When adult-use recreational cannabis was legalized in California on Jan. 1, 2018, billions of dollars in sales and tax revenues was projected for the state. However, revenue from cannabis in California fell in 2018 with officials scrambling to find ways to stop the decline and increase revenues.
Legal cannabis sales in California decreased from $3 billion in 2017 to $2.5 billion in 2018. These figures are according to GreenEdge, a BDS Analytics’ sales tracking platform as outlined in the State of Legal Marijuana Markets 2019, a forecast by Arcview Market Research in partnership with BDS Analytics.
Reasons for the decline given by industry experts include excessive state and local licensing, delays in lab testing of products for dosage and purity, and heavy taxation. Along with local licenses, permits must be obtained from the California Department of Food and Agriculture, Bureau of Cannabis Control, and/or the California Department of Public Health adding to the burden of legalization. Additional costs are passed on to the customer who can still turn to the cannabis black market to purchase at a much lower price.
Examples of frustration concerning lab testing can be found with experiences of two top-ranking cannabis companies. Kikoko is a cannabis-infused tea and ranked by BDS Analytics as the state’s leader in cannabis beverage sales. BDS Analytics ranks PLUS gummies as the leading edibles brand in sales and units sold. Both companies reported spending large amounts of money to either find qualified labs or acquire machinery that could verify the dosage and purity of products.
By 2020, legal cannabis could become cheaper, under a bill proposed by Assemblyman Rob Bonta, (D-Oakland), to reduce cannabis taxes. Supervisor Rafael Mandelman (District 8-San Francisco Board of Supervisors) proposed the legalization of the sale of cannabis at public events in San Francisco, which has been approved by the board and can go into effect by the summer.
The director of the Office of Cannabis in San Francisco, Nicole Elliott, reported processing over 430 permits including indoor cultivation, manufacturing, distribution, testing, and brick-and-mortar retail space. She has reached out to officials from the states of Nevada and New York as well as the countries of Australia and New Zealand to learn about their legislation and procedures. With the upcoming vote in the city of Las Vegas on May 1 to legalize consumption lounges, she is also gathering insights on the changing cannabis landscape for social venues.
In San Francisco, Moe Greens on Market Street near Twitter’s headquarters is an upscale lounge with Sputnik-inspired light fixtures and plush leather booths. Poised to transform into a consumption lounge when legalized, Moe Greens is the second social venue for co-owner and CEO Nate Haas. The Barbary Coast Dispensary lounge on Mission Street attracts locals and tourists featuring the same vibe.
“We’ve had to navigate some pretty interesting legislative, as well as bureaucratic, things in San Francisco,” Haas told told ModernLuxury.com. “It has not been easy. Moe Greens has taken over four years to sign the lease. Four years and a few tears!”
“We have brought quite a few businesses into a much more compliant space,” Elliott told ModernLuxury.com. According to the state’s Bureau of Cannabis Control, 625 dispensaries in California are currently licensed for commercial sales.
Steve DeAngelo, cannabis activist and the co-founder of Harborside dispensary in Oakland, California, points out that California was a forerunner in legalizing cannabis. The Compassionate Use Act of 1996 for patients and caregivers led the way for medicinal cannabis. California Senate Bill 420 allowed for collectives to grow cannabis and Proposition 64 in 2016 legalized recreational cannabis use for adults 21 and older.
“It’s a remarkable thing when you consider that a little over 20 years ago, California was the only political jurisdiction anywhere in the world that had any form of legal cannabis commerce—medical commerce,” says DeAngelo. “Now we have huge swaths of the globe, blocks of continents, that are becoming free cannabis zones.”
DeAngelo explains that the trend to legalize cannabis is growing on a global level.
This includes Canada’s legalization of recreational and medicinal cannabis and Mexico’s Supreme Court ruling that it is unconstitutional to enforce a total ban on recreational cannabis.
Worldwide spending is projected to grow to $17 billion in 2019, a 39 percent increase over 2018, and projected to reach $31.6 billion by 2022, according to the Arcview and BDS Analytics report.
