New Jersey Marijuana Bill is ’98 Percent’ Done
Marijuana Industry News September 19, 2018 MJ Shareholders
Cannabis advocate Hezekiah Allen is stepping down from his executive director role at the California Growers Association to join the Emerald Grown farming cooperative to help small cannabis farmers succeed in California’s market.
“It’s a bit of a leap of faith. It’s not without some uncertainty,” Allen tells Cannabis Business Times. “Social entrepreneurialism, I think, is an even more uncertain plunge to take. It feels like the right one. I’m always one to go with what feels right and give things space to work out, so I’m pretty stoked.”
Here, Allen describes his new endeavor, the regulatory landscape in California’s market and what may lay ahead for the state’s cannabis farmers.
Cannabis Business Times: Can you tell me more about Emerald Grown and what you will be doing upon your departure from the California Growers Association?
Hezekiah Allen: We filed the papers for California Growers and Emerald Grown at the same time, and it was the day after my birthday back in 2015. So, they’ve both been around about the same amount of time, and the way that we looked at it, the communities that I represent—growers and businesses that operate in the gray area, businesses that are trying to transition—we knew that we would need a political identity and a market identity, and we wanted to make sure that there was something about the market identity that really distinguished it and made sure that it would honor all the hard work that’s went into this. So, we identified the cooperative model as being a real focus, and we realized that cannabis businesses would not be able to form cooperatives. We made this a legislative priority. We successfully advocated for this in the state legislature.
SB94 was signed last summer about this time, and that created the idea of a cannabis cooperative association. That went into effect on Jan. 1. A few months ago, the secretary of state uploaded the form onto their website and … just about an hour ago, we got our first stamped articles of incorporation. So, the first-ever cannabis cooperative has been incorporated—first in the world, I believe, that technically qualifies to be called a cooperative. The organization that I’ll be chairing is focused on managing, promoting, developing [and] bringing as many of these cannabis cooperatives into the market as possible and making sure that consumers understand why cooperatives are important and figuring out how to put the most affordable, highest quality [and] really any type of cannabis product that a consumer in California wants—we want them to have it at a price point that makes sense. We want to make sure that the entire state can have this farm-fresh experience.
We have a lot of work to do. Cooperative cannabis is the theme—everything from farm gate to delivery fulfillment is on the agenda. Simply put, there’s a lot of cannabis in California and there are a lot of consumers who can’t access it, and we see a huge opportunity in addressing that problem.
CBT: What is the current state of California’s market?
HA: Things aren’t going well, to put it simply. It’s not unexpected. This is a big, complicated market, and we knew it was going to be bumpy. It’s certainly not disappointing us in that regard. It’s pretty turbulent.
There are some businesses that are having a good experience—usually a vertically integrated business that has a significant retail presence like a big store or a functioning delivery service. Those silos are functioning pretty well, but for the independent businesses that rely on an organized market and an organized supply chain, it can be hard to connect the dots. You need four or five partners to bring product to market. You need a distributor, you need a retail facility, you need a testing lab, a grower [and] maybe there’s a manufacturer mixed in there for fun. So, for a business that’s not doing all of those things, there are a lot of partnership agreements and a lot of contracts that need to be put in place, and that’s taking time to put together. The market side of that is that there’s just not a lot of activity taking place out there. Most California consumers are still accessing cannabis through the informal, unregulated market. There’s just not a lot of activity at this point, so we need to jumpstart the system.
CBT: What fixes are still needed in the regulatory landscape to help growers succeed in this market?
HA: I think that small businesses especially need access to affordable capital. There are several hundred businesses that if they had access to just a basic small business loan, they would be able to make this transition, but without access to that capital, they’re very vulnerable right now. I think making progress on the banking issue is probably one of the highest priorities, and especially making sure that there are affordable banking solutions. A lot more you see a company that can successfully bank a cannabis client, but it takes a tremendous amount of cost that some of these smaller businesses are not going to be able to bear.
Secondly, we need to make progress on the local level. There’s not going to be a market without access. If we don’t start issuing more permits for retail, whether storefront or delivery, the market just isn’t going to work. Californians have to be able to access cannabis if legalization is going to succeed.
Finally, tax reform is an absolute must. California’s tax program is really an outcome of the worst elements of legislative process. It’s a bunch of odds and ends from various different ideas. The thought was they would pick the ideas from all the leading proposals that had failed. What they ended up with is something that just doesn’t work, practically speaking. I think we’re going to have to make tax reform an absolute top-level priority going forward. … The only redeeming quality of this tax program was that it was going to generate a lot of revenue, but it’s choking the market, so there’s actually no revenue. They forgot that basic principle that if you tax a market too much, it’ll just collapse. We’ve got places in the state where, no joke, you see 50 percent of what the consumer is paying—a $10 pre-roll, you’re paying $20 for it because the state is getting $10, too. It’s pretty absurd. … Then we also have this whole, complicated network of different local taxes, so depending on if a product was grown in a high-tax county, distributed through a high-tax county and then sold in a high-tax county, you could get some really whammy tax bills.
CBT: What do you see happening from now through next year in California?
HA: The legislature is out of session until January, so none of the laws are going to change. The regulations are sort of winding up. Right around the new year, we’ll start seeing new legislation introduced, and that’s when I’d expect to get a sense of what might move, but what we need to do immediately and what I think is going to happen—what I’m going to be focused on—is the business community needs to get much more organized than we currently are. This year in the legislature, there were a lot of instances where one group of businesses was fighting another group of businesses. The industry collectively spent a lot of time and resources fighting itself in the state legislature, and so what we need to do immediately in California is get better organized. The market needs to be better organized. Our advocacy efforts need to be better organized. We’re stronger together. We’ve got a heavy load, and we’ve got more work to do.
CBT: What do you see happening five years from now in the market?
HA: The regulated market is going to grow and succeed over time. Obviously, history is moving in one direction. We’ll be normalized and we’ll become a regulated market. How many of the folks decide to participate in it? How many succeed? How long [does it take] us to get the unregulated market to go away? Those are all open-ended questions. I know with certainty over the next five years that the regulated market is going to grow and improve. I have a much harder time when I try to quantify how much it’s going to grow. It’ll depend on a lot of these externalities.
I guess the one other thing that anybody who’s doing business in or thinking about doing business in California should keep in mind is water. We’ve obviously had several years of extreme drought, and cannabis irrigation is being treated very differently, so one of the things we need to be mindful of is water and working on making cannabis not only the largest cash crop in the state, but also the most sustainable cash crop in the state.
Editor’s note: This interview has been edited for length and clarity.
Top Image: © Dmytro Sukharevskyi | Adobe Stock
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