california Archives - Page 2 of 4 - Green Market Report

Kaitlin DomangueFebruary 12, 2020
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Amid layoffs appearing as a constant, The Supreme Cannabis Company is the latest in the industry to let a percentage of its staff go. Last night after the market’s close, the company announced a 15% layoff, releasing a third of corporate positions and 13% of its operational ones. This report comes after the announcements of companies like Tilray and Aurora also slashing jobs. 

All hope is not lost though in the ganja workforce. Leafly found 243,700 full-time-equivalent (FTE) jobs in the United States that are supported by legal cannabis as of January 2020. That is a 15% annual increase. 

This data was reported in Leafly’s fourth annual Cannabis Jobs Report. Even more encouraging, the report shows that the industry created 33,700 new jobs nationwide in 2019, effectively making it the fastest-growing job arena in the United States. 

According to the report, Massachusetts, Oklahoma, and Illinois are leading the fight in terms of employment expansion. Massachusetts recently celebrated the one year anniversary of legalizing cannabis for adult-use in the state and added 10,226 jobs to boot. Oklahoma saw a 221% growth in 2019, supporting 9,412 full-time jobs. Illinois adult-use market rolled out on the first of the year, and early 2020 data shows this is already a $470 million annual market supporting 9,176 jobs.

An interesting tidbit of information, Massachusetts has more cannabis industry workers than hairstylists and cosmetologists, and Illinois has twice the number of cannabis industry workers than they do meat packers. When compared to other industries, it is truly amazing to see the creation of jobs in the United States by the industry, as well as the cannabis industry’s growth in general. 

Though the previously mentioned states take the prize for the fastest job growth, California is still America’s largest cannabis employer. However, Colorado may be the nation’s biggest per-capita cannabis job market. With California offering one job per 980 residents, Colorado supplies one job per 165 residents. 

Colorado is also passing Washington state in terms of jobs. Though both states legalized cannabis for adult-use in 2012, Colorado supplies nearly 10,000 more jobs than Washington state, despite Washington’s population containing nearly 2 million more residents. 

Despite cannabis job expansion’s rapid growth in most of the country, California and Michigan suffered technical job losses. 

Leafly’s experts estimate that their job markets fell due to changes in laws and regulations. In California, an estimated 8,000 jobs moved from legal to non-legal status, but as mentioned before it is still America’s largest cannabis job provider. Michigan’s new regulatory processes pushed hundreds of legally operating dispensaries into illicit status. 

Leafly started their annual job counts four years ago, upon the discovery that federal and state labor economists do not account for state-legal cannabis jobs in their employment reports. The reason? Federal prohibition. The NAICS (North American Industry Classification System) codes classify cannabis retail stores in the same category as art supply stores, hot tub stores, and auction houses. While cannabis cultivators have the same job code as hay farmers and agave growers. 

It is important to note that this report does not include jobs created by CBD since it’s recent change in legal status. Because the regulations for CBD differ from state-legal cannabis, there is no data to build from yet.


Debra BorchardtOctober 27, 2019
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On the October 27 episode CBS news program exposed the California cannabis illegal grow problem. The show highlighted that more supply is grown than is sold within the state and that most of the surplus is being shipped east to states where marijuana is still illegal and can be sold at a higher price.

The program interviewed one farmer, who was trying to grow his cannabis legally, but because of onerous taxes and numerous fees, he can’t make a profit. Mikey Steinmetz, Co-founder of Flow Kana walked the CBS reporter through the company’s clean, shiny and very expensive factory to show what a legal operation looks like. He, too, bemoaned the state’s inability to control the illicit market.

Todd Kleparis, the CEO of cannabis security and distribution company Hardcar wrote, “Last month, it was announced that there had been a significant license contraction for cultivators, manufacturers, and retailers in the state. There was a 48% drop in active cultivation permits and a 29% drop in licensed manufacturers, according to statistics offered by Marijuana Business Daily. This loss in licenses for cannabis was because those who had been approved for temporary licenses for cannabis-related operations (that expired earlier this year) couldn’t meet the regulatory requirements for obtaining provisional and annual permits.”

He went on to add, “More importantly, there is a significant barrier to entry, both financially, and in terms of compliance, to the legal cannabis market in the state that once held such promise for cannabis. Those who once had a hope of moving from grey to legal are left to consider going back into the shadows, rigorously pursuing the investors needed to build capital for licensing, or give up altogether.”

