One month into 2018 and we have 225 adult use cannabis retailers, 37 adult use delivery services, and 21 testing labs. For more information on a complete Cannabis Compliant Accounting & Tax Solution, please contact us at www.nesteggg.com
One month into 2018 and we have 225 adult use cannabis retailers, 37 adult use delivery services, and 21 testing labs. For more information on a complete Cannabis Compliant Accounting & Tax Solution, please contact us at www.nesteggg.com
We’re not even a month into recreational marijuana sales in California, and already, the state has been issuing 50 marijuana licenses per day. The team at Cannabiz Media has been tracking these licenses closely, and with thousands of licenses still pending in the state’s queue, the team believes this license pace will continue well into the future.
Based on research from the Cannabiz Media License Database, let’s take a closer look at some of the most interesting trends developing in California.
We all know how big the California market is (it’s the sixth largest economy in the world), so it’s not surprising that a large number of marijuana licenses have already been awarded across the value chain. For a bit of background, it helps to understand how the California regulatory structure works when it comes to issuing licenses:
As of January 15, 2018, the Bureau of Cannabis Control (BCC) had issued 622 licenses compared to 349 issued by the Department of Food and Agriculture (DOFA) and 302 by the Department of Public Health (DOH). You can see the breakdown by issuing department in the chart below.
Diving a bit deeper into the data, the Cannabiz Media License Database reveals that a total of 1,273 cannabis licenses have been issued in California. The breakdown by license type follows:
You can see this data in the chart below.
Marijuana was legalized in California long ago, so there are companies doing business in the state that have already established brands and expert management. As a result, some of these companies are early winners of many licenses. In fact, just 15 companies hold nearly 10% of the 1,273 licenses awarded as of January 15, 2018 in California. Here’s the leaderboard to date:
Of particular interest are license holders who are bundling licenses to create larger sites or stacking licenses by obtaining them from different regulators. For example, CA Systematize obtained its eight licenses from all three issuing agencies, including small medical and adult cultivation licenses, adult and medical extraction licenses, and retailer and dispensary licenses. Suffice it to say, this strategy certainly required a highly effective compliance team who had to coordinate multiple licenses from the three different regulators in a very short timeframe.
Another example is Honeydew Farms, which operates in Humboldt County, California. The company pursued a two-step strategy to compete with large grow sites that had permits with other municipalities. First, it secured conditional use permits in Humboldt County. Second, it applied for and received its 29 small/medium outdoor cultivation licenses bringing it to the top of the California license leaderboard at this time.
The number of jurisdictions that have received cannabis licenses changes on a daily basis. As of January 15, 2018, cities that passed marijuana ordinances and issued local permits have reaped the early rewards. In total, 162 jurisdictions in California have received licenses, and just seven cities account for 40% of those licenses. Here is a license breakdown by city:
As mentioned earlier in this article, Cannabiz Media believes this fast-paced licensing trend will continue for some time. In fact, if the trend continues. There could be more than 10,000 licensed California marijuana businesses by the end of 2018!
What remains to be seen is how market maturity will affect license distribution and the overall California cannabis license landscape in terms of the types of licenses awarded, who holds those licenses, and where the businesses holding those licenses are operating. Cannabiz Media will be tracking it all in the Cannabiz Media Licensing Database, so stay tuned for updates.
Thanks to Ed Keating or Cannabiz Media for content “Original” share
We are seeing the California Cannabis Market grow rapidly with every month that passes, it is going to be exciting to see the numbers once we release January’s finding here in a couple of weeks.
According to our most recent consumer survey in California, 38% of adults over the age of 21 were NOT current consumers but were open to trying cannabis in 2018. That means that there is now the possibility of 25 million ADDITIONAL Californians walking through your door.
How are you preparing for this new consumer? Do you know what products and brands they are going to prefer? How much they’ll be willing to pay? We can help answer those questions for you, your buyers, your budtenders, your marketers, etc. We like platforms that collect anonymized data (transactions only – we don’t touch patient information) from hundreds of dispensaries and provide them total market sales data in return, allowing them to answer the above questions and more.
