Call us Coming Soon

Support

Blog

Federal policy kills buzz for advertising pot

America’s cannabis companies are racing to build national brands and market their wares to mainstream consumers. There’s just one problem: It’s hard to advertise your product when the federal government considers you a drug dealer.

Facebook, which like Google prohibits marijuana ads, has kicked some weed sellers off Instagram. CBS declined to air a commercial touting the benefits of medical marijuana during the Super Bowl. Much the way banks are unwilling to finance cannabis startups, television networks and online advertising marketplaces are understandably cautious because the Feds still classify marijuana as a Schedule 1 drug alongside heroin and ecstasy.

With a growing number of states legalizing weed for recreational and medical purposes, the U.S. market could surge eight-fold to $80 billion in sales by 2030, according to Cowen & Co. But it’s hard to see that happening unless companies can market their wares the way beer and liquor companies do. After decades of prohibition, many consumers need a push to give marijuana a try.

“The public has a stigmatized view of the product but legitimate business owners can’t reach them; it creates mistrust,” says Kyle Porter, who runs CMW Media, which does marketing and public relations for cannabis companies. “We’re really limited in how we can reach customers.”

For several years, marijuana companies have considered Instagram an ideal place to build their brands. In an effort to position weed as a mainstream product, they post pictures of buds and joints and show people hiking with vape pens or relaxing on the beach with cannabis edibles. But Instagram, a Facebook property, doesn’t let weed sellers advertise. In a statement, the company said that while it allows “marijuana advocacy content,” posts promoting the sale of cannabis are verboten. Dispensaries are prohibited from providing contact information, including phone numbers and street addresses, “regardless of state or country.”

Though many weed sellers — legal and black market — continue to operate accounts on Instagram, some complain that the social-media site shuts down their accounts with little warning or explanation. Binske, a Colorado company that sells vape pens, bud and cannabis-infused chocolates made with Peruvian cacao, spent the better part of two years building up its brand on Instagram. Then in September, just a few days after the company paid Snoop Dogg $30,000 to DJ a promotional event at a Las Vegas dispensary, the account disappeared.

Concerned about losing social-media momentum, Binske vice president of business development Alex Pasternack spent two weeks submitting documents to Instagram, trying to prove his company was legit. Then, without notice, the account came back — with its more than 12,000 followers intact.

“Everyone is just making up their own rules,” says Pasternack, who’s looking at other ways to get the word out. Binske now has licensing deals with companies that will use its recipes and branding in California, Nevada and Florida, partnerships the company hopes will help double revenue this year. This type of arrangement is key in an industry where companies are still not allowed to ship products from one state to another.

Caliva, one of California’s top-selling marijuana brands, says it has lost five or six Instagram accounts over the last couple of years. It sponsors education events at Bay Area yoga studios and senior centers, where representatives hold forth on the medical benefits of marijuana, how to fit edibles into an active lifestyle and other topics. Many companies rely on the “bud tenders” manning the counter at dispensaries around California. If asked for recommendations, they can steer customers toward certain brands.

“Our hands are really tied from a marketing perspective,” says Caliva’s branding chief Rosie Rothrock. “So we rely heavily on those relationships.”

MedMen, arguably the best-known name in the industry, is using a time-tested marketing trick from the brick-and-mortar playbook: opening stores. With a market value of roughly $1.5 billion, the company has spent heavily on licenses and real estate to operate stores at high-profile spots in Los Angeles, Las Vegas and even New York City, where it has a location not far from the Public Library on Fifth Avenue. New York state has a small medical program and is expected to approve recreational weed this year. Until then, the real estate is an “investment in a flagship,” says David Dancer, the company’s chief marketing officer.

While MedMen has also lost Instagram accounts, it’s finding that some marketing channels are opening up as attitudes about marijuana shift across the U.S. The company, which sells weed in distinctive red bags, has billboards in California and runs spots during the Howard Stern show on Sirius radio. It has also started placing print ads in Conde Nast publications.

Marijuana article strikes a nerve

The joint you smoked last night won’t give you schizophrenia. It also won’t make you assault your neighbor.

You might not know that after reading a recent New Yorker article that draws connection between marijuana use, schizophrenia and violent crimes in Washington.

In the article — “Is Marijuana as Safe as We Think?” — writer Malcolm Gladwell focused on a 2017 report by the National Academy of Medicine that examined the scientific evidence of the health effects and therapeutic purposes of cannabis and cannabinoids. Gladwell’s article also draws on a new book by former New York Times reporter Alex Berenson called “Tell Your Children: The Truth about Marijuana, Mental Health and Violence.”

Gladwell’s article and a subsequent New York Times op-ed by Berenson, was quickly rebuked by marijuana researchers and legalization advocates, who took issue with Gladwell’s selective use of data and Berenson’s linking marijuana use to schizophrenia.