Jordan Zoot pointed this out in a previous piece on Green Market Report saying, “California’s underground economy generates between $60 to $140 billion in unreported revenue annually, according to a University of California at Los Angeles Labor Center report, depriving the state of $8.5 billion in corporate, personal, and sales and use taxes each year.

A pilot program has allowed a team of agencies in Sacramento and Los Angeles to work together to investigate and prosecute the most outrageous felony-level multijurisdictional underground economic crimes in California. AB 1296 builds on the success of a state pilot program by permanently establishing law enforcement teams in Sacramento and Los Angeles and authorizing additional teams in the three other major metropolitan regions of the state: San Diego, the Bay Area, and Fresno.

Investigative teams have identified $482 million in unreported gross receipts and $60 million in an associated tax loss to the state. Additionally, through its criminal enforcement actions, the pilot program has recovered over $25 million in lost tax revenue, victim restitution, and investigation costs.

The legislation strengthens the program by ensuring multi-agency collaboration between several governmental entities, including the Department of Justice, the Department of Tax and Fee Administration, the Franchise Tax Board, and the Employment Development Department. Together these agencies combat wage theft, tax evasion and other crimes in the underground economy.

Zoot also determined that “The taxes that California should be collecting are approximately 31% of the gross receipts of cannabis businesses, or $960K for each “black market” cannabis entity, and $1.1MM per legal cannabis entity. The annual total for cannabis taxes for the “black market” and legal business should be $3.66B. It is our recollection CDTFA recently announced the cannabis taxes collected for the second quarter of 2019 were $144.2MM[3] vs. $915MM California should be collecting.”

 


StaffOctober 18, 2019
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Guest opinion piece by Todd Kleperis, CEO of Hardcar. 

Protecting What’s Left of the California Cannabis Industry

Many people within the cannabis industry operate on the assumption that it’s safe to move cannabis products and cash within states; after all, peace and love are all that the plant is about, right? 

As an established cannabis security professional who has been operating in California since before legalization with my cannabis security company, HARDCAR, I can confidently confirm that when it comes to participating in the legal market, many are willing to trade in the peace and love of the plant for criminal activity and potentially life-threatening situations. 

I hate to say it, but the California cannabis industry is slowly killing itself and has the potential to literally endanger lives as a result of this loss of a promised regulated system that intended to keep cannabis clean of criminal activities. 

Pushing Cannabis Back into the Shadows

With a recent contraction of hundreds of cannabis licenses, California could be getting itself into is a situation that threatens the security and safety of those moving cannabis, and cannabis cash, across the state. 

Last month, it was announced that there had been a significant license contraction for cultivators, manufacturers, and retailers in the state. There was a 48% drop in active cultivation permits and a 29% drop in licensed manufacturers, according to statistics offered by Marijuana Business Daily. This loss in licenses for cannabis was because those who had been approved for temporary licenses for cannabis-related operations (that expired earlier this year) couldn’t meet the regulatory requirements for obtaining provisional and annual permits. 

More importantly, there is a significant barrier to entry, both financially, and in terms of compliance, to the legal cannabis market in the state that once held such promise for cannabis. Those who once had a hope of moving from grey to legal are left to consider going back into the shadows, rigorously pursuing the investors needed to build capital for licensing, or give up altogether. 

The Bureau of Cannabis Control has done what it can to regulate a ferociously growing market, yet the job just proved to be too tremendous to regulate cannabis on such a large scale. No matter who is at fault for where we’re finding ourselves now, the State of California has deprived good human beings of the ability to provide reliable and convenient products to their established clients with these barriers for entry that make participating in the legal market a no-go. 

Is Cannabis in California Safe at All?

Those who operate in the grey market of cannabis are forced to do business within the shadows, but unfortunately many aren’t taking the necessary precautions to protect their safety while moving cannabis and cannabis cash. We’ve heard of, and even seen, cars with cannabis leaves peaking out of the trunk in an effort to transport the crop. People are transporting thousands of dollars of cannabis cash across cities, even the state, with no protection or precautions to protect the employee against being robbed. 

Licensed growers, manufacturers, distributors, and retailers are even putting themselves at risk with a lack of security on cash, product, and people. Despite the ideals that cannabis-related crime would begin to fall with the legalization of cannabis, people are still facing gun-related violence in California over cannabis. “People are getting shot over this plant,” said Ben Filippini, a deputy sheriff in Humboldt County said to The Atlantic, “All legalization did here was to create a safe haven for criminals.” In Humboldt County, the largest cannabis-producing region of the United States, 717 per 1 million people go missing each year. 

