

In 2016, California state legislators put forth Proposition 64, the Adult Use of Marijuana Act, to voters, which ultimately passed. Prop 64 limited the canopy size per cannabis cultivation license as a way to give smaller legacy growers a head start and establish themselves in the marketplace prior to 2023, when licensing of very large commercial cultivation facilities is due to open up.
That date is drawing nearer, as signaled by California’s Department of Cannabis Control (DCC) providing notice of modifications to proposed regulations in late August as part of its attempt to “simplify the cannabis regulations,” according to its website.
The proposed regulations are “to implement, interpret, and make specific requirements for obtaining a large cultivation license under the Medicinal and Adult Use Cannabis Regulation and Safety Act (MAUCRSA)” and to create a pathway for existing licenses to convert to a large cultivation license come Jan. 1. The proposed regulations would also provide a pathway for existing licenses to convert to medium cultivation licenses once the limitation on the number of such licenses that may be held by the same owner expires January 2023.
Essentially, the grace period for small growers is over, and the canopy cap is about to be lifted.
The withdrawal of the canopy limitation comes at a difficult time for small growers. Since Prop 64 passed, cannabis cultivation companies have been over-regulated, but worse than that, overtaxed. The combination of both have drained the lifeblood of most legacy farms in the form of cannabis production taxes, which have ultimately benefited the illicit market. This market is difficult to compete with and has devastated most legacy growers at a time designed to allow these cultivators to profit and establish their prospective businesses. The kicker: In June, California Gov. Gavin Newsom signed Assembly Bill 195, which included the repeal of the state’s wholesale tax on cannabis cultivation. Besides eliminating the cultivation tax, the bill also shifts the point of collection for the excise tax from distributors to retailers (effective 2023) and caps the 15% excise tax for a minimum of three years. The tax formerly assessed on dried cannabis was a rate of $161.28 per pound.
So, after stifling the legacy market with excessive taxation, right before lifting canopy limits and permitting growers to have multiple licenses, paving the way for commercial large-scale cultivation, the cannabis production tax was eliminated. This does help the smaller growers because they will no longer have to pay cultivation taxes. However, the elimination of this tax also means the corporate competitor doesn’t have to pay it either and can now produce unlimited amounts for the lowest cost of production, further slanting the playing field. Competition will only continue to increase as more states come online and issue licenses, especially if—and when—federal legalization becomes a reality.
So, how can legacy, craft and other smaller companies differentiate themselves and compete? While it’s easy to get discouraged, operating a smaller, more nimble company can have its advantages.
Brand loyalty goes beyond name recognition, and many consumers seek out companies that produce products locally and in smaller batches, such as craft beer, produce from regional farms and other goods.
When it comes to cannabis, legacy farms with ties to the local community that contribute not because they’re expected to or will benefit from it, but because they want to and genuinely care, can go a long way with customers.
While a small grower must shout very loud to get recognition among celebrity and corporate brands, it is possible to compete in this landscape. Here are a few suggestions that can help companies of any size stand apart from the crowd.
1. Take advantage of new genetics.
Smaller companies tend to be more flexible and are able to experiment with lots of different cultivars rapidly in search of the newest, latest and hottest genetics. In doing so, they can be the first to market with them. Larger corporations, on the other hand, need a bit of time to replicate a large amount of new genetics that have been tried, tested and deemed profitable.2. Pay attention to the fine details during cultivation.
Growers at small craft farms may have more time to focus on each plant and all aspects of its existence. They may have more flexibility to employ multiple methods to maximize the full potential of each plant, including tending to each plant multiple times each day if they have the resources. For example, in the morning, growers may water, remove unnecessary plant material, then perhaps tie up a few branches; in the afternoon, they may scout for pests and diseases, check media moisture levels, and carry out any other requirements for each plant. This is not always a possibility for commercial cultivation facilities. The attention to small details can help differentiate products. For example, which tastes better: a tomato shipped to the store, or the tomato grown just a few miles away?
3. Prioritize proper drying and curing.
Consumers prefer properly dried and cured cannabis, and it is certainly easier to dial in parameters necessary to achieve this with small amounts of cannabis than with large. Small companies have the luxury of drying and curing cannabis in small batches, while some larger companies carry out the process with large amounts all at once on a more rapid schedule.
4. Be selective with packaging.
With a plethora of product offerings on store shelves, businesses must aggressively attempt to differentiate and set their products apart from their competitors while also ensuring the packaging preserves cannabis. Strive to highlight your product with packaging, and think about your target audience. For example, I recently saw packaging for flower in the shape of an ice cream cone. If that company’s demographic and target consumer were 21- to 35-year-olds, then that creative approach to packaging might be a sound strategy. However, that look may not be as effective on an older demographic. Know your target audience and cater to it.
5. Attend as many industry events and local functions as possible to gain brand visibility.
Both regional and national industry events, and even local farmers markets, can help you advertise on the ground. While there, provide as much information as possible regarding your products (even if you’re not able to sell on site) as well as their superior qualities and why they are so. If, say, you’re in California and selling product at farmers markets and other events is an option, really use that time to sell your product—make it pop, make it special, make everyone want it. If you can’t sell product, share information and offer educational resources and opportunities for attendees to connect with your brand.
6. Maximize your use of available online platforms.
Tell your unique brand story everywhere you can. This includes social media channels, but also a very strong interactive website that reflects the values of your artisanal production facility or cultivation company. Express your mission and engage people through stories—tell customers about your family, about your farm or facility, and why it is important to you to produce your products with love and care. Highlight any collaborations or affiliations with other high-quality companies or manufacturers and any local partnerships. List all your contributions to the industry. A multitude of small, craft legacy growers ultimately created today’s cannabis industry and have a unique perspective and experience. Today’s cannabis industry would not be the same without the dedication and contributions of these farmers, so if your company was or is founded by such legacy growers, let it be reflected in your company story.
7. Embrace new or alternative technologies.
Along with the aforementioned social media avenues, one must investigate and utilize any technology outlets available, such as QR codes, to educate potential customers. Consider using QR codes on products whenever possible that link to information about your brand, creating another path where consumers can find your company’s story and learn about what sets it apart from competitors.