Beatriz Carlini, a senior research scientist at the University of Washington’s Alcohol and Drug Abuse Institute, said she was “disheartened” by the New Yorker article. Gladwell draws a connection between legal marijuana and an increase in crime, citing a 17 percent rise in aggravated assaults in Washington state from 2013 to 2017. The problem, Carlini said, is that there was a one-year decrease right before that, so after 2013 the numbers are just creeping back up to where they were before.

FBI data also estimate that, in every year between 2007 and 2017, Washington has had less violent crime per capita than the country as a whole. (Violent crimes are defined as aggravated assault, murder, non-negligent manslaughter, robbery and rape.) In 2017, for example, Washington had 304.5 violent-crime incidents per 100,000 people, compared with the national rate of 394 per 100,000 people.

The New York Times, in its data blog The Upshot, featured work by a University of Oregon economics professor whose model showed that Washington and Colorado had lower crime rates crime after recreational marijuana was legalized.

Carlini noted that other things were going on during that time — most notably, the privatization of liquor sales in 2012, which made alcohol easier to get in Washington.

“Alcohol has been linked to violence very clearly, although it is not the only factor,” Carlini said. “The same thing cannot be said about cannabis, except for this article.”

By highlighting certain parts of the National Academy of Medicine report and Berenson’s writings, Gladwell draws lines not only between marijuana and violent crime, but also between marijuana and schizophrenia.

Ziva Cooper, one of the authors of the National Academy of Medicine report, took issue with Berenson’s op-ed confusing correlation and causation.

Cooper, who is the research director at UCLA’s Cannabis Research Initiative, wrote in a series of Twitter posts that the Academy found an association between cannabis use and schizophrenia. Researchers also found an association between using cannabis and improved cognitive outcomes for people with psychotic disorders, which she points out wasn’t mentioned in Berenson’s piece.

“We did NOT conclude that cannabis causes schizophrenia,” she wrote.

“Since the report, we now know that genetic risk for schizophrenia predicts cannabis use, shedding some light on the potential direction of the association between cannabis use and schizophrenia.

“We also now know that under placebo-controlled conditions, (cannabidiol, or CBD) improves outcomes in patients with schizophrenia when given as an adjunct med, showing that cannabinoids (not necessarily cannabis) improve symptoms,” Cooper wrote.

Not everyone in the field of cannabis and cannabinoid research was put off by the articles. One of those was Denise Walker, whose position as a research associate professor at the School of Social Work at the University of Washington has her working in treatment and intervention for people with marijuana disorders.

Walker said that while Gladwell’s article wasn’t ideal, it does raise questions worth discussing, especially about the difficulty of studying marijuana.

“He was getting into some issues that need to be addressed and can’t be ignored,” Walker said.

The federal government classifies marijuana as a Schedule 1 controlled substance, the same category of drug as heroin. That makes marijuana hard for researchers to get their hands on; they can obtain it only from a federally sanctioned growing facility at the University of Mississippi. Walker said the government marijuana doesn’t reflect the high-potency kind used around the country.

Can CBD oil ease pain for pets?

Pot for pets? It may be the next step in the ever-evolving legitimization of medicinal marijuana, and a trio of South Florida companies are competing to become the Blue Apron of cannabis oils for pets.

Three companies formed in recent years are selling cannabidiol (CBD) products that owners and enthusiasts claim might be more effective than traditional veterinary medicines at treating chronic pain, inflammation and anxiety in dogs and cats.

But their growth prospects face a big hurdle: While early research suggests that the treatments show promise, the legality of the products are widely disputed, preventing pet owners from buying them at their favorite chain pet store or through the most popular e-commerce sites.

That hasn’t stopped Delray Beach-based Prana Pets, Plantation-based King Kanine and Fort Lauderdale-based Diamond CBD from joining a growing number of new companies around the globe that promote and distribute CBD oil products, including oral liquids, chews, balms and sprays for pets.

“CBD is a gold rush, and a lot of companies have just jumped on the bandwagon,” said Jeff Riman, founder and co-owner of King Kanine, which formed in 2015 and now has, he said, hundreds of thousands of customers and sales in the millions of dollars.

A few miles north, Prana Pets’ Brad Solomon and his partner, Brad Noonan, sell CBD oils alone and in combination with herbal products formulated to treat various ailments.

“It actually works,” Solomon said. The partners formed the company in 2016 and saw their sales of CBD oil increase to about 20,000 in 2018, Solomon said.

July 4 demand

Demand peaks around July 4, when loud and frequent fireworks displays turn millions of U.S. dogs into quivering, drooling, bulging-eyed basket cases, Solomon and Riman said.

Sellers are quick to point out that CBD oils don’t get pets high. They point to lab tests that show the products contain only trace amounts of THC, or tetrahydrocannabinols, the ingredient that gets marijuana users high, and say their CBD oils are extracted from marijuana’s low-THC-producing cousin, commonly known as industrial hemp.