Across the state, delivery drivers, who can carry up to $10,000 in cash, are being robbed by criminals eager to take what the legal market has. To carry cannabis and cash without protection is just sheer lunacy. Shame on anyone involved in cannabis who will willingly put their people in harm’s way for a profit.  

Despite efforts to keep gangs and drug cartels out of the legal markets, it is speculated that those involved in organized crime are heading from prohibitionist states in the east to west to use California’s legal cannabis to feed illicit markets. 

While the headlines may feed us contradictory statements on the connection between cannabis and crime rates, we can’t deny that crime within cannabis still exists and persists. People want what licensed cannabis can provide and produce, and are willing to go to any lengths to get it. 

Simply put, the California cannabis industry is killing itself and endangering what’s left of it by its own lack of foresight towards its own regulations towards safety and security right after they got out of the gates.

Whether they like it or not cannabis will continue to be bought and sold in the Golden State and regulators will just lose their hold on a large portion of what could have been a tremendously large regulated market. 

Protecting What We Have Together

The regulated cannabis market in California has come too far to endanger what we’ve built. 

HARDCAR was built from the ground up to protect the cash, product, and most importantly the people of cannabis to ensure the safety of California’s legal cannabis while setting a standard for the state to strive to as far as enforced safety and security compliance. 

Our efforts have come from recognizing that cannabis can be dangerous and will continue to be if we don’t get the safety of cannabis under check now before more lives are unnecessarily lost. 

California and other states can work to develop the intelligence to recognize cannabis crime and put in the security measures to ensure it no longer persists. Just recently, we have uncovered one firm out of Colorado that carries up to half a million dollars in cash at a time, without any protection, and as expected, they have a target on their head. As a community around cannabis, we need to work together to intervene in these criminal activities before they have a chance of coming to fruition. 

Catching the cannabis industry before it becomes victim to crime starts with lessening the barriers to entry to receiving a cannabis license to allow people to operate legally, while also taking the proper security measures to ensure that cannabis product, cash, and people are safe. 

 


Debra BorchardtOctober 16, 2019
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Green Market Report reported news last week that Trump associates who had been arrested for campaign finance violations had applied for marijuana licenses in Nevada. It also seems one of the gentlemen tried to pursue licenses in California as well.

The San Francisco Chronicle reported that Andrey Kukushkin had attempting to build a cannabis business in the Bay Area. The paper said that Kukushkin had some control in a variety of cannabis companies named Oasis Venture, Legacy Botanical Co., and Venture Rebel Inc. It was reported that Kukushin first entered the space in 2015 as his Rebel Venture Inc. company was contracted by the medical marijuana dispensary MediThrive to manage its Mission Street location.

This information came about as Kukushkin sued his partners in 2018 claiming they cost him $1 million by running the company into the ground. Venture claims it gave MediThrive a million dollars to renovate a storefront and purchase inventory. The case alleges that the inventory got diverted to another business and the investment was squandered.

It looks as if this case is continuing as the latest filing is dated 9/3/2019. Cannabis law firm Greenspoon Marder seems to be representing Kukushkin in this case and Green Market Report is in the process of confirming whether this is still the case.

More recently, his Oasis Venture company planned to turn a large ranch in Livermore into a cannabis farm. It seems the neighbors weren’t so keen on the idea. Oasis Venture originally applied for a cultivation permit in 2017 but was denied. The paper reported that a business partner by the name of Chuk Campos wrote a letter to the Alameda County saying Oasis was going to use the cannabis to advance cancer research. The article says Campos is now distancing himself from Kukushkin.

According to CannaBiz Media, Andrey Kukushkin appeared on 11 cultivation and manufacturing licenses in California relating to Trava Group LLC., which wasn’t mentioned in the Chronicle story. Trava Group is based in California. CannaBiz said that the licenses appear to have expired, yet a story in the Mojave Desert News says a license was awarded to Trava Group for delivery only.

The Sacramento Bee is reporting that the FBI is investigating whether cannabis business people have tried to bribe California politicians. The Bee is suggesting that it could be Kukushkin that is being investigated, which is a logical conclusion since the group also tried to bribe politicians in Nevada in order to get licenses approved.

