Cannabis Industry Daily News

Arkansas adds two medical cannabis growers to fast-growing market

Arkansas medical cannabis regulators voted to issue two additional cultivation licenses in response to some supply concerns in the rapidly growing market.

The state now has awarded the maximum eight cultivation licenses allowed under a 2016 ballot initiative that legalized MMJ in Arkansas.

But only three growers currently are in operation.

The Arkansas Medical Marijuana Commission had faced a July 10 deadline to decide whether to issue the full number allowed, according to the Arkansas Democrat-Gazette.

The commission also awarded four additional dispensary licenses.

As of June 30, Arkansas’ nearly 64,000 qualified MMJ patients had spent a total of $520,000 a day, or a little more than $8 per person, the newspaper reported, citing state records.

The new edition of the Marijuana Business Factbook, released this week, projects that Arkansas MMJ sales, after a slow start last year, will reach $175 million-$215 million in 2020. Arkansas registered $30 million in medical marijuana sales in 2019.

Cresco closes $29M sale-leaseback deal on MA marijuana facility

Cresco Labs, a multistate cannabis operator headquartered in Chicago, has entered into its fifth sale-leaseback deal with San Diego-based Innovative Industrial Properties (IIP), this time for a vertically integrated marijuana facility in Massachusetts.

According to a news release, the deal is worth $29 million and includes $21 million for tenant improvements.

“IIP has proven to be a reliable partner, and we are thrilled to work with them for a fifth lease. This transaction, along with our expanded real estate partnership with IIP, is allowing us to continue building out Cresco’s presence” in Massachusetts, Michigan and Ohio, Cresco CEO Charlie Bachtell said in the release.

The sale-leaseback agreement follows similar deals struck between Cresco and IIP in Illinois, Michigan and Ohio, including at least two such deals in June worth $17 million.

In all, Cresco has made at least $92 million from sale-leaseback deals to date.

Much of that money has been reinvested in company operations, according to the release, and though IIP will now own the Massachusetts facility, Cresco will continue to oversee operations.

IIP, a real estate investment trust (REIT), has been on a marijuana real estate buying spree for years and has closed similar deals with many cannabis multistate operators, including Green Thumb Industries and Vireo Health.

Cresco trades on the Canadian Securities Exchange under the ticker symbol CL and on the U.S. over-the-counter markets as CRLBF.

IIP trades on the New York Stock Exchange as IIPR.

California cannabis market a challenge, but it’s not all doom and gloom

Experts agree the California recreational marijuana market is extremely challenging because of high tax rates, huge illicit production and consumption as well as an uncertain economy amid the coronavirus pandemic.

But while much of this is unfair to legal marijuana business owners, one also must keep things in perspective: California is a new market with “brand-new baby regulations,” cannabis attorney Katy Young said Tuesday during the MJBizConNEXT Direct virtual conference.

“It’s a challenging environment, it’s difficult to make money, but it’s not impossible to turn a profit,” Young said. “Everyone is learning as we go along …. I do see the market improving over time as regulations mature.”

Young’s comments came during a panel discussion titled, “Key Market Insights to Embrace the Future. Searching for Stability: Surviving in California’s Cannabis Market.”

Ideally, of course, tax rates would be slashed, all municipalities would be required to allow rec sales and the illicit market would be squeezed out by statewide access to safe, high-quality and competitively priced products.

But, in the absence of major reforms in California, the experts hit on a number of key points in the search for stability in the market:

  • Young, managing partner of Ad Astra Law Group: A big enough war chest to survive the ups and downs. She also advised having a litigation budget.
  • Robert Hunt, principal of Linneae Holdings, a private equity firm: Manage your entire supply chain. Picking your vendors and suppliers is critical, he said. And “cash flow is king.”
  • Avis Bulbulyan, CEO of Siva Enterprises, a cannabis business development and consulting firm: Understand the line of business you’re in and your position in the supply chain – and understand the needs of others in the supply chain.
  • Virgil Grant, founder and CEO of California Cannabis West Coast, a Los Angeles-based marijuana operator: To plant your roots and grow a robust business, you need to understand the industry you’re operating in, plus the culture and people you’re servicing.