In testimonials published on CBD distributors’ websites, customers report strong results after using CBD oils to treat their pets’ arthritis, hip dysplasia, ligament tears, epileptic seizures, cancer pain and other problems.

A review posted on King Kanine’s website by “Jeff C.” reported: “It’s been almost 2 months since I upped Rico’s dosage to medicinal level, and I’m amazed. His limping from hip arthritis has basically disappeared and his luxating patella issues have calmed down substantially. Rico (used) to be a slow walker, but now I have to pick up my step to keep up with him.”

Lisa Turk, president of the Pompano Beach-based nonprofit Labrador Retriever Rescue of Florida, said she has seen results after giving CBD oils to her own two dogs and three rescue dogs she fostered. One had severe separation anxiety and “took the place apart if I left him alone,” she said. “It was so bad my husband and I had to take turns leaving our home. It was the worst five months of our lives. We were prisoners to a foster dog.”

Used in combination with a strategy of getting the dog used to being alone for gradually increasing periods of time, the treatments calmed the dog to the point that it could be adopted and no longer has to be crated when left alone, Turk said.

Another dog had such severe thunderstorm fear, she had to take him into the shower stall and put a blanket over him to calm him down, she said. “I was worried the dog would have a heart attack,” she said. Now, a pre-storm CBD oil treatment keeps the dog calm, she said.

Not a miracle drug

Andrew Turkell, a Boca Raton-based holistic veterinarian, said he sees promise in CBD use in combination with other treatments, particularly to treat pain, cancer, and separation anxiety.

But he cautions it’s not a miracle drug. Of about 100 pet owners who have tried it at his recommendation over the past couple of years, about half told him they saw no effects, he said. “I’ve seen it work in some cases and not work in similar cases. Everything is different.”

Cannabidiol derives its healing and pain-relieving powers by interacting with receptors that regulate a wide range of physiological and neurological functions, advocates say.

How Gov. Inslee’s marijuana pardon plan measures up

LONGVIEW — Washington Gov. Jay Inslee announced Friday he will offer pardons to people convicted of minor marijuana possession between 1998 and 2012. But those offenders may be better off under other alternatives available to clear their names.

Someone pardoned under Inslee’s plan, for example, would still have to answer “yes” to the question “Have you ever been convicted of a crime?” on housing and other forms, although they would be able to clarify they have been pardoned. A pardon does not expunge a crime from someone’s record.

By contrast, getting a conviction “vacated” wipes away a sentence and can set aside a guilty verdict.

But vacating a sentence comes with certain requirements that a pardon doesn’t, and a spokesman for the governor’s office said Inslee’s pardon plan can be easier to access.

“A pardon is going to have less impact than if one would have vacated a conviction,” Governor’s office Deputy General Counsel Tip Wonhoff said by email Tuesday.

However, pursuing Inslee’s offer of clemency is much easier, he said. Applicants fill out a simple web form without the assistance of a lawyer and with no need to go to a courthouse.

“We recognize the limits of a pardon, but it is better than nothing,” Wonhoff said.

By contrast, to get a conviction expunged requires filing paperwork with the court. In Cowlitz County, this means paying a $20 fee and waiting one or two weeks for a judge to consider the request, Cowlitz Court Administrator Dee Wirkkala said. She added that the process doesn’t require attending any hearings.

Roughly 3,500 people in Washington would be eligible for Inslee’s pardon, according to the Governor’s office. Officials here do not know how many offenders could be eligible for Inslee’s clemency program. However, assuming equal conviction rates across the state, about 51 people in Cowlitz County may be eligible.

Inslee’s initiative aims to ease some of the social and financial burdens imposed by a marijuana conviction, because cannabis was legalized more than six years ago. Reporting those convictions can make it more difficult to find housing, education or employment, his office said.

“This is a small step, but one that moves us in the direction of correcting injustices that disproportionately affected communities of color,” according to the governor’s website. “A successful pardon of a marijuana possession conviction can assist with barriers to housing, employment and education.”

Which option is better — pardon or vacation — depends on the conviction. A pardon can be granted even if one hasn’t paid off all his fines for a sentence or if he’s currently under a civil restraining order, unlike a motion to vacate.

However, “In my mind it’s much easier, if you qualify, to vacate your conviction,” Cowlitz County Prosecutor Ryan Jurvakainen said Tuesday. “(It’s) easier and more time efficient to go to the court of your conviction and ask for a vacation if you’ve paid all your dues and done everything necessary.”

Inslee’s pardons come with restrictions: The conviction must be for misdemeanor adult marijuana possession and must be the person’s only conviction (meaning those convicted of multiple possession charges would be ineligible). And it must have occurred between Jan. 1, 1998, and Dec. 5, 2012 (from when medicinal cannabis was legalized to when it was legalized recreationally).

