The first leg of my journey up the coast has taught we where Cali thrives and where it nose dives.
5 min read
Opinions expressed by Green Entrepreneur contributors are their own.
I lived in Los Angeles for ten years prior to moving to Colorado. Since then, I’ve been curious how the new legal cannabis market has evolved, and how the culture surrounding it differs from city to city.
So I decided to clear my calendar recently for a road trip up and down California’s highways, visiting as many storefront cannabis dispensaries as possible. I wanted to learn just what these retailers have been experiencing in this transition from the “grey market” to a new era of hyper-compliance.
As a CEO in the cannabis space, I believe it’s important to get back on the ground, understand the needs of the people who are experiencing this shift towards regulation, and view the California cannabis industry through an anthropological lens.
To date, I’ve only toured the Southern California area, but I’ve already witnessed some of the most sophisticated retail experiences at California dispensaries.
Stellar retail experience
In both the desert and huge metropolitan areas like LA San Diego, you will find a highly-robust product selection. San Diego presents a shopping culture more similar to what you’d expect from a traditional retail experience vs. visiting a pharmacy.
All over the state, retailers are creating familiar and welcoming environments like you might find at popular high-end stores like Sephora, where the floorplans lend themselves to multi-sensory browsing experiences. Customers are often encouraged to touch packaging and smell cannabis products as they shop, appealing to connoisseurs as well as novice consumers who might not yet know exactly what they want.
Premium product, premium prices
There are more vendors than ever selling their products to cannabis retailers. In fact, California dispensaries are inundated with requests to work with brands offering flower, edibles and other infused products, technology and security solutions, and much more. The stream of vendors is so endless, many dispensaries have to designate special procedures to meet with potential partners.
Strong name brands have emerged — like Cookies, Henry’s, Flow Kana, Marley Natural, Viola, and Lowell Herb Co — just to name a few. Some flower brands are so prominent that see you see them sold in almost every dispensary statewide.
However, all these cannabis products are being sold at ultra-premium prices to consumers. They can cost up to six times more than a similar product in other legal markets, like Colorado.
Why? Consumer costs are driven up by a combination of high taxes, high demand, limited licensed providers, and a supply chain with kinks still to be worked out.
The black market flourishes
To fill the growing demand for cannabis, illicit providers continue to pop up and thrive throughout California. Because they aren’t complying with the state laws, they’re able to charge a lot less than licensed dispensaries do.
There are still tons of illegal shops operating quietly in the state, and a “pop up” black market event cycle in most major cities which are popular among consumers looking for cheap product. This phenomenon only fuels the lackadaisical attitude towards compliance.
It’s not just college students or millennials buying cannabis in California; older adults and seniors are increasingly choosing it for both medicine and recreation. With increased interest and accessibility comes further adoption and social acceptance.
Cannabis consumers are diversifying, and more people are shopping at dispensaries for the first time. They expect high standards of quality and purity from their cannabis products — which the state of California is set to enforce with an iron fist.
Licensed retailers are, understandably, hardly prepared for cannabis compliance enforcement. Since legalization, applicants and licensees have received nothing but mixed messages, postponed due dates, and misleading information from people looking to make a quick buck in the industry.
The latest news from the state government is that METRC tracking and tracing will be enforced starting in January, yet basic definitions are still being clarified by way of Emergency Regulations. Cannabis operators are expected to comply immediately, or risk shutdown — regardless of unclear language or quick changes.
I foresee retailers having trouble with adapting and leveraging compliance-based tools because current workflows are not yet established to scale. Many of these businesses will need to write SOPs for the first time, or make adjustments to their intake process for packages. There will be a lot more at stake with increasing regulations.
Licensed dispensaries are going to get audited, and many license holders are going to get shut down because they aren’t ready to comply with METRC. Retailers will consolidate or diversify their offerings to stand out from their competition, who often carry the exact same inventory. Dispensaries will need to up their game on in-house offerings, specials, community and loyalty programs as third-party producers expand their operations and become more ubiquitous.
In 2019, California retailers need more education about how compliance works and what it means for their business. Today there is more emphasis on cool features and trends, less emphasis on protecting their business from suspension or other penalties. Right now, there is a general lack of concern surrounding the transition towards a regulated market. The current mindset is, We’ve done this for years. Wake me up when the government starts cracking down.
My professional opinion: It’s time to wake up.
My tour isn’t over yet – follow Flowhub’s journey and peek inside California’s cannabis market by following #CAonFlowhub on Instagram.