The Sacramento Business Journal reported that “Kukushkin’s business dealings extend to Sacramento’s legal cannabis industry, where he is a business partner of Garib Karapetyan, the CEO of Capitol Compliance Management, which is the group behind nearly one-third of Sacramento’s cannabis dispensaries.”

The Kolas dispensary brand is owned by Capitol Compliance and is up to nine of the 30 dispensaries licensed by the city of Sacramento. “Karapetyan has permits for eight dispensaries in Sacramento, according to The Sacramento Bee, making him the single largest permit holder for dispensaries in the city.”

The Bee had this statement: “If this story is true, then our cannabis licensing process, which was designed to protect consumers and reward local law-abiding businesses, is being improperly exploited,” said the mayor’s spokeswoman, Mary Lynne Vellinga, in a statement provided to the Business Journal. “The mayor is calling for an immediate investigation and will lead an effort to add additional safeguards to licensing process.”

 

 


Video StaffDecember 13, 2018

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Humboldt County in California has seen its fair share of boom and bust cycles. From gold mining to logging, this county continues to reinvent itself. Now it’s cannabis that is fueling the county and specifically the town of Eureka’s latest boom. Rob Holmlund, the Director of Community Development in Eureka California tells the Green Market Report how the area has been transformed by the cannabis industry that has brought meaningful jobs to the residents.


William SumnerDecember 12, 2018
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Earlier this week, the cannabis technology platform LeafLink released its 2018 Wholesale Cannabis Pricing Guide and the company learned that Alaska and Maryland are the two most expensive states to buy legal cannabis, followed by Nevada and California.

Examining the wholesale landscape of some of the most mature cannabis markets in the United States, the guide looks at the average wholesale price of cannabis in eight states: Alaska, Arizona, California, Colorado, Maryland, Nevada, Oregon, and Washington. The product types covered by the report include concentrates, cartridges, edibles, flower, and pre-rolls.

Although the report does not dive into the specifics of why one state is more expensive than another, the authors speculate that the Alaska and Maryland’s high prices are due to the states having a low number of cannabis cultivators. In the two states where cannabis is cheapest, Washington and Oregon, there is currently a glut of cannabis cultivators; leading to low prices and oversupply.

“As the standard wholesale marketplace for the industry’s leading brands, we are able to provide crucial market information to cannabis retailers and brands, which will help inform their plans for 2019,” said LeafLink Co-Founder and CEO Ryan G. Smith in a statement. “As more states like Massachusetts, Connecticut, Pennsylvania, and Michigan continue to establish wholesale operations, we will be able to provide a larger scope of market activity to further empower the LeafLink community, as well as the industry at large.”

Nationwide, the average price for a pound of cannabis flower is $2,124 per pound, while a gram of pre-rolls costs around $5.66 per gram. The average price for cannabis concentrates costs approximately $26.07 per gram and cartridges are priced at around $39.55 per gram. Edible cannabis products, on average, cost around $0.20 per milligram.

When taken on a state-by-state level, cannabis prices start to vary. With regards to cannabis consumer preferences, the report found that consumers prefer products in the lowest 25% price range. The exception to this was pre-rolls. On average, consumers preferred pre-roll products in the 25%-49.99% price range.

The report also examined the relationship between pricing and discounted sales. On average, approximately 16% of the products sold through LeafLink’s platform have a discounted price. Across all eight states examined, discounted products generated 3% more sales than regularly priced products.

The discount effect is magnified when combined with larger sales campaigns. During the last year, LeafLink ran two sales promotions, one in the month leading up to 4/20 (dubbed 3/20) and one in July called 7/10; which is a considered an industry-wide “holiday” for concentrates.

When combined with those larger sales campaigns, discounted products generated 37% more sales on 3/20 and 38% more sales on 7/10. This seems to suggest that cannabis retailers stand to significantly boost their sales numbers by combining sales promotions with discounted cannabis products.


Debra BorchardtAugust 20, 2018
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The state of California released its tax data for Q2 cannabis sales last week.  Tax revenue from the cannabis industry totaled $74,240,257.00 million from April 1, 2018, through June 30, 2018, which includes state cultivation, excise, and sales taxes. It does not include tax revenue collected by each jurisdiction.

