California cannabis regulator clarity spurs entrepreneurs to move forward in North Coast
This fall, North Bay cannabis business leaders have been hard at work building and networking to develop a slew of creative proposals. Sonoma County, and Santa Rosa in particular, have emerged as a hub for the industry. The county's central location, proximity to cannabis cultivators in Sonoma and Mendocino counties, and invitation to submit permit applications have attracted industry professionals from around the state.
‘Uncertainty and dynamic change every week'
Terry Garrett, a co-managing member of Sustaining Technologies LLC, a Santa Rosa-based company that developed the Go Local cooperative network, and Robert Eyler, Ph.D., president of Economic Forensic and Analytics, a Petaluma-based forensic economic and accounting firm, are currently writing a cannabis economic-impact report regarding Sonoma County.
Garrett said the report reveals that there are no patterns in the cannabis industry in the past year that have been sustainable enough to become trends. He said the current state of the North Bay's cannabis industry is “uncertainty and dynamic change every week.”
“The fluctuations (of the market), the regulations, and how they impact (operators) show there's been a lot of change in this industry. The cannabis industry had to operate underground (before legalization). It created its own culture, which was ostracized for 80 years,” said Garrett.
Garrett said the good news is that the North Bay is home to a “tremendous cannabis knowledge base” that predates state legalization.
“We also have a sophisticated and experienced consumer market, which numbers close to 30 percent of the general adult population,” said Garrett.
Garrett said it is a concern that in the past year, many experienced cannabis operators have left the region.
“(The drain is) due to an adverse regulatory environment that has triggered economic distress and an exodus of that brain trust. (Yet) we have more (of a) knowledge base than other counties…and other states,” said Garrett.
Garrett added that the North Bay's cannabis industry also has a stable “of ambitious, entrepreneurial folks” who are very resilient.
“You have to be almost much better at business than anyone else to survive that. When you're a cannabis operator, you get no banking, pay way too much in taxes and fees, and have a shortage of people who can (work in the industry),” said Garrett.
Eyler said it is also helpful that the cannabis marketplace is becoming more professional.
“There is also a hard line developing between those who are complying with local and state regulations and those who are very content to roll the dice and produce cannabis to move it to other states. Local government is trying to balance between two worlds, making consumption temperance a priority and being relatively open-armed to it because they want the revenue,” he said.
Eyler said one advantage that the North Bay has over other parts of the Bay Area is its proximity to local cultivators and cultivators to the north in Humboldt, Mendocino, and Trinity counties.
“The North Bay's location allows it a lower transactions cost of doing business than in Los Angeles, San Diego, or Fresno. But that won't last forever,” said Eyler.
Production line gears up in Santa Rosa
In early 2019, Annie Holman, the former owner of a Petaluma gourmet edible company, Derby Bakery, plans to open an 8,300-square-foot cannabis product-manufacturing space on Sebastopol Road in Santa Rosa. Holman co-founded The Galley with two partners.
Holman said the group hopes to break ground in mid-2019 on an additional 20,000-square-foot second building next to the first building.
“At our cannabis contract manufacturing facility, we'll start by focusing on five (different types of products), baked goods, both sweet and savory, topicals and tinctures, hard candies and gummies, chocolates, and … cans, bottles, and power shots of drinks that contain cannabis,” said Holman.
The Galley will have a large commercial equipment and also run a bottling line.
“Our customers are interested in ‘white labeling,' (or) contract manufacturing where we make the products for them. We'll also rent out shared kitchen space to customers who would prefer a more hands-on approach. In addition, we'll have our own product line of THC/CBD products such as edibles, beauty products, beverages and vapes called Big Fish,” said Holman.
Holman said that in the past three months, she has talked to over 75 cannabis business operators interested in having The Galley make products for them.
“We have heard from operators in the North Bay and throughout California, as well as cannabis companies from Arizona and Oregon who want to enter the California market. Most of our potential customers want us to source ingredients like eggs, sugar, and chocolate, and high-end extracts for their products. Right now I am working on finding suppliers for organic, fair-trade (ingredients),” said Holman.