However, that pardoned person “would still have to identify a conviction,” Jurvakainen said. “In order to say, ‘I wasn’t convicted of a crime,’ you still have to go to the court, which somebody can already do, regardless of the governor’s initiative.”

The marijuana pardon and vacating processes can both only be used once, for a single conviction, and will remove the conviction from public crime listings. Neither can be sought if the applicant has any pending criminal charges. And the requests are generally guaranteed as long as all conditions are met, although the decision is up to the governor or a judge.

While “there is no timeline” for marijuana convictions pardoned through the governor’s office, Wonhoff said he anticipates the requests being processed in a matter of “weeks versus months.”

The form to apply for a pardon request from Gov. Inslee can be found at: https://www.governor.wa.gov/marijuanajustice.

The form to apply to vacate a sentence in the Cowlitz district court can be found at: http://www.co.cowlitz.wa.us/index.aspx?NID=876.

The future of pot in Washington: State regulators talk marijuana ahead of 5-year anniversary of sales

SPOKANE — Nearly five years on, regulators of Washington state’s legal marijuana industry say there’s more work to be done on keeping pot out of the hands of children and assisting growers facing falling revenues due to a glut of product.

“We need to be well-positioned for an eventual national legalization, and what does that require,” said Jane Rushford, who chairs the three-member policy-making arm of the Liquor and Cannabis Board, in an interview Monday recorded for The Spokesman-Review’s Newsmakers podcast. “How do we get really smart about doing the things we can do now?”

Representatives of the state’s Liquor and Cannabis Board will meet at Spokane City Hall on Wednesday to consider changes to rules governing the labeling and visual appeal of cannabis products, just one of many regulatory issues that have cropped up in the now multibillion dollar industry. That includes candies, cookies and other sweets that board members had originally considered to remove from shelves beginning in April, but producers and processors are now being given an additional year to comply with new rules that prohibit the sale of marijuana edibles that “are brightly colored” or look similar to products marketed toward children.

The board was initially prompted to act after complaints from “members of the public, folks in the prevention community,” said Rick Garza, agency director of the Liquor and Cannabis Board. Both he and Rushford acknowledged that state laws prohibit minors from entering retail marijuana stores. But passing the rule would limit exposure to the drug in the home, Rushford said.

“Any product that has THC, the adult consumer should protect youth and children from that,” she said, referring to the psychoactive element in marijuana. “If you look at a cookie, how does a child distinguish a marijuana-infused cookie from a regular, normal cookie? It becomes that full spectrum, of how do we take all the steps we can?”

Growers have been banding together to counter local air pollution regulations that took effect last year, arguing that the continued plummeting price of marijuana sold wholesale to processors and retailers is limiting their ability to cover the additional regulatory cost of doing business. In late December, industry analysts at Cannabis Benchmarks, an analytic firm based in Connecticut, reported wholesale prices had continued to tumble throughout 2018, raising “the question of where the market’s bottom might lie.”

Garza said the growing pains the industry is going through can be linked back to the same phenomenon that occurred in the 1970s when Washington’s wineries were beholden to distributors rather than being able to sell their product directly. State laws prohibit Washington’s marijuana producers from also holding a retail license in a process known as “vertical integration,” a holdover from state laws governing liquor production and sale after alcohol sales were banned in the United States in the early 20th century.

“That has created, probably if there was a fault in that initiative, was not allowing for the vertical integration,” Garza said.

Other states that have legalized the sale of marijuana, notably Colorado, have allowed marijuana producers and processors to also obtain retail licenses.

Another area where Washington differs from other states permitting cannabis sales is in the testing of flower for pesticides. At least one private retailer in Seattle has begun testing products on their shelves for prohibited substances, in the absence of a state law or rule mandating such tests. Washington-grown pot is tested for bacteria and other potentially contaminating substances.

Garza said the board would consider mandatory pesticide testing soon. The hold-up has been the absence of data to indicate what levels of certain substances are safe, as the drug’s classification as illegal under federal law has limited research opportunities.

“When you take action against a licensee for pesticide use, remember that you’re going to have to go to court, or you’re going to have to go before a judge, and you’re going to have to prove that these action levels that you’ve placed into rule are acceptable,” he said. “And how are you going to do that?”

The Liquor and Cannabis Board will hold its monthly meeting beginning at 10 a.m. Wednesday in the lower level of Spokane City Hall, 808 W. Spokane Falls Blvd. The public will be allowed to speak during an open forum period at the end of the meeting, as well as weigh in on proposed changes to the state’s laws on vaping.

The entirety of the conversation can be heard at spokesman.com/podcasts.

Listen to “Washington State Liquor Cannabis Board Director Rick Garza and Chair Jane Rushford” on Spreaker.

