The six month report card on California’s first steps into regulated cannabis came in with a sobering grade: “Needs Improvement.” With its heavy emphasis on local (county and municipal) controls, administratively intense applications and compounded State and local tax rates exceeding 45% for each cannabis dollar earned, most legacy California cannabis operators and indeed consumers, have simply elected not to participate. Of the ~2,500 cannabis dispensaries operating before regulation, less than 500 have thus far become state-licensed shops. (The remaining 2,000 or so shops are electing instead to make as much money as they can until their Prop 215 rights sunset on January 1, 2019.) Because regulated operators cannot sell to legacy Prop 215 shops, the entire regulated marketplace has suffered massive constriction, forcing layoffs, reduced SKUs, and intense financial restructuring. “Pioneers get the arrows, settlers get the land,” goes the saying. With regulation came a great reckoning that leveled the playing field and reset the marketplace, but with a much smaller footprint than anticipated. Some contraction was expected, but governments are scrambling to reset a healthier course. For example, our own County of Monterey was the first in the state to reduce cannabis tax rates, and it did so by almost 75%! In the meantime, most operators in California who chose the regulated path are reeling to down-scale to a constrained market. Those who did not, the Prop 215 operators, have less than six months of existence left and time will only tell how many will migrate to the regulated environment. As the hangover excitement of regulation fades, a new market emerges – even if slowly. Ours is a challenging landscape and Grupo Flor will surely earn its fair share of arrows. However, unlike others, Grupo Flor was specifically designed to weather these transitional years. From our blend of cannabis and ancillary business units, to our aggressive acquisition of permits to the very architecture of our supply chain, we are specifically built to weather this transitional. Successful scaling will require more than a strong foundation, capital and guts; it also demands a mature adjustment of perspective with balanced expectations. Stay in the loop! Subscribe to our newsletter. Above image is FPO - The Grupo Flor Constant Contract generated embed code can be placed within the context of the story to increase email subscriptions.
