California to experience "weed drought" this summer, insiders say

New, hard-to-satisfy restrictions may lead to the corporate consolidation of the industry, some fear

By Nicole Karlis

Senior Writer

Published June 30, 2018 2:00PM (EDT)

A budtender (right) shows cannabis buds to a customer at the Green Pearl Organics dispensary on the first day of legal recreational marijuana sales in Desert Hot Springs, California.  (Getty/Robyn Beck)
A budtender (right) shows cannabis buds to a customer at the Green Pearl Organics dispensary on the first day of legal recreational marijuana sales in Desert Hot Springs, California. (Getty/Robyn Beck)

Out with the old, in with the new is the mantra of many California marijuana retailers this weekend. In case you missed it in a haze of smoke, California dispensaries are scrambling to dispose of their noncompliant bud — slashing prices in fire sales in what is likely to be the biggest marijuana sale the Golden State has ever seen.

“Walk into any dispensary right now, and you will see some of the most incredible sales you will ever witness,” Jamie Warm, CEO of Henry’s Original, a boutique cannabis cultivator and distributor, told Salon.

If dispensaries fail to get rid of their non-compliant flower, they must record its destruction on video.

The weed sale is happening because on July 1, the state’s new safety and regulation requirements go into effect. While legalization technically took effect on January 1, industry players were given six months to make the necessary changes to operate their businesses legally. Starting on Sunday, marijuana packaging must be child-proof, in addition to now resembling traditional food packaging. All the products must implement a process that tracks current and past locations. And, the amount of THC in any product must be clearly marked, in addition to all businesses acquiring the proper licenses to operate.

Carlos Gutierrez, a business development officer for Prime Harvest, a San Diego-based cannabis company with cultivation, manufacturing and retail operations throughout the state, including its dispensary Olive Tree Wellness Center in Ramona, told Salon they had to implement a proactive strategy to mitigate the possibility of being left with a lot of noncompliant weed.

"Knowing that the implementation of phase 2 testing requirements was coming July 1, we began preparing our inventory accordingly right after 4/20 weekend,” Gutierrez said. “We identified a need for a strategic plan that would allow us to decrease our existing inventory while continuing to offer patients the variety of strains and products they expect. We knew that working toward decreasing existing inventory that could no longer be legally sold starting July 1 was imperative to avoiding being stuck with inventory we could not sell.”

Gutierrez’s hardship is just one that underscores the struggles that come with legalization of recreational weed. Indeed, it has not turned out to be all sunshine and rainbows. In reality, preparing arrangements to legally sell, transport and grow weed has become a logistical mess, marijuana pundits told Salon. The requirement to obliterate noncompliant weed before Sunday is just one of several prerequisites that have been giving those in the industry a headache; how to fill the shelves after July 1 is another.

Shareef El-Sissi, founder of one of the first California Bay Area dispensaries, Garden of Eden, told Salon that California is likely headed into a marijuana drought this summer. One reason is because the state’s regulations have been so difficult for businesses to interpret.

“I think what you’re going to find is there is a shortage of compliant weed,” he said. “It hasn’t been very easy from the state to determine what the requirements were. We kind of had this big rush for the cultivators and manufacturers and distributors to figure out what is a compliant package, all the while trying to provide licensed products into the system.”

The packaging debacle, some say, has been a waste of time and resources. According to the state’s regulations, after July 1 all packaging and labeling must be performed "prior to cannabis goods being transported to a retailer.” This, in essence, has introduced a new moving part to the process.

“Traditionally in California, dispensaries have bought in bulk and then packaged their own flower, and that’s been one of the hard margin activities for a long time,” El-Sissi explained. “Now, the new regulations say dispensaries aren’t able to deal with ready-for-consumer goods, and that introduced the new layer called the distributor.”

“The distributor was kind of spliced in there to assist with the state and collect the taxes,” he added. “What it’s actually done is cut off dispensaries from their existing supply chain."

The packaging itself has been complicated, too. The new regulations say that all cannabis goods must be in child-resistant packaging prior to delivery to a retailer. Exit packaging, which was previously thought to be child-proof, no longer is by state standards. Unfortunately, some retailers did not find out until it was too late.

“On January 1st they said everything that leaves your dispensary has to be child-proof or go into a child-proof bag, and then everyone goes and rushes out and they buy these exit bags, which are super harmful to the environment,” El-Sissi explained.

Another component that has been “overlooked by the state,” according to Warm, is the Certificate of Analysis — basically a certificate confirming the weed has passed lab tests — which, according to the regulations, distributors are not allowed to transfer. Since there are no distributors that cover the entire state of California, if the last-mile run from the testing lab to retailer is not completed in a day, it has to be retested, which is causing “incredible difficulties,” he explained.

Testing has posed its own set of problems. Tim Blake, founder of cannabis competition the Emerald Cup, told Salon that many Mendocino farms have failed to pass all testing requirements. This is in part because there are many factors and technicalities that contribute to the flower’s purity — sun exposure being one.

“Farmers in the [Emerald] Triangle have been extremely demoralized... it has been so hard for them,” Blake said. “For legalization, the fallout is that you have a lot of small farmers and product-makers suffering.”

On Friday, 150 marijuana businesses in California joined forces in a last plea to the state to ask for an extension for the new regulations, citing testing as a primary concern.

Perhaps the most sobering consequence of the changes will be how small cannabis farmers may be impacted, or even go extinct as the industry consolidates and becomes more corporate. Legal cannabis first made its way into the state’s law books in 1996, when voters passed Proposition 215, which legalized medical marijuana. California was the first state in the U.S. to do this, paving the way for medical marijuana use in other states. In 2010, the California Senate passed bill 1449, which made possession of 28.5 grams of marijuana an infraction punishable only by a fine of less than $100. Indeed, the state trail-blazed the legal weed movement, in part thanks to the artisanal mom-and-pop growers in Humboldt and Mendocino counties — yet those same growers may be unable to move on to the next chapter in California's weed saga.

“For the most part we are seeing the death of the small farmer,” El-Sissi said. “Be prepared for Budweiser and Coors Light to kind of fill in the majority of the market.”

And for those who are staying in the market, now there is no room for error.

“The ‘Wild West’ days of California’s cannabis market officially die July 1, and any cowboys left will be stranded without a horse,” Gutierrez said.


By Nicole Karlis

Nicole Karlis is a senior writer at Salon, specializing in health and science. Tweet her @nicolekarlis.

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