I just spent two days at NCIA’s 3rd Annual California Cannabis Business Conference. In talking with friends, colleagues, clients and just by walking the floor, there are a few obvious challenges dominating the industry conversation these days and I think they’re worth sharing here.
Challenge No. 1: The unexpected vape crisis
Our industry has enough growing pains or pushback from anti-cannabis forces, thank you very much. And that’s what makes the vape crisis so ...infuriating. These same forces are grabbing the pitchforks and want to ban vaping, they want to ban flavored cartridges, and states that have no laws on the books are freaking out. Hell, even places like Berkeley are freaking out.
The consensus and science is not clear, to be sure. But it does seem there are dispensaries (without licenses) operating openly that sell fake and untested cartridges. Unsuspecting people buy the knockoffs (made for pennies in China) thinking the product has gone through rigorous testing. The problem is made worse because states like California seems categorically unable or unwilling to enforce existing laws and take steps to close the doors on folks operating without licenses. And so instead of focusing on passing legislation that fixes some of the problems that result from what is a regulatory mess in California, we all now have to deal with this.
And speaking of operating without licenses, those doing so are not paying the gigantic tax that the rule followers area paying and are not subjecting themselves to the rigorous testing and approval that the legit companies are doing. This means that the unlicensed operations are selling product for sometimes 2/3 the price of the legit shops. So folks paying taxes and creating jobs and doing payroll and all that stuff are being penalized. Not fair!
The clear answer to this crisis is to welcome regulation with open arms.
Challenge No. 2: The myth of the green rush
So many companies, brands, bankers, are trying to enter this space thinking everybody will get rich. And although a few are doing well, many are…not. Take a look at the Toronto stock exchange prices for cannabis brands a year ago to today. Many are down 75%. And the road to profitability is especially challenged by inconsistent rules and regulations across states, and inconsistent enforcement within states. This means that the money people hope to make is not the “get rich quick” kind.
It’s feeling a little like e-commerce and 1999 all over again. Are we ready for a big correction that might be lurking?