I spent my formative years on the road with legendary author and activist Jack Herer. His 1985 book “The Emperor Wears No Clothes” educated millions of people about how marijuana had historically been used for food, fuel, fiber and medicine. It unveiled the government’s racist, unscientific and absurd efforts to enact and continue prohibition. His rallying cry, “Hemp can save the planet,” still rings in my ears 20 years after retiring from the road.
The scale of cannabis legalization in California and Canada rapidly brought change to the cannabis landscape. It came with a form of commercialism and capitalism that the existing industry was unprepared to compete against. Big business was everywhere, looking for a way into the Green Rush. Many cannabis business owners took the golden parachute, selling their brands and companies. Others found partners looking to fund people willing to stay and run their companies. Preexisting small cannabis businesses felt the burden of high regulatory costs this year, leaving them less able to compete and making them acquisition targets for bigger companies.
I can hardly be impartial about this, sitting in Oakland, Calif.—ground zero. We saw a massive decline in small businesses here, driven out by the high taxes, fees and near impossibility of finding a compliant facility. It’s been heartbreaking to watch.
The good news: The cannabis community is not afraid of hard work. We fought the feds, educated our families and friends, and put prohibition on the run. Evolving the industry’s ethos will take time, yes, but if done right, we may accomplish our goals and create a kinder and more compassionate society. Finding our footing in this new era of big business may take longer, as stakes are high and competition is tough. But one thing is certain: 2019 will be a stellar year for the industry, especially for those who thrive on grit and grind.
Here is a list of five challenges to the industry to keep in mind for the new year.
1. The laws and regulations are suffocating. Well-meaning regulators are creating rules that make starting and running a marijuana business a costly and burdensome process. Add these regulations to the current laws, and the dream of owning a cannabis business remains just that for many people. In 2019, the industry must push hard for reasonable laws and regulations.
2. The market is unpredictable due to shifting rules. California had a rocky transition to the legal market. On Jan. 1, new regulations forced many of the state’s cannabis companies to close. This drove the market underground. Thus, sales underperformed for the first half of the year. The end of 2018 looks better for California, but other emerging markets, such as Michigan, should expect problems. Get ready for high taxes, complicated regulations and an eventual smoothing of the market as regulators gain an understanding of how to best implement new laws.
3. Cannabis is going corporate. Dozens of publicly traded cannabis companies are listed everywhere from the OTC to the NASDAQ, and the best are already worth billions. In 2018, corporations such as Walmart and Marlboro entered the cannabis discussion. Constellation Brands (parent company of Corona Beer) put $5 billion into Canopy Growth, a publicly traded Canadian cannabis company. GW Pharmaceuticals, a British company with FDA approval to sell cannabis-extracted CBD-based drug Epidiolex at U.S. pharmacies, has a market cap of nearly $4 billion (at press time). In 2019, small-, medium- and large-sized cannabis businesses will be acquired by bigger companies unless they develop a dedicated target market.
4. Dispensary chains are taking over. Potentially hundreds of California’s dispensaries are chains with multiple locations. California-based MedMen has 22 licenses across various legal states. Washington state’s Have A Heart has 15 stores in six states. Both companies are continuing their expansion. Well-funded chains are literally knocking on dispensaries’ doors, asking if they are for sale. Small dispensaries will find it difficult to compete against this bulk purchasing power, and many of the best flowers and cannabis products could be locked up in contracts with large, well-funded chains.
5. Compassion is being legislated out. California’s new laws failed to include a provision for providing cannabis to people in need. Since 1996, “compassion” programs have existed to provide free cannabis to these people. This oversight left thousands of people without access to medicine, a problem advocates worked to solve last legislative session with SB 829, but it failed to pass. Patients and advocates must work to ensure that free cannabis medicines are available to those in need.
This story was originally published by Cannabis Dispensary.
