On Dec. 20, a 6.4-magnitude earthquake hit Humboldt County, Calif., part of the Emerald Triangle region that is arguably the heart of the U.S. cannabis industry, well-known for its legacy operators, ideal growing conditions and top-notch genetics.
It felt like yet another blow to California, which has struggled considerably in 2022, a year where the persistent challenges of competition from the illicit market, high taxes, price compression, compliance standards and local cannabis business opt-outs have pushed the world’s largest cannabis market to the brink.
“It’s just a recipe for disaster,” Jocelyn Sheltraw, who serves on the Board of Directors of the California Cannabis Industry Association, told Cannabis Business Times Senior Digital Editor Melissa Schiller in March. “It’s just created turmoil on the cultivation side.”
In July, California implemented a policy change growers had long pushed for—eliminating the weight-based cannabis cultivation tax, a rate that had been $10.08 per dry-weight ounce for flower and $3 per dry-weight ounce for leaves, bringing much relief to licensed growers.
Although removing the cultivation tax burden was perhaps the most impactful for cannabis growers, Gov. Gavin Newsom also signed 10 bills in September meant to offset other industry challenges, remove employer penalties for cannabis use and improve access for patients and consumers.
However, it remains to be seen how much these and other efforts will mitigate stagnant sales in the state, and when these changes will start to impact markets.
As Associate Editor Tony Lange reported in November, “California’s adult-use retail market is on track to shrink for the first time since the state launched commercial sales in 2018.
“State-licensed dispensaries reported $1.27 billion in taxable adult-use sales for the third quarter 2022—a nine-quarter low going back to the second quarter of 2020—according to data released Nov. 18 from the California Department of Tax and Fee Administration (CDTFA),” Lange reported.
Throughout 2022, Cannabis Business Times published nearly 200 articles covering the California market, tracking cannabis policy reform efforts and changes and checking in with cannabis business owners and stakeholders throughout the state to get their take. Here is an overview of the most compelling conversations and biggest stories CBT editors published throughout the year, plus tips on how to navigate some of the hurdles. Read all the California news and keep checking in here in 2023 for ongoing coverage.
California’s Cannabis Market at a Crossroads: CBT June 2022 cover story
Cannabis operators across the state say lawmakers and regulators must address several key issues for the market to prosper. Government officials are proposing changes, but will they be enough?
“We’re all juggling 50 different balls right now,” Marie Montmarquet, founder of cannabis cultivation, processing and delivery company MD Numbers, told Managing Editor Patrick Williams in the cover story, written by Williams and Senior Editor Zach Mentz. “Everyone was expanding and then immediately had to stop expanding. If you were doing well and you’re like, ‘Oh, let’s take on more territory; let’s add to our portfolio’—then the next thing you know, prices drop 40%—who wants to invest in cultivation, or who wants to dive into cannabis like they wanted to in 2018?”
In this special 90-minute presentation, Angela Pih (StateHouse Holdings), Jocelyn Sheltraw (Budist), Claudio Miranda (Guild Extracts) and Swami Chaitanya and Nikki Lastreto (Swami Select) share tips for California plant-touching cannabis operators in today’s market as it relates to price compression, retail scarcity/imbalance, resource-intensive sales and marketing support, and much more.
Plus, read the top 10 takeaways from the conversation.
“… this is their last season. It’s over.” Q&A with Julia Jacobson, Aster Farms CEO
In this conversation with Senior Editor Zach Mentz and Aster Farms CEO Julia Jacobson, Jacobson chronicled the beginnings of her cultivation company and spoke about the ramifications for growers, and the industry as a whole, if the challenges in California are not addressed.
“What we’re hearing is a significant number of those small legacy farmers, this is their last season. It’s over. These are the people who created this industry. We owe it to them to support them and keep that piece of the industry alive. We are losing grow practices from these people being out of the market. We are losing communities’ revenue sources if the [illicit] market is really being cramped down on and people are also shut out of the legal market. There are certain counties that rely on cannabis revenue for their community to survive.
“Another thing people aren’t talking about is that heritage genetics are going to be lost.”
Jocelyn Sheltraw, former Director of Industry Relations for Headset, says that while sales in California continue to grow, unstable market dynamics highlight the need for regulatory changes.
Glass House Brands co-founder and president Graham Farrar outlined the biggest challenges—and opportunities—for the state’s licensed cannabis businesses.
“Right now in California, surviving is thriving, but I think the opportunity on the other end makes it more than worthwhile,” Graham told Senior Digital Editor Melissa Schiller during a March interview.
“As prices compress and the cost of cannabis comes down, the tax percentage actually goes up. For easy math, call it $150 a pound. If cannabis is $1,000 per pound, it’s a 15% tax. But if cannabis is $500 a pound, it’s now a 30% tax. That hits the smaller growers and the outdoor growers particularly hard because their product is usually worth less on the market, but the tax isn’t adjusted for that at all.”
“This ruling sends a strong message that the illegal cannabis market will not be tolerated in California,” Department of Cannabis Control Director Nicole Elliott said in a press release. “DCC and our partners will do everything in our power to protect consumers and maintain the integrity of California’s legal cannabis market. We applaud the court for its commitment to enforcing the rule of law in California’s cannabis industry.”
Cannabis sales figures rose slightly in Q2, eclipsing $1.2 billion, representing a 2.9% increase from the previous quarter.
In an ongoing effort to address California’s obstacle-heavy cannabis landscape, Gov. Gavin Newsom announced Sept. 18 that he signed 10 bills to help expand the legal market and address the ever-lasting impacts of prohibition.
It hasn’t been all doom and gloom. In the spring, we caught up with small growers in California to talk about the harvest and the year ahead.
“Everything went right this season, which never happens in cannabis,” Stone Road Farms founder Lex Corwin told CBT.