Main Street Marijuana near $100 million in sales

Downtown Vancouver’s Main Street Marijuana has consistently held an unbeatable lead as the state’s highest-selling recreational cannabis store, and it’s quickly approaching a major milestone: passing $100 million in total lifetime sales.

The store’s owners expect to cross the threshold on Jan. 15 or 16.

“We’re the first one in the state to do it,” says Adam Hamide, one of the store’s three co-owners. “That’s a lot of tax dollars we’re taking out of the hands of criminals.”

The store’s net sales stand at approximately $68 million — with more collected for state marijuana taxes and sales taxes.

The marijuana taxes are collected by the Washington State Liquor and Cannabis Board, and the funding is distributed to a variety of state agencies, as well as local governments to help fund enforcement efforts.

According to a board report, the state took in $319 million in marijuana revenue in 2017. It said $145.7 million of that total went to fund health care services, $96.6 million went to the state’s general fund, $35.1 million went to education and prevention efforts, $1 million went to research, $6 million went to cities and counties and $15.1 million went to other agencies.

State of the market

With its lifetime total of around $68 million in sales after taxes, Main Street easily ranks first out of all of the state’s retail locations. The next runner-up is Uncle Ike’s in Seattle, with about $48 million in after-tax lifetime sales as of October, according to the industry tracking website 502data.com.

Main Street also consistently ranks first in the state in monthly sales, although it does have some competition in that department: Green2Go in Kennewick has come close to dethroning Main Street in monthly sales, a feat Hamide attributes to the store’s location near several areas with local bans on cannabis retailers — Green2Go’s website describes it as the “Tri-Cities only Recreation Cannabis Retailer.”

Despite remaining at the top of the pack, Main Street’s sales have been relatively flat for the past two years, hovering slightly above $6 million per quarter (pre-tax). But in the current market, Hamide says that’s an achievement.

Wholesale cannabis costs have plummeted in Washington due to oversaturation on the producer side of the market, and many marijuana retailers have been feeling the pinch of the falling prices, including Main Street.

“Back when we first opened, we were charging $40 per gram,” Hamide says. “Now we have three and a half grams for $15.”

Main Street has been able to make up the difference by consistently growing its customer base, Hamide says; average customer tickets have declined by about 10 percent, but foot traffic and transactions have gone up by about the same margin.

“We’re actually serving more customers than we ever have,” he says. “We’re happy where we’re at.”

The store employs 48 people, with an average of about 16 employees on site at a time. Foot traffic ranges from 1,700 to 2,000 customers per day, depending on the day of the week.

“On a busy day, like a Friday at peak hours, we’ll have as many as 19 (staff) on the floor and six in the back,” says co-owner Jason Keller. “Friday is definitely the busiest.”

Despite the legalization of recreational cannabis in Oregon, Hamide and Keller estimate that Oregon customers still make up about a quarter of Main Street’s overall foot traffic. The owners say the store’s large and popular product selection has allowed it to remain competitive in the Portland market.

Main Street’s large lineup stems in part from a difference between Washington and Oregon marijuana laws, Hamide says: Oregon law allows for vertically integrated cannabis businesses that operate as both producers and retail sellers, but Washington is more restrictive and keeps the two separate.

With both states facing overcrowded production markets, the vertically integrated Oregon stores are scrambling to sell their own products first, Hamide says, which limits their selection. Since Main Street relies entirely on separate suppliers, it doesn’t have to prioritize and can take advantage of the cheap wholesale prices to offer a much wider selection.

Growing the business

Hamide and Keller say the store’s success began with a case of lucky timing, but the two of them — along with the third co-owner, Hamide’s brother Ramsey — were able to maintain their momentum by making continued investments and improvements, expanding the store’s selection and maintaining low prices.

“Focusing in on what we have has allowed us to do what we do exceptionally well,” Hamide says.

The lucky circumstance at the start was the store’s location: It opened in July 2014 as one of the few initial locations in Vancouver, at a time when recreational marijuana was not yet legalized across the river in Oregon.

The vast majority of the store’s traffic during the initial months came from Portland, Hamide says, and the store’s comparatively large market area gave it a major lead in sales over other Washington stores. Net sales averaged just over $200,000 for the first eight months, then began to spike, reaching a high point of more than $2 million per month in the summer of 2015, according to 502data.

The surge generated enough revenue to allow the owners to lower their prices, which in turn attracted more customers, and so on.

“It kind of fed on itself,” Hamide says. “We haven’t looked back. We’ve had that momentum ever since, and we’ve kept it.”

The store’s best-selling months to date were July, August and September of 2015 — the final three months before recreational sales became legal in Oregon. Keller says that at the time, he and Hamide were worried about losing Oregon customers to the hundreds of new competitors that suddenly opened up just a few miles away.

Sales did drop substantially in October and November 2015, but recovered in subsequent months, eventually stabilizing at a rate of $6 million per quarter, which has remained consistent since the second half of 2016, according to 502data and the store’s own records.

