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Guest Opinion: Don’t Let Big Business Shape California Cannabis

December 20, 2017
(Courtesy of Hezekiah Allen)

Guest Opinion

Hezekiah Allen is the executive director of the California Growers Association, which consists of more than 1,200 cannabis growers and business owners. Leafly welcomes op-ed contributions from industry and political leaders on a range of topics related to cannabis.


Let’s get some clarity on this issue: big cannabis. Some leaders in our community think this is “noise.” Most see it as a critical component of a discussion about our future—a future that we are building with intention and a future that deserves honest, clear, and transparent dialog.

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Big isn’t inherently bad. Small isn’t inherently good. But both can be—and often are—self-interested. When a business becomes big enough, amasses enough resources, and/or enjoys enough of a regulatory advantage to bend public policy to its interests, there is a problem. And that is exactly the problem we are observing now.

When small businesses work together to shape public policy, there is an intrinsic element of “the greater good” embedded in their work, because their interests reflect shared goals and common ground. Small businesses—small farms particularly—provide an irreplaceable cultural and economic value to our community.

Emerging From the Shadows

For more than a decade, most businesses in the cannabis industry in California have had little opportunity to come out of the shadows. A policy vacuum at the state level left most localities with few good options. Many cities and counties chose to put their heads in the sand, deferring to local law enforcement. This left most businesses in hiding, unable to engage with policymakers, and unable to build businesses and brands.

As we emerge from more than a century of cannabis criminalization in California, it is wise and prudent to take our time.

In the midst of this environment, a few municipalities moved forward and adopted local medical cannabis regulations. As a result, a handful of businesses in those cities got a head start. They were able to build their businesses while thousands of others around the state were left behind. This phenomenon most severely impacted the marginal and criminalized communities where cannabis commerce was most present.

So, as we emerge from more than a century of cannabis criminalization in California, it is wise and prudent to take our time. We won’t miss the opportunity to scale up just because we take a few years to get there. On the other hand, if we allow a finite, inelastic marketplace to be dominated by a few large players and close the door to others, we may lose the opportunity to establish a diverse marketplace, built around small and mid-sized businesses, that has the capacity to restore social and economic justice to our communities.

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A Long Road to Normalization

Cannabis consumers deserve the same choices as grocery shoppers, and California’s cannabis growers deserve the same opportunities as the state’s food producers. And yet they don’t. Where are the consumer champions calling for cannabis growers to have access to the privileges afforded to all other growers in the state through the Direct Marketing Act, which allows customers to buy directly from producers?

The Price Problem

Concerned about the price of cannabis? Ask your retailer what markup they are taking. Many California retailers state are striving to keep markups and prices reasonable. Others are not. Our experience as growers is that the big retailers are typically not the ones seeking to be balanced and fair. We have talked a lot about craft growers; it is probably time we start talking about small-scale retailers, cottage food makers, and all the other small businesses that have been excluded from the regulated market for years.

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A Controlled Market

Why do some cannabis retailers take a 100% (or more) markup when other, similar industries are closer to 30% or 40%? Because they can. California’s cannabis marketplace is one in which too few businesses control access to consumers. We lack the competitive forces that keep a market honest.

In the past 15 years, the wholesale price of cannabis flower (the price growers are getting) has decreased, first in half, then in half again. Meanwhile, the price to the consumer has remained relatively static. Where is the surplus revenue going? To the “keystone markup” that many retailers are taking—and, ultimately to the big-budget lobbying and PR efforts that are now seeking to shape public policy and public opinion to serve a few retailers’ own interests.

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If you are concerned about cost to the consumer, we should create policies that protect against price gouging. Perhaps folks concerned about massive price increases would support a surplus markup tax? After all, if it’s price to the consumer that matters most, we all share an interest in ensuring reasonable, fair markups. Right?

Or, better yet, let’s support policies that would allow small farmers to market their products directly. Cut out a few steps in the supply chain, and California can have both low prices and small farms. This is the most direct way to ensure consumers have access to high quality products and fair prices.

The High Cost of Low Prices

While everybody would like to be able to afford heirloom tomatoes, meticulously tended in small patches and selling for $5.99 a pound, many families can’t afford them.

Many shoppers can only afford the lower-priced tomatoes grown by larger, more efficient farms that pay workers less; rely on unsustainable use of natural resources, synthetic fertilizers, and toxic pest management; and consolidate even more wealth in the hands of a select few.

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Rather than crashing our economy so a few people can get wealthy, let’s rebuild it so everyone can afford healthy, high-quality produce.

A small handful of well capitalized, well positioned businesses will work to protect the comfortable position that regulatory advantage has provided them.

Giving California’s cannabis farmers a transition period of five years by enforcing regulations that protect against industrial-scale agriculture will maximize choice and competition. It may inflate wholesale prices—but that is uncertain. Regardless of wholesale pricing, the facts in the market tell us that the price to consumers will still be largely determined by retail markups.