– Jeff Smith

Marijuana edibles maker Dixie Brands changing name to avoid causing ‘pain’

Denver-based marijuana edibles producer Dixie Brands said it will change its name in a move to separate itself from the historic context of the word “Dixie” and to “stand shoulder to shoulder with the Black community.”

The 10-year-old Denver-based company, which has operations in six states, announced the move on its website and social media.

The company hasn’t come up with a new name yet, but said it is committed to doing so as soon as possible.

The country pop band Dixie Chicks recently changed its name to “The Chicks.”’

“Dixie,” a popular song in the 19th century, was widely used as a marching tune and anthem of sorts for the Confederate Army during the Civil War.

In a statement on its website, the Denver cannabis company explained:

“Recently, the national conversation about racism and injustice has focused our attention to the pain the Dixie name can cause due to the historical context of the word. We stand shoulder to shoulder with the Black community, and we stand firmly against racism and injustice.

“To stay true to these values, we have decided to change our name …. We hope this change is a small step forward for a more just and equal world.”

The company is asking that name suggestions be emailed to [email protected], according to the Denver alt-weekly Westword.

For a sampling of organizations and efforts that support, foster and enhance social equity in the cannabis industry as well as opportunities for minorities, overall diversity and racial justice, click here

NJ is key to East Coast adult-use cannabis legalization, stakeholders say

New Jersey is the “linchpin” for coming recreational marijuana legalization on the East Coast, a panel of industry experts said Tuesday on the second day of MJBizConNEXT Direct, Marijuana Business Daily‘s three-day virtual cannabis business conference.

Panelist Rob DiPisa, partner and co-chair of cannabis law group Cole Schotz, called New Jersey a “hot market” that has continuously expanded its medical marijuana program and, therefore, has the infrastructure in place for a successful recreational program.

“It’s something of a linchpin. I think New Jersey ties the knot,” said Jeremy Unruh, senior vice president of public and regulatory affairs for Illinois-based cannabis firm PharmaCann. “It also places a tremendous amount of pressure on New York” to legalize.

Unruh pointed out that New York Gov. Andrew Cuomo doesn’t want to see state revenue go to bordering New Jersey.

“The focus right now is certainly New York and New Jersey,” DiPisa added.

Unruh said the likelihood of New York legalizing recreational marijuana in the near future is “limited at best.”

He also said it will be difficult for New York’s lawmakers to take up social justice and inclusion questions during the coronavirus pandemic.

But pressure from New Jersey and Pennsylvania as well as New York’s substantial budgetary issues could help to drive the governor’s budget in 2021, Unruh added.

Bridget Hill-Zayat, counsel for Denver-based Hoban Law Group, said Pennsylvania might see momentum toward adult-use legalization because of the state’s massive budget shortfall amid the pandemic.

“People who weren’t considering adult use previously may be taking another look,” she said.

Unruh added that “gaming and cannabis are really the only two turnkey options to generate revenue for the state.”

Another state ripe for recreational legalization is Maryland, Hill-Zayat said. It’s “an inevitability,” she added. “The money is too palatable right now.”

She noted that, in other markets, converting from medical marijuana to a recreational program is the “natural progression.”

Information about any of these virtual events is available here.

– Bart Schaneman

Second medical marijuana provider in Louisiana poised to roll out products

Only two entities in Louisiana – both colleges – are authorized to produce medical marijuana for patients, and Southern University on Wednesday is expected to join Louisiana State in rolling out its first product line.

Southern’s product debut is also an industry landmark because the Baton Rouge university is the only historically Black college in the United States allowed to produced medical marijuana, according to a news release.