Main Street’s customer base eventually transitioned to be more local. The owners don’t keep records of customers’ home states, but Hamide says that based on ID checks at the front door, roughly three-quarters of Main Street’s customers now hail from Washington.

In addition to lowering their prices, the owners have also put their proceeds toward expanding the business; Main Street now operates a second Vancouver location and a third in Longview — which has become the top-selling retailer in Cowlitz County, Hamide notes.

The original location has also gradually expanded from a starting size of about 1,000 square feet. At one point in 2017, the owners felt that the business had outgrown its space and they strongly considered moving, but ultimately were able to expand into adjacent suites in the same building, tearing out cosmetic walls to create the current 5,000-square-foot space.

Future plans

The Hamide brothers previously worked as online ticket brokers, and Keller worked at a security company, so opening up a physical retail store was new territory for them — let alone operating what would turn out to be the biggest marijuana retail location in the state.

“I have an MBA, but it was still a learning curve,” Hamide says. “Having employees and a brick-and-mortar store — none of us had that experience.”

Hamide says the co-owners initially opened the store because they saw it as a business opportunity, but he says he’s become proud of the store’s role in what he describes as bringing the marijuana industry “out of the shadows,” and generating new revenue for the state.

As the store has continued to grow, Hamide says the owners have tried to reach out to the surrounding area and find ways to better integrate Main Street into the community, such as by joining the Uptown Village Association and helping to organize street cleanup events.

“A lot of people view marijuana stores as liabilities, and we want to be viewed as an asset,” he says. “I think we’ve done that.”

Looking toward upcoming years, Hamid says he expects the supplier oversaturation problem to begin correcting itself as suppliers merge or scale back their operations, so he says he’s not concerned about further price cuts impacting Main Street.

“I think they’re as low as they’re going to be able to go,” he says.

Oregon again sees huge 2018 marijuana harvest

SALEM, Ore — For the second year in a row, Oregon cannabis farmers have harvested more than a million pounds of usable marijuana.

The huge harvest (more than 453,592 kilograms) is again driving down prices for consumers and putting pressure on growers who aren’t getting the price they hoped for after a similar phenomenon in 2017, The Bulletin reported Thursday.

Oregon’s cannabis market is limited to sales within the state’s borders, yet the state of about 4 million people has 1,107 licensed active producers and another 900 producers seeking licenses from the Oregon Liquor Control Commission.

There is also no cap on the number of licenses issued by the state, but the commission did place a temporary freeze on new applications last summer to try to address the glut.

“Everyone is concerned about this,” said Adam Smith, Craft Cannabis Alliance executive director. “You’ll see people going out of business in the spring when it’s planting time. There are far too many in the industry in distress. No one is making money here.”

Growers harvested more than 2.5 million pounds of cannabis in October. Of that so-called wet harvest, 1.3 million pounds of usable marijuana was logged into the Oregon Liquor Control Commission’s cannabis tracking system as of December, according to the agency’s latest report .

In 2017, the fall harvest reaped about 1 million pounds of usable marijuana.

Last year, cannabis farmers statewide cut back the amount they planted, while others didn’t plant at all, and some surrendered their licenses, said Don Morse, a Portland cannabis consultant. As of Wednesday, 70 grower licenses were expired, and 57 licenses were surrendered, according to commission data.

Buyers market

There is one silver lining: People are buying so much pot that Oregon’s marijuana tax collections have exceeded the forecast by 7 percent in the 2017-2019 biennium, according to the Oregon Office of Economic Analysis.

State economists noted that ongoing growth in sales volumes has been more than enough to make up for falling prices.

“Because of the federal illegality, there is not a balance between suppliers and demand,” said Beau Whitney, senior economist and vice president of New Frontier Data, a cannabis market research firm. “If it was an open market and it was legal throughout the United States, there would be demand and prices would stabilize.”

Prices for pot last year plunged as much as 50 percent, Whitney said. This year could see prices drop by 50 percent more, he said.

“There is no short-term fix for this,” Whitney said. “You have a lot of supply in the system, and it will take a while for it to flow through the system.”

Gov. Kate Brown said Thursday the discrepancy between state and federal laws is the biggest hurdle for alleviating oversupply.

The newly sworn-in Congress could push through changes to help growers, she added. The U.S. House is controlled by Democrats, including some who favor making marijuana legal at the federal level, such as Oregon Rep. Earl Blumenauer.

Brown said she also hopes that Congress will act to allow banks to do business with the marijuana industry.

“This Congress can be of incredible use to us,” she said.

Oregon State Sen. Floyd Prozanski, a Democrat from Eugene, plans to reintroduce parts of a 2017 bill that would have allowed Oregon to enter into agreements with California and Washington for coordination of marijuana-related businesses, The Statesman Journal reported.

