Legalization is beginning to become more and more attractive to states as the year moves on. Even deep-red states are looking at legalization on their ballots or in their legislature this year. But the supply of business licenses isn’t keeping up with demand in recreational states – making it increasingly difficult for expanding businesses to get licenses to operate.
It’s reported that California made close to 3.1 billion dollars last year in licensed sales – a remarkable number, but nothing compared to the 8.7 billion the unlicensed market made. In these unlicensed stores, consumers can find the same types of products for much cheaper, and businesses can skip the 45% tax hike on their products. Some experts suggest that up to 80% of the California cannabis market is illegal.
Recreational use of cannabis is completely legal in California – but towns within the state still have some control under Prop 64. Up to 75% of cities in the state have banned cannabis storefronts – citing increased rates of crime as one reason to ban cannabis shops.
The verdict is still out for delivery services. Since they don’t have a physical storefront, they can operate in any city. Nice Guy Delivery has recently struggled with this issue. Originally, they operated in unincorporated Tamalpais Valley, California – but began to lose money while they waited to obtain their business license with the county. They eventually moved to the city of San Rafael, where they’re based and continue to serve and deliver in Marin County.
The crackdown on Prop 64 regulations is spotty at best – but the Bureau of Cannabis Control in California is beginning to confiscate substantial amounts of products from unlicensed suppliers. They’ve seized about 8.8 million in products, almost ten thousand vape cartridges, and $128,742 in cash. Not every warrant served is correct though – businesses have reported mistaken violations of both the cannabis and CBD market. Cannabis businesses in LA claim that oversight is sporadic and inconsistent, with different areas of LA experiencing different levels of enforcement.
California is beginning to build the foundation of a legal CBD market, looking to repeal the Sherman Food, Drug and Cosmetic law that declares CBD infused foods to be considered adulterated. A drug is said to be adulterated if it fails to conform to compendium standards of quality, strength or purity. Food operators who violate this law will receive a two-point deduction on their Health and Safety inspection reports. This hasn’t just shaken consumer confidence – but it makes it harder for CBD and food suppliers to build relationships. Fear of these point deductions are making food suppliers nervous, and pulling multiples of CBD products off the shelves, rendering them unsellable and tagged to be shipped back to the producer.
The kicker? CBD products are still purchasable through state-licensed recreational stores.
When cannabis brands across the country plan for the rest of 2020, the fact that laws are continually changing must be built into any contingency plan. Keeping informed on what actions local and federal cannabis lobbyists are in the best interest of any company.
As the opinion of legalization changes but laws do not, cannabis companies must brace for a complicated year while defining themselves. Lay the foundation with not only good products – but good branding that sticks in the consumer’s mind. Not sure how to begin? Give us a call.
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