, here is what Fish predicts will be the cannabis trends to watch. 

1. This will be the year of cannabis acceptance.

I believe that 2018 is the year that will turn the tide in the cannabis industry. Legalization of cannabis has been coming for a long time, and California will be the state that breaks the camel’s back. With several states legalizing cannabis, the government seeing the industry mature and the tax revenue opportunities growing, momentum is on the rise.

We’re also seeing a decrease in stigma as people are becoming more accepting of cannabis. New cannabis customers are creating this change, and lifelong consumers are coming out of the shadows. More and more people are realizing and accepting cannabis’s health benefits. Many politicians are finally realizing that people want cannabis and that it is here to stay.

2. There is a great need for cannabis education.

New consumers are entering the market, and they’re hungry for knowledge. Our industry needs to explain how cannabis is grown and extracted and how to use it. One of the most important aspects of OutCo is that we’re vertically integrated (we cultivate, extract, package, distribute and sell), and I can honestly say that our process is controlled from start to finish.

When it comes to extraction, there are many different methods used, which can affect what people ingest. Often, the average cannabis consumer (let alone a brand-new consumer) does not know the difference between extraction methods—or even what an “extraction method” is. The good news is that there are a variety of cannabis products and a variety of consumption methods, including vaporizing, tinctures and capsules, that do not require smoking. The bad news is that people don’t know what’s available or how to dose. All consumers need to know more.

3. The move to a consumer demand-driven business.

Right now, the cannabis industry is by and large a product-demand business. Once it shifts to being more focused on consumer demand, the industry will be able to better respond to what consumers want. Technologies and input from the market will change how we know what products are out there, what is selling well and what will help us predict trends, enabling us to respond with the products people want. Current sales trends show flower sales at 65 percent of total sales, vape cartridge sales at 25 percent and tincture sales at 10 percent, according to BDS analytics, whose team analyzed point-of-sale data from Washington, California, Oregon and Colorado.

With legalization and the marketplace opening to a new, more educated consumer, we predict an increase in tincture sales in 2018. Tinctures offer this new consumer more control with dosing. The vape market is also experiencing increases, most likely due to the discreetness and the ease of inhaling versus smoking. By the end of the year, we see sales categories most likely averaging out to 50 percent flower, 30 percent vape and 20 percent tincture sales. 

4. Recreational cannabis use will challenge alcohol popularity. 

We’re all aware of the comparisons between cannabis and alcohol, and we know there’s growing curiosity about cannabis as a recreational substitute for alcohol and other substances. OutCo commissioned a large study at the end of 2016 on cannabis use in California that revealed that 51 percent of millennials are replacing alcohol with cannabis—and for some surprising reasons, including fewer side effects (no hangover, low calorie) and perceived health benefits.

5. Other businesses will recognize the validity of cannabis businesses.

Insurance, banking and other services that weren’t available before are now becoming available to cannabis-touching companies. Legitimacy is helping to make cannabis a more reliable business partner, and many investors that were waiting to see how legalization would roll out are now committing. It’s already happening internationally (in Canada) very quickly. Investment-wise, large, institutional funds (pensions, endowments, etc.,) are interested in investing in cannabis in the U.S., but few have taken the plunge.

From maturing business practices to an explosive consumer marketplace and acceptance for our burgeoning industry, I feel that 2018 will be the year that we all remember.