Legal pot industry toasts banner year

PORTLAND — The past year was a 12-month champagne toast for the legal marijuana industry as the global market exploded and cannabis pushed its way further into the financial and cultural mainstream.

Liberal California became the largest legal U.S. marketplace, conservative Utah and Oklahoma embraced medical marijuana, and the U.S. East Coast got its first commercial pot shops. Canada ushered in broad legalization, and Mexico’s Supreme Court set the stage for that country to follow.

U.S. drug regulators approved the first marijuana-based pharmaceutical to treat kids with a form of epilepsy, and billions of investment dollars poured into cannabis companies. Even main street brands like Coca-Cola are considering joining the party.

“I have been working on this for decades, and this was the year that the movement crested ,” said U.S. Rep. Earl Blumenauer, an Oregon Democrat working to overturn the federal ban on pot. “It’s clear that this is all coming to a head.”

With buzz building across the globe, the momentum will continue into 2019.

Luxembourg is poised to become the first European country to legalize recreational marijuana, and South Africa is moving in that direction. Israel’s Parliament approved a law allowing exports of medical marijuana. Thailand legalized medicinal use of marijuana, and other Southeastern Asian countries may follow South Korea’s lead in legalizing cannabidiol, or CBD. It’s a non-psychoactive compound found in marijuana and hemp plants and used for treatment of certain medical problems.

“It’s not just the U.S. now. It’s spreading,” said Ben Curren, CEO of Green Bits, a San Jose, Calif., company that develops software for marijuana retailers and businesses.

Curren’s firm is one of many that blossomed as the industry grew. He started the company in 2014 with two friends. Now, he has 85 employees, and the company’s software processes $2.5 billion in sales transactions a year for more than 1,000 U.S. retail stores and dispensaries.

Green Bits raised $17 million in April, pulling in money from investment firms including Snoop Dogg’s Casa Verde Capital. Curren hopes to expand internationally by 2020.

“A lot of the problem is keeping up with growth,” he said.

Legal marijuana was a $10.4 billion industry in the U.S. in 2018 with a quarter-million jobs devoted just to the handling of marijuana plants, said Beau Whitney, vice president and senior economist at New Frontier Data, a leading cannabis market research and data analysis firm. There are many other jobs that don’t involve direct work with the plants, but they are harder to quantify, Whitney said.

Investors poured $10 billion into cannabis in North America in 2018, twice what was invested in the last three years combined, he said, and the combined North American market is expected to reach more than $16 billion in 2019.

“Investors are getting much savvier when it comes to this space because even just a couple of years ago, you’d throw money at it and hope that something would stick,” he said. “But now investors are much more discerning.”

It’s spreading

Increasingly, U.S. lawmakers see that success and want it for their states.

Nearly two-thirds of U.S. states now have legalized some form of medical marijuana.

Voters in November made Michigan the 10th state — and first in the Midwest — to legalize recreational marijuana. Governors in New York and New Jersey are pushing for a similar law in their states next year, and momentum for broad legalization is building in Pennsylvania and Illinois.

“Let’s legalize the adult use of recreational marijuana once and for all,” New York Gov. Andrew Cuomo said last week.

The East Coast’s first recreational pot shops opened in November in Massachusetts.

State lawmakers in Nebraska just formed a campaign committee to put a medical cannabis initiative to voters in 2020. Nebraska shares a border with Colorado, one of the first two states to legalize recreational marijuana, and Iowa, which recently started a limited medical marijuana program.

“Attitudes have been rapidly evolving and changing. I know that my attitude toward it has also changed,” said Nebraska state Sen. Adam Morfeld, a Democrat. “Seeing the medical benefits and seeing other states implement it … has convinced me that it’s not the dangerous drug it’s made out to be.”

With all its success, the U.S. marijuana industry continues to be undercut by a robust black market and federal law that treats marijuana as a controlled substance like heroin. Financial institutions are skittish about cannabis businesses, even in U.S. states where they are legal, and investors until recently have been reluctant to put their money behind pot.

Marijuana businesses can’t deduct their business expenses on their federal taxes and face huge challenges getting insurance and finding real estate for their brick-and-mortar operations.

Oregon may look to export marijuana

SALEM, Ore. (AP) — Marijuana could take the next step toward joining pinot noir and craft beer on Oregon’s list of famous exports, under a proposal likely to go before state lawmakers in the new year.

The Statesman Journal reports that the Craft Cannabis Alliance, a business association led by founder and executive director Adam Smith, is working with legislators to let Oregon start exporting pot to other legal-weed states by 2021.

Among them is Sen. Floyd Prozanski, D-Eugene, who said he also plans to reintroduce provisions from Senate Bill 1042, a similar proposal that died in the statehouse in 2017.

This comes as the state’s legal weed industry has faced plummeting prices over the past year due to demand not keeping up with supply. Also at issue is whether bad actors are funneling marijuana into the lucrative black market.

