Artificial Barriers

Citing festering challenges such as high taxes and an ingrained illicit market, Glass House Brands president Graham Farrar told Cannabis Business Times that simply “surviving is thriving” in California’s cannabis industry.

In a March interview with Senior Digital Editor Melissa Schiller, he also pointed to a lack of retail outlets as being yet another obstacle for cultivators in the state, where supply is increasingly outpacing demand, and wholesale prices are falling.

As the largest cannabis market in the U.S., all eyes are naturally on California. But these issues aren’t new (Oregon suffered a glut that caused prices to drop “like the proverbial rock, falling from $1,789 a pound to $649,” from May 2017 to May 2019, reported the Portland Business Journal), nor are they exclusive to the West Coast market.

A similar problem could be taking shape over in a younger Midwest industry.

Retail flower prices in both the adult-use and medical markets in Michigan dropped more than 50% from January 2021 to January 2022, according to a February 2022 report published by the Michigan Marijuana Regulatory Agency.

And just like in California, active licensed growers outnumber retailers, with about 616 grower licenses and 460 retailer licenses in the two-year-old adult-use market, according to an article about the report by CBT Associate Editor Tony Lange.

Also mirroring California is the ability of Michigan municipalities to opt out of adult-use cannabis sales, creating an artificial barrier to business growth and an inability to meet consumer demand (not to mention going against voters’ will). In California, for example, just “53% of the 58 counties in California allow for commercial Medicinal/Adult-Use cannabis business operations,” according to a 2021 report in Cannabis Business Law. With the ever-present lack of traditional banking and non-deductible tax burdens, without change, these barriers will continue to stall progress, hinder legal businesses, and prevent people—many who use cannabis for medicinal purposes—from accessing safe and tested products.

Access is also an issue in Texas, a state with nearly 30 million people but only about 20,000 patients in its medical program. Major restrictions are at play in the Lone Star State, as well—there are only nine qualifying conditions and a 1% by weight limit on THC—and just three licensed cultivators serve the entire state. CBT Managing Editor Patrick Williams outlines Texas’ limitations in this month's cover story.

He also, however, shares how one of those cultivators, Texas Original Compassionate Cultivation, is looking beyond those boundaries and at the future potential of the second-largest state in the country.

“We have one out of three licenses in the ninth-largest economy in the world,” Texas Original Chief Financial Officer Steven Yoo notes in the cover story. “The Texas cannabis market will eventually be the second-largest cannabis market in North America. We’re capitalizing on first-mover advantage, and we’re all really excited about the opportunity here.”

It’s sometimes difficult to see the positives through the seemingly insurmountable barriers facing the day-to-day cannabis industry; but as the overall industry progress demonstrates, advocates are powerful, and some local and state lawmakers and regulators are working to remove obstacles. In California, for example, Sonoma County is cutting cannabis growers’ taxes by 45%, retroactive to July 2021, and an Oklahoma bill proposes taking steps to create safe and legal non-cash currency transactions.

Perhaps other cities and states will watch how these efforts play out and offer cannabis businesses, who have had to dodge challenges that do not exist in other industries, some much-needed support.