Some of the highlights from a recent data (see below). Also, as a freebie, the subcategory breakout for California concentrates in October 2017:
As you can see, vapes (cartridges) dominate the total category, making up 2/3 of concentrate sales in California, double the share of Colorado vapes. This could potentially indicate that California, in some ways, is already behaving like an adult use market. Within the dashboard, I can click on the vape portion of the pie (or any other portion) and drill down into more interesting insights, such as top brands, products, doses, price-point breakout, disposable vs. not, high-CBD, branded vs. in-house, you name it.
Hundreds of retailers are already using this data to make day-to-day and long-term strategic decisions for their businesses and I wanted to make sure you had the opportunity to do the same.
Dear Marijuana Licensee:
Leaf Data Systems will be implemented as Washington’s traceability system in less than a week. As we approach the transition, there are some important things to know:
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Washington state’s cannabis supply continues to swell, flooding the market and causing both wholesale and retail prices to sink.
With an ounce of legal marijuana flower selling for as low as $40 in the state’s retail stores, both shop owners and producers are seeking changes to Washington’s cannabis regulations.
Lawmakers and industry leaders are discussing ways to correct the market, including:
“Right now we have about three times more product than we have retail sales,” said grower Steve Fuhr, who owns Toucan Farms in Shelton.
‘Bloodbath of prices’
Fuhr said he’s struggling to get more than $1 a gram ($454 a pound) wholesale for the cannabis he grows.
“It’s a bloodbath of prices,” he added.
MacRae tallied the number of plants in spring to arrive at his estimate of a 60% larger supply.
“It’s the biggest harvest we’ve ever seen in the state,” he said.
“It’s unlikely that all of that is going to sell, and if it does, it’s going to sell at even further depressed prices.”
MacRae expects about two-thirds of the harvest will have difficulty selling through the regulated system.
Jeremy Moberg – president of the Washington Sungrowers Industry Association – wonders if prices have gotten so low that retail businesses are cannibalizing themselves.
“You can drive a mile from the Washington State Liquor and Cannabis Board and buy a pretty good-looking ounce for $40,” added Moberg, also CEO of Cannasol Farms, a producer/processor company in Okanogan County.
“Half of the black-market price. That’s how bad it is.”
Logan Bowers, co-owner of Seattle retail shop Hashtag Cannabis, said his most expensive ounce sells for $420.
He also sells ounces at around $100 with tax and expects to begin selling ounces that maintain his quality standards for $75 in the next month or so.
Bowers said he’s heard of a few retailers selling ounces for as low as $40.
“But the quality is awfully suspect at that price,” he said.
Washington’s wholesale oil market is also impacted by the cannabis glut.
Much of the flower from the outdoor harvest isn’t pretty enough to be displayed on a store shelf, so it goes into the oil market.
Growers selling their trim for oil production have “seen that market crater,” Bowers said.
That’s led to lower prices for pre-rolls, for example, because processors are making joints from the flower they’d normally sell for oil production.
Diversion practices
When the price of a legal ounce of cannabis sells for less than a black-market ounce, the potential for diversion is no longer a risk, it’s a certainty, said Moberg.
Retail stores selling at the $40-$50-per-ounce price are moving 400-500 units a day to customers around Washington, Moberg added.
“This is clearly for diversion,” he said. “Is the store breaking the law? Probably not.
“The rule about looping is vague here, and there’s no enforcement.”
“Looping” is where a customer buys multiple ounces of cannabis in one day through repeated trips to the same store.
Colorado retail chain Sweet Leaf has been accused of allowing the looping practice.
Bowers said some industry insiders put a positive spin on the low prices by pointing out the state still receives tax revenue.
But it’s easy to make money selling those ounces across the border in a prohibition state, he added.
Neighboring Idaho, for example, doesn’t allow the sale of either cannabis recreational or medical cannabis.
“It’s important if we want our system to be successful that we be respectful of our neighbors,” Bowers said.
What can be done?
License holders understandably would like to see failing businesses taken off the market rather than have them gobbled up by a more successful company.
Such action would decrease competition and allow the existing businesses a larger market share.
Moberg believes this is the best solution for the supply problem.
“I’m going out of business competing against people going out of business,” he said.
With prices so low, a rash of companies are going belly-up.
But before closing their doors, owners put their licenses up for sale, which likely will fetch a hefty profit from a more successful business, according to Moberg.