Southern, in conjunction with Ilera Holistic Healthcare, will launch a brand line called AYO. The university will also sell hemp-based CBD products from ALAFIA, a brand that will launch later this year, according to the release.

The product launch comes on the heels of an expansion of the state’s MMJ program that will allow an increased number of physicians to recommend medical cannabis for any ailment.

The other university licensed to grow and dispense medical marijuana in the market, Louisiana State, began supplying pharmacies with MMJ when sales officially began in summer 2019.

Illinois delays awarding 80 cannabis business permits

The governor of Illinois on Monday signed an executive order delaying the issuance of 80-plus marijuana business permits that were scheduled to be awarded on July 1, and now it’s unclear when the licenses might be granted.

According to the Chicago Tribune, Illinois Gov. J.B. Pritzker’s order delays indefinitely 40 new craft cultivation permits, 40 infuser licenses and an uncapped number of transporter permits. There’s also no indication when the licenses might be given out.

That has some applicants worried that they could be on the hook for property-rental payments while they wait, since the state required applicants to have business properties lined up before the licenses were awarded.

Several applicants told the Tribune they believe the delays could cost them thousands, if not tens of thousands, in extra rent they might not be able to afford, which could mean the delay cost them the opportunity to enter the industry.

Social equity applicants are among those who now might not be able to get into the industry, the Tribune reported.

Earlier this year, a similar delay occurred for 75 new storefront licenses. Those permits still have not been handed out, nor have the applicants been given a timeline for when the licenses might be granted, the Tribune reported.

Iowa governor signs bill expanding medical marijuana THC formula

Iowa Gov. Kim Reynolds signed into law a bill that replaces the 3% THC cap with a per-patient limit of 4.5 grams of THC for a 90-day period, but it’s unclear how much the move will boost the state’s heavily regulated medical cannabis market.

The provision is a much weaker version of a measure that Reynolds vetoed last year. That would have capped THC quantities at 25 grams for 90 days.

The state’s largest provider of MMJ, MedPharm Iowa, already has warned the formula might not meet the needs of some existing patients, according to the Des Moines Register.

Patients certified as terminally ill can get more than the 4.5-gram limit, and a doctor can recommend a higher amount to treat a particular medical condition.

Another potential issue is cultivation/manufacturing supply.

New York-based marijuana multistate operator Acreage Holdings, doing business as Iowa Relief, recently pulled out of Iowa, indicating the market didn’t show enough potential for growth.

Iowa Relief was one of only two licensed cultivator/manufacturers in the state. Regulators are determining the timetable to take applications and select another cultivator/manufacturer.

The new Marijuana Business Factbook, released Monday at MJBizConNEXT direct, estimates that Iowa medical cannabis sales will reach $7 million-$9 million this year, up from $4 million-$5 million in 2019.

Ways to shake up cannabis firms and keep as many workers as possible

The coronavirus pandemic has caused the cannabis industry to focus on operational efficiency rather than rapid growth, a shift that has resulted in layoffs in California and other locations across the country.

But panelists at the MJBizConNEXT Direct conference on Monday also talked about ways operational disruptions can be cushioned by the creative restructuring of staff roles, and being vigilant about all expenses.

A silver lining for cannabis companies that have the resources right now: It’s a good time to recruit talent from other industries.

Three experts shared those views and others in a panel called, “Overcoming Staffing and Operational Challenges Resulting from COVID-19.”

Here were some of their insights:

Michael Ray, founder and CEO of California-based Bloom Farms: He described the industry as going from “hypergrowth” to efficiency mode. “Oftentimes the path to profitability requires significant cuts and looking for savings wherever you can find them.” Bloom put in place some pay cuts, he said, but none for those making under $60,000 a year.

Peter Flint, partner of Pennsylvania-based executive recruitment firm JM Search: The cannabis industry needs executives today that can focus on cash management and operational efficiency. Providing equity in lieu of cash could be attractive to employees if they believe the company has a long-term future. For companies so positioned, it’s a good time to recruit talent from other industries, such as the consumer packaged goods industry.