The proposals represent how advocates are trying to move pot onto the forbidden superhighway of interstate trade, which is fraught with regulatory roadblocks. Oregon demands weed grown or sold here stay within state borders, and marijuana remains federally illegal.

Wholesalers could ship across state lines so long as Oregon’s governor had made a pact with the receiving state to allow those deliveries, according to draft language reviewed by the Statesman Journal.

Still, opponents aren’t convinced Oregon would find any takers. “I can’t imagine any state would agree to do this with Oregon,” said Kevin Sabet, president of anti-pot group Smart Approaches to Marijuana.

“It looks like a desperate attempt to tackle the out of control black market production that has happened in Oregon since legalization,” Sabet said. “The state should be focusing on how to reduce overall demand and supply.”

Marijuana businessman and former federal inmate faces new legal problems

SPOKANE — Cip Paulsen, a former federal inmate-turned marijuana businessman, is fighting for control of his firm in court against angry investors and new drug charges.

Paulsen’s licensed marijuana business, Growstate, is in the hands of a court-appointed receiver after three early investors sought repayment of their initial $625,000 investment in 2014.

Financial documents filed with the court last week indicate debts totaling more than $5 million, a bulk of it five-figure monthly utility bills from Avista Corp. for powering the roughly 130,000-square-foot former Costco warehouse on Third Avenue in Spokane where the pot was grown. To save on those electric costs, Paulsen recently switched to processing existing plants for oils and extracts, rather than growing marijuana, according to court filings.

Even if Paulsen can pay off his creditors, it’s unclear whether he’ll be able to retain his business. A pair of arrests earlier this year on drug possession and driving under the influence charges could disqualify him under state rules that prohibit convicted criminals from participating in Washington’s legal marijuana industry.

Paulsen was in a Spokane County courtroom last week attempting to reverse the judge’s order appointing the receiver, who acts as a custodian of both his marijuana license from the state and the business until the creditors are satisfied. That includes the three investors, who filed a lawsuit in early November seeking dissolution of the company. They allege Paulsen was using profits of the business for personal benefit and had failed to provide an accounting of business gains and losses for three years.

“Plaintiffs in this case have a continuing fear of losing the remainder of their investments,” Brook Cunningham, the attorney representing the investors, said in court last week. The investors signed an operating agreement that indicates they could receive up to three times their initial investment, but also notes a number of risk factors that include “stringent government regulation,” an argument that some other growers and processors have cited as the cause of their own financial hardship.

Michael Paukert, the attorney representing Paulsen in the civil lawsuit, disputed claims he’d improperly spent the business’s money and requested at the hearing that he be able to question Paulsen’s personal accountant, Paul Fruci, about its finances.

“Mr. Paulsen, over the last year, has put over $140,000 of his own cash, through cash and the use of credit cards, into the company, over what the company has ever given him,” Paukert said. “It’s a matter of explaining the ledger.”

Paukert also argued that Paulsen was initially served with a lawsuit on a Friday evening and had to appear in court the following Tuesday, following a three-day weekend. Paulsen wasn’t afforded the opportunity to mount a defense before his company was taken away, Paukert said.

A financial report of the company shows Paulsen has deferred wages totaling more than half a million dollars.

Judge John Cooney, who is hearing the case, postponed the testimony until a court hearing scheduled for the middle of January. The marijuana license will remain in the hands of the court-appointed receiver and Growstate will continue to do business. The firm earned about $20,000 in net income for the second half of November, out of $105,000 in sales, according to court filings.

The investors filed their lawsuit after discovering a pair of new arrests for Paulsen, who spent nine years in federal prison as the central defendant in a cocaine bust dubbed ” Operation Doughboy ” in the mid-1990s. The Washington Liquor and Cannabis Board approved Paulsen’s marijuana license in 2014 because it determined he hadn’t had any criminal convictions in 10 years.

New criminal convictions are handled by a point system. If a marijuana licensee exceeds a certain point limit, they are barred from renewing their license. Paulsen faces two felony counts of possessing methamphetamine and cocaine and one misdemeanor count of controlling a vehicle under the influence of a drug after an arrest in Spokane County in February. In June, Paulsen was arrested on suspicion of driving under the influence in Kootenai County.

State laws prohibits anyone convicted of a felony in the past 10 years or two misdemeanors in the past three years from possessing a marijuana license. Paulsen is due in court in Idaho in January and the Spokane County charges are scheduled to go to trial in February.

The investors allege Paulsen didn’t notify them of the potentially disqualifying arrests.

Growstate’s license with the Liquor and Cannabis Board is up for renewal at the end of the month. The LCB reported Paulsen’s name is no longer on the license, and that the receiver is looking for a replacement.

Growstate has sold $7 million worth of marijuana since 2015, according to state records.