Marijuana Business Magazine February 2019

Marijuana Business Magazine | February 2019 34 “T he year of stability.” That’s what the California Cannabis Industry Asso- ciation is hoping 2019 will become, according to the group’s executive director, Lindsay Robinson. And it very well could play out that way—especially compared to the roller-coaster turbulence the Golden State’s marijuana market experi- enced in 2018. But I know a lot of folks who would scoff at that kind of optimism. The first full year of California’s regulated marijuana market was as much about survival as anything else—especially for existing compa- nies that were transitioning into new modes of operation, with hundreds of pages of new rules (and multiple drafts of those rules) to comply with and comprehend. There was massive upheaval right from the get-go in January 2018, with sales not reaching their full potential because state and local taxes were much higher than many consumers were willing to pay. That led straight to the ongoing fight between legal operators and illegal ones—though many of the latter have been trying for months to obtain licenses and run their companies in a fully legal manner. But the underground market is still alive and well. I hear about it on a regular basis from retailers statewide who are having a hard time compet- ing on price with unlicensed shops and delivery businesses. The illicit market is only one reason Robinson’s hopes of stability may be for naught. I’ve also heard from plenty of others who don’t expect any real market stability for several more years—or until regulations are set in stone, wholesale cannabis prices stop fluctuating madly, testing processes become well-established and the sup- ply chain in general settles down. That’s not to say that 2019 won’t be easier than 2018. It probably will be for many members of the can- nabis industry. But it still won’t be a cakewalk. Here’s why. Anticipated Lawmaker Action There are as many as 50 or more bills already being drafted at the state capitol in Sacramento to further reg- ulate marijuana. Those will probably require further pivots and costs for companies that will have to adjust their operations to comply. Many of those are likely to be posi- tive shifts, such as a probable renewed attempt to open up banking in Cali- fornia for cannabis businesses, or to streamline existing regulations. But some could also be related to packag- ing, advertising or other logistics that will cost money and time to manage. At the very least, many compa- nies will have to keep an eye on Sacramento, which means less time building business and more time ensuring compliance. Licensing Changes Speaking of compliance, another ongoing process that began months ago is the transition from temporary business permits to full annual licenses for anyone on the plant-touching side of California’s MJ supply chain. Throughout 2018, almost every company was operating on temporary business permits issued by state offi- cials. But those permits, which were fairly easy to obtain compared to the annual licenses, are being phased out. It could take officials months to pro- cess applications for the new annual permits. That means we probably won’t have a clear picture in 2019 of just what the California cannabis business landscape looks like, or who exactly is part of it, until the current backlog of annual permits is relieved. Track-and-Trace Questions The onset of annual licensing in California brings with it a mandatory cannabis track-and-trace system, which has its own set of challenges, stakeholders say. Since only annual licensees are required to use the system, few com- panies were actually using it by the end of 2018, meaning the system has yet to bear the full brunt of the largest MJ market in the world. Will 2019 Be the �Year of Stabilityʼ in California? Trends & Hot Topics | John Schroyer