Andrea Brooks, founder and CEO of California cannabis company Sava: Sava did a complete restructuring of its work force, with cross-training, to try to keep the staff as intact as possible. Additional advice: Watch every dollar, measure every spend. It’s critical to be transparent about the state of the industry and the company so employees understand what’s happening. Provide perks that make people feel valued.

– Jeff Smith

Cresco CEO: How marijuana firms can ‘slingshot’ out of recession, pandemic

If cannabis companies can survive this “giant curveball” and economic downtown, those businesses can “slingshot out of it” in better shape and with more opportunities than before the coronavirus.

That was one of the central messages delivered Monday by Charlie Bachtell, co-founder and CEO of Chicago-based Cresco Labs, while offering business tips during an appearance at the MJBizConNEXT Direct virtual conference on Monday.

He stressed the engagement and commitment needed to keep a cannabis company’s balance sheet and employees healthy during these unprecedented times.

“No one forecasted pandemics in their operational plans,” Bachtell said Monday during a talk called “Survive to Thrive Executive Strategies: “Restructuring your Business for Sustainability Amid Market Contraction.”

Bachtell has been through a recessionary challenge before; he worked as a lawyer in the residential mortgage banking business during the Great Recession of late 2007 to mid-2009.

Here are some of Bachtell’s tips:

  • Develop a business model and mission that really speaks to today’s environment.
  • Don’t focus exclusively on putting out the fires; address your high-level strategy to see whether you need to pivot – and, if so, how.
  • Control costs and manage for profit and loss.
  • Engage immediately to fight through the difficult environment. A company needs a “kick down doors” mentality to find opportunities amid challenges.
  • Build your infrastructure and devote resources to face the headwinds.
  • Develop a trusted relationship with regulators and lawmakers so you’re in the room with the people who will have a huge say in the way the industry develops.

– Jeff Smith

California cannabis regulators extend license fee deferrals amid coronavirus

The three regulatory agencies that oversee California’s marijuana industry said Monday they’re again offering license fee payment deferrals for up to 60 days – this time for business permits that are expiring in July and August.

The announcement was made by the California Bureau of Cannabis Control, which oversees most MJ companies, in tandem with the state Department of Public Health and the Department of Food and Agriculture.

The three agencies announced in May that any marijuana company whose permit expired between May 14 and June 30 would be allowed to take up to 60 extra days to pay renewal fees, given that the coronavirus outbreak has increased pressure on businesses and their employees.

The same reasoning was applied for the deferral extension through Aug. 31.

Once a company obtains a deferral, the license payment will be due 60 days from when the license expires.

“We hope that today’s announcement will provide assistance to the industry as we continue to work together to address the challenges created by the pandemic,” BCC chief Lori Ajax said in the news release.

Additional deferrals for licenses that expired before July 1 are not available.

San Diego creates new marijuana business regulatory agency

San Diego has joined cities such as Los Angeles, Sacramento and San Francisco in creating a cannabis-specific agency to oversee its marijuana industry.

The city’s fledgling Cannabis Permitting Bureau will have an annual operating budget of just under $1 million and a staff of nine full-time employees to focus on licensing as well as industry oversight, according to The San Diego Union-Tribune.

“We will be doing proactive code enforcement where necessary and revoking permits for what we call ‘bad actors,’ if necessary,” P.J. Fitzgerald, an assistant deputy director in the city’s Development Services Department, told the newspaper.

Plenty of other cities in California and other states already have established their own marijuana-centric government offices, given the unique and evolving nature of the industry.

San Diego has five licensed cannabis storefronts and another five waiting to open. Forty production facilities are licensed in the municipality, 11 of which are operational.

But the city – along with the rest of Southern California – is still grappling with an immense illicit market, driven by the high costs of operating a legal marijuana business.