According to GreenWave Advisors, that means that the implied recreational retail revenues increased 36% to ~$290M from $213M in Q1.  In addition to the retail revenues, the implied wholesale revenues would have reached roughly $29.9M vs $10.7M quarter-over-quarter.  “We note while these results fall below expectations, it does not include medical marijuana sales in which sales and excise taxes are excluded,” said Matt Karnes, the founder of GreenWave Advisors.

The California Department of Tax and Fee Administration also noted the excise tax on cannabis generated $43,490,668.00 million in revenue during the second quarter of the calendar year 2018. The cultivation tax generated $4,482,119.00 million, and the sales tax generated $26,267,470.00 million in revenue.

California cannabis retailer MedMen (MMNFF) said on Monday that its stores accounted for roughly six percent of all legal retail sales of cannabis and cannabis products in the second quarter for the state. MedMen said in a statement that its eight stores represent about two percent of all retailers, meaning on average MedMen stores outperform non-MedMen stores by a factor of three.

“The strong growth in tax revenue in the second quarter of the year shows that the legal cannabis industry is delivering on its promise of economic activity and greater public resources to the people of California,” said Adam Bierman, MedMen chief executive officer, and co-founder.

While MedMen is clearly happy with its results, the actual tax receipts are far lower than what the state had projected in the budget proposals. Governor Jerry Brown had estimated that the state would pull in $175 million in the first six months and instead the number was $135.1 million.

GreenWave went on to add that approximately 100,000 medical marijuana cards have been issued by the state since 2004 so Karnes believes that total retail sales are likely considerably much higher with med marijuana included and he estimates that its near $700M  for the first half of the year.

“As the regulated market in CA continues to evolve, it will likely experience ongoing sales pressure in the near term.  However, we remain optimistic that these “growing pains” will ultimately be resolved to achieve a $7B retail market over the next 5 years,” said Karnes. He went on to add that the average revenue per dispensary for the first half of the year is roughly $300,000 per month.

At the end of June, there were approximately 64 medical only licenses representing 15% of the market and 331 licenses for outlets selling both medical and recreational. At that time there were only 21 recreational only licenses representing 5% of the market.


Jack SmithAugust 8, 2018
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Despite the overwhelming majority of Californians being happy with the legal cannabis market, there is still a significant percentage of residents who buy marijuana illegally, due in large part to high taxes on the substance.

A new report from Eaze Insights shows that 84 percent of Californians are “satisfied” with the legal marijuana market, but approximately 20 percent have purchased illegal or illicit marijuana in the past three months. Concerning to regulators and the state’s finances is that 84 percent of that segment of the population is “highly likely to repeat that behavior in the future due to the illicit market having cheaper products and no tax.”

Part of the concern is that although consumers would like to purchase marijuana legally if, given the option, the taxes are a major concern for many consumers. According to the California Department of Tax and Fee Administration, marijuana has a 15 percent excise tax, though recent reports have suggested the state is looking at cutting taxes as a way of driving legal means of consumption.

Approximately 85 percent of Californians have purchased cannabis from “unlicensed sources,” but most of them cited factors such as lower prices and a lack of taxes for the reasons those purchases were made.

Other consumers say they have purchased from illegal marijuana vendors because it’s “hard and time-consuming” to find legal businesses. Approximately 1 in 7 respondents said it was “not easy to identify licensed cannabis businesses.”

Although the picture has been painted with some negative brushes, there are changes that can be made that will positively affect California’s burgeoning weed economy.

If taxes were decreased by 5 percent, that could drive much of the illegal market into the legal market, Eaze notes. The town of Berkley took that initiative early on when it lowered its city tax on cannabis from 10% to 5%.

“A 5% decrease in the overall tax rate in CA could bring twice as many CA consumers to only purchase cannabis from licensed businesses (from 16% to 32%),” Eaze wrote in an email obtained by Green Market Report. “Conversely, a 5% increase in the overall tax rate in CA would drive twice as many CA consumers to only purchase from unlicensed businesses (12% to 23%).”

Use cases in the state include wellness (treating or coping with illnesses such as cancer) and consumers are increasingly becoming more sophisticated in the types of cannabis they consume.

“They care the most about consistent product quality,  fair pricing, packaging, safe access and a great customer experience, the same way they care about those things for more traditional consumer products,” the email obtained by GMR said.


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The Green Market Report focuses on the financial news of the rapidly growing cannabis industry. Our target approach filters out the daily noise and does a deep dive into the financial, business and economic side of the cannabis industry. Our team is cultivating the industry’s critical news into one source and providing open source insights and data analysis


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