The new owners typically have more business savvy and deeper pockets, Moberg added, so they’ll likely end up adding to Washington’s marijuana surplus.
Meanwhile, some business owners have called for the state to review canopy limits and consider reducing the cultivation facility size.
And, according to Bowers, the state’s cannabis board has begun looking into that exact issue.
Under the current regulations, each large-scale cultivation license (Tier 3) is allowed 30,000 square feet of canopy and each company can own up to three licenses.
That’s 90,000 square feet of canopy, which “grows a lot of pot,” Bowers said. “You only need about 270,000 square feet to grow for the entire state.”
There are currently about 1,100 growers in Washington.
“At the current limits that are licensed, we could grow enough (cannabis) to service California, Oregon and Washington combined,” Bowers added.
Moberg thinks reducing the canopy size is the wrong answer.
“Particularly when you haven’t done everything in your toolbelt to take care of the problem,” Moberg said. “The winners and losers all get hurt.”
Another looming problem: The state still has 77 outstanding production licenses from the original round of 2013 applications.
“Let’s stop adding any more,” Moberg said.
Thanks to Bart Schaneman @mjbizdaily for content share
Annual licensing fee for events, physical modification, test labs, distribution transporter retailer, microbusiness based on max $ value
Cultivator is separate
Article 3. Licensing
(a) The application fee for an annual license under section 5002 of this division, a cannabis event organizer license under section 5600 of this division, a temporary cannabis event license under section 5601 of this division for each event, and physical modification of the premises under section 5027 of this division shall be paid by an applicant or licensee as provided by this division. Applicants and licensees shall pay the appropriate fee as outlined in the following fee schedule.
Application Fee Schedule
License Type Fee Per A location All Annual Licenses $ 1,000
Cannabis Event Organizer License $ 1,000
Temporary Cannabis Event License $ 1,000
Physical Modification of Premises $ 500
(b) The annual licensing fee for each license shall be paid by an applicant or licensee as provided by this. division.
(c) In determining the appropriate license fee to be chazged, each applicant or licensee shall estimate the maximum dollar value of its planned operation in terms of the value of the product expected to be tested, distributed, transported, retailed, cultivated and/or manufactured as determined in assessing the 15%excise taac pursuant to Revenue and Taxation Code section 340 L 1. The applicant or licensee will use the maximum dollar value of its planned operation to determine the appropriate fee as outlined in the following fee schedule.
Bureau of Cannabis Control Emergency Regulation Text Page 15 of ll5
Annual License Fee Schedule
License Type Operarions Fee Per $ Max. Per License) License Testing Laboratory up to 50 million $ 20,000
greater than 50 million to 500 million $ 45,000
greater than 500 million $ 90,000
Distributor up to 2 million $ 1,200
greater than 2 million to 8 million $ 5,000
greater than 8 million to 80 million $ 36,000
greater than 80 million $125,000
Distributor Transport Only up to 2 million $500
Self-Distribution greater than 2 million to 8 million $2,000
greater than 2 million to 8 million $2,000
Distributor Transport Only up to 2 million $800
greater than 2 million to 8 million $2,500
Retailer up to 0.5 million $ 4,000
greater than 0.5 million to 1.5 millioxi $ 12,000
greater than 1.5 million to 4.5 million $ 36,000
greater than 4.5 million $ 72,000
Microbusiness up to 0.5 million $ 5,000
greater than 0.5 million to 1.5 million $ 15,000
Beater than 1.5 million to 4.5 million $ 42,000
greater than 4.5 million $ 120,000
Breau of Cannabis Control Emergency Regulation Text Page 16 of 115
(d) Notwithstanding the fees identified above, cannabis event organizers shall pay the appropriate fee as outlined in the following fee schedule.
Annual License Fee Schedule for Cannabis Event Organizers
License Type Planned Operations. Fee Per (Number of Operations) License
Event Organizer 1-10 events annually $ 5,000
greater than l0 events annually $ 10,000
(e) No license shall be issued or renewed before the license fee is paid to the Bureau.
(fl All fees are nonrefundable.
Authority: Section 26013, Business and Professions Code. Reference: Sections 26051.5 and 26180, Business and Professions Code.
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