That five-year transition was clearly spelled out in Proposition 64, which California voters passed in November 2016. But a few weeks ago that phasing-in period was effectively eliminated by regulators in Sacramento.

The need for healthy competition among California cannabis cultivators is clearer than ever. That is why it is critical to ensure that as many of those cultivators as possible have an opportunity to transition to a regulated system—rather than hand the market over to the well positioned few who happen to control market access.

Keep in mind, “healthy competition” does not mean a free-for-all. Imagine the difference between a civilized sporting match and a ruthless bloodsport. The difference? Rules.

Related

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The bottom line is this: There are a small handful of well capitalized, well positioned businesses that have benefited tremendously from a controlled, inequitable market during the last decade. They will work to protect the comfortable position that regulatory advantage has provided them.

California has one chance to get this right. In order to build the cannabis marketplace that so many activists, business owners, and consumers have long envisioned, we need to do two things. First, the state needs to implement the law as the voters passed it, with the five-year transition period included. Second, we need to keep pushing for policy reform so that cannabis consumers and growers have all the opportunities that are afforded to consumers and producers of other crops.

It is time we open up the market, reduce barriers to entry, disrupt the regulatory advantage enjoyed by a few, create opportunity for as many entrepreneurs as possible, and work to reform federal and global policies so that cannabis consumers can enjoy the same choices as everyone else. Then we can let the market decide.

Hezekiah Allen's Bio Image

Hezekiah Allen

Hezekiah Allen is the executive director of the California Growers Association, which consists of more than 1,200 cannabis growers and business owners. Born and raised in rural Humboldt County, he works to protect the interests of the state’s cannabis cultivators and other small and mid-sized businesses.

View Hezekiah Allen's articles

  • Karol Hudson

    It all begins in the voting booth ??? We need more cannabis user to run for
    public office ??? I believe, if voters know you are favorable to cannabis,
    more people will go to vote, for you ???

    • freewheelinfranklin543

      If voting could change the system it wouldn’t be legal. You must like bashing your head on a concrete wall for kicks!

  • mark_cuckerberg

    California is a one party run authoritarian state that loves to regulate, tax and control everything under the sun to beat down he populous until it can’t even afford to rent a home here. You expect them to play fair? In CA? Really? Legalization was the worst thing to happen. This is the same state that has an ammo registry which clearly flies in the constitution’s face along with insane gun control laws, but surely they’ll make fair and reasonable laws about a multi billion dollar industry fully at their control and whims with no federal backups or challenge to their lordships.

    • Fridge Nukem

      Preach!

  • Mo Jo

    Other States realiazed if rules are too onorous and taxes are too burdonsome, most of the growers stay in the Black or Grey market and the State essentially cuts its own throat in many ways. WA, CO and OR mostly got it right, but I will say this – the Sungrowers Guild, based out of CA originally, tried like hell to get these States to put a per-plant tax in play which would have absolutley RUINED growers that use economical methods to grow like SOG, methods that depend on smaller plants and hydro systems that can use up to 90% less water, 75% less nutrients and 50% less labor that outdoor methods. The Devil is in the Details. Beware the fox in your henhouse! The Big Guilds are going to serve themselves instead of the little guy, which means that small farmers will be under assault from all angles.

  • DCBC

    Big Business and the laws around capitalism are making everyone rip everyone off just to survive. Commercial growing has always decreased quality due to the quantity that has to be trimmed and speed they produce it at. But going back many years to buying off street dealers and knowing some, they would be trying to make as much profit as the grower by their mark up and by under weighing the product. Then dispensaries offering less and less,growers bouncing buds on screens to remove 1st top grade product-HASH then selling flowers with half the resin and usually fertilizer burnt. Lets just think about how many bad chemicals are in the commercially grown American and Canadian CIGERETTE. Cannabis is and should always be diverse and commercial growing has already hurt the natural plant. People have different ideas of breeding, not just for speed and money. Now with legalization we should be getting a chance to grow strains that take long, stink a lot and maybe not produce quite as much like in the old days. To me we should be sharing it and should finally be affordable not treating it like it was flippin Plutonium. Let’s say an once at the dispensary sold for $180, well someone will get it form a pirate grower for $150 and the pirate grower is getting more than the dispensary will give them. I’m sure there’s differences between dispensaries and from state to state and province to province but really the only thing good i’m seeing is the legalization and decriminalization of this plant mother nature gave US. NOT FOR PEOPLE TO PATENT.

  • freewheelinfranklin543

    Every so called legal pot state has prices up the ying yang. Quality is low. Black markets still exist. Ed Rosenthal was right.Tomato model!

  • Thank you for this article. So important to remember to work to keep the industry fair and reasonable so that we can all thrive.