California legal cannabis market alive and well, despite coronavirus pandemic, illicit competition: experts
With it poised to rake in about $1 billion in annual tax revenue for California by the end of 2020, the cannabis culture and economy have come a long way in the handful of years since the state legalized adult, recreational use in 1996.
That’s one in a series of assessments made Thursday at the North Bay Business Journal’s second virtual North Coast Cannabis Industry Conference this year, surrounding the industry’s past, present and future issues. Those range from legal guidelines and a new California appellation law to COVID-19’s impact and growing government support.
California Gov. Gavin Newsom’s cannabis adviser Nicole Elliot told the audience the business of cannabis is alive and well — with its $306 million in state excise, cultivation and sales tax revenue in this quarter, up 80% from the $170 million in 2019.
She also indicated the state has earmarked to fund $30 million in cannabis research grants at seven University of Calfornia and two California State University campuses.
Another $45 million is designated for grant applications that bring in more companies participating in this growth industry.
“These are exciting new ways to reinvest back into the community,” she said.
Hitting $1 billion in tax revenue is significant, Elliot said, given the industry’s challenges including businesses adjusting their operations with pandemic safety protocols because they were considered essential by the state.
Beyond the financial windfalls, the industry also got help in 2020 from state lawmakers.
The Senate Bill 67 bill by Sen. Mike McGuire, D-Healdsburg, signed into law in September allows for the marketing of products by appellation, akin to the legal designations of wine origin used for centuries.
“This was a watershed moment,” Elliot said.
Another panelist, Humboldt County Growers Alliance Policy Director Ross Gordon, agreed.
“This has the potential of proving beneficial to small and legal cultivators,” he said, adding the law may help to counteract the trends in consolidation that tend to allow larger companies to swallow up the boutique operations.
What’s in store for 2021?
As the state’s top cannabis expert, Elliot noted the hope for 2021 should lie in the industry departing from crisis management mode, with companies across the state and distribution channel scrambling to satisfy rising consumer demand during the pandemic.
Elliot also mentioned further anticipation that U.S. President-elect Joe Biden’s administration will help drive the movement to remove the federal level classification of cannabis as an illegal drug. More states legalized the substance in the November election, and the House of Representatives passed its version of the MORE Act that would decriminalize it across the United States. The verdict is still out on the Senate’s next move.
That is where all eyes may be on Georgia as a top issue leading into 2021, chemist Christian Sweeney of Sonoma Lab Works pointed out. The conference panelist was referring to two run-off senate elections that could tip the balance of power to Democrats come Jan. 5.
“That outcome will likely affect things like banking,” Sweeney said. Banks currently shy away from cannabis businesses because of the federal stigma, but another bill floating around the U.S. Congress would make it easier for banks to do business with cannabis businesses operating legally.
As the industry deals with its newfound fame, Sweeney warned that some cannabis companies may find it difficult to hold up to the pressures of 2021’s ongoing coronavirus crisis and consequential shutdowns.
“I have heard that as the financial assistance wears out, (these pressures) will creep up in the supply chain,” he said.
Sweeney’s hope is a vaccine poses as the primary solution to the American public getting back to business as usual and the economy picking up instead of “managing the stresses” of major challenges like strict protocols and soaring unemployment.
“This industry is extremely resilient,” Confident Cannabis Senior Vice President in Sales Paul Cebulak told the webinar viewers. Cebulak insisted that, although the COVID-19 crisis impacted the supply chain, its value grew exponentially.
“People were dealing with stress,” he said of increased use.
Cebulak listed a few sales dynamics that occurred as well. Consumers became more budget conscious of what they were regularly buying given the state of the economy, but they would also flip to “top shelf” products to treat themselves on occasion.
