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Cannapocalypse Now, How a Global Pandemic Infected the California Cannabis Industry

Cannapocalypse Now, How a Global Pandemic Infected the California Cannabis Industry

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California has long been hailed as the leader in legal medical and recreational cannabis, being one of the first states to implement laws that made it legal to purchase and possess certain quantities. For nearly three decades, California has given rise to an acceptance and appreciation for a culture that had forever been viewed as a counter-culture of hippies and drug addicts. California has also proved to the world that cannabis is a viable resource and a powerful healing alternative to opioids, antidepressants, and other harmful prescription drugs offered by Big Pharma.

But just how well is the legal cannabis industry holding up in California after nearly 30 years of legalization, corporatization, and massive expansion, despite the challenges surrounding licensing, zoning, banking, price fluctuation, and over-saturation? Furthermore, how has California’s cannabis market been affected by two-plus years of pandemic lockdowns, closures, and restructuring? Well, my friends, I’m here to tell you it’s been greatly affected.

Currently, several factors plague the legal California cannabis market. Aside from the obvious issues like overly-exorbitant taxation, limited license availability, and the standard political hurdles that complicate every industry, the market is seeing a significant drop in sales, and that’s just the beginning.

In 2019 the market had reached a pretty steady pace of natural organic growth, with a healthy number of dispensaries and brands occupying the space. There seemed to be plenty of room for additional growth. By this time, California had solidified itself as the mecca of high-quality cannabis, and the rest of the world was watching to see what we would do next.

global marijuana culture industry business empty distro warehouse shelves
Empty Distro Warehouse Shelves. Photo Credit: SVH

Then in January 2020, the entire globe was hit with the looming threat of a deadly new virus as the first cases of Covid 19 started popping up in the US. By mid-March, the entire state was in full-on panic mode. Schools, churches, restaurants, and several other businesses were forced to close their doors, while many companies transitioned to have employees work from home. It seemed that the balance experienced in the market in 2019 was about to be shaken off its foundation. But it wasn’t….

As more and more panic ensued, as more fear and uncertainty crept in around what normal life would look like in the face of a worldwide pandemic, more and more people turned to cannabis for relief from their anxiety and as a way to improve their overall well-being. Dispensaries learned to pivot from brick-and-mortar retail sales to online orders, curbside pickup, and delivery service options, allowing for greater access when the streets were virtually barren and empty. California officials even deemed those of us working in any field of cannabis as “essential workers.” While most of the state was on lockdown, many of us had an all-access pass to keep racking up sales and finding new outlets to feed with our brands.

Then came “The Stimulus.” The United States Government began issuing stimulus checks to every American in hopes of “stimulating” the economy and providing the means necessary to help people buy the essential items they needed to get by. So naturally, with a rise in demand for cannabis and some extra money in our pockets, cash started flowing heavily into the legal cannabis market, and business was booming! Of course, as the rise in demand kept climbing, greed began to loom its ugly head, looking for new ways to take advantage and cash in.

Shelves Jam Packed with Product in Early 2021
Shelves Jam Packed with Product in Early 2021. Photo Credit: SVH

Cultivators started charging upwards of $3800 per pound on the legal books while back-dooring packs illegally across several other states for sometimes twice the price. I can personally attest that I witnessed firsthand one of the absolute biggest brands in the industry buy up everyone’s bulk supply at unheard of high prices just to force as many people out of the market as possible. Brands were then forced to impose a price increase on their products, which in turn forced the dispensaries to raise their prices as well. Alongside the rise in prices came the rise in corporate entities entering the space to cash in on the new green rush. This influx of new corporate cash led to a whole slew of new mega-grow operations, some of which look like 20 of the biggest Ikea stores you’ve ever seen under one roof filled wall to wall with weed!

These trends grew rapidly and rampantly throughout the entire state, forcing many smaller cannabis businesses and legacy growers to sell their farms and close up shop. How can a small family-run farm in Humboldt compete with the dozens of million square feet of mega facilities that just keep popping up everywhere? And what about the trailblazers that paved the way for legalization? The ones whose homes were raided, farms destroyed, and lives drug through the mud so these mega-corp Chads could even get in the game to start with. They never got the opportunity to benefit from the spike in demand; they just got bumped out of the way. Sadly, greed got the best of the business, and those that cashed in flourished, that is, until the stimulus checks stopped.

This was when the real ugly side of the industry started to show its true colors as things began to regress. Fast-forward to late 2021, and the California market was starting to see a rapid decline in sales. As shops began to reopen, they reported seeing fewer customers per day and noticed a significant reduction in overall purchases and dollars spent per customer.

Many of these shops overbought, meaning they stocked up too heavily on products from too many brands, and now they are sitting on outdated product, or at best, long-dated. All of this led to a new wave of unrealistic expectations being imposed on brands. They must bear the burden of the dispensary’s poor buying strategies and offer free promo product to help them move through their excess inventory. This was accompanied by shops asking for terms (IE: Credit) in an industry without banking support and where credit doesn’t exist. You would then extend them the courtesy of 14-30 days to pay the bill for the cannabis they already bought and are starting to profit from, only to be treated as a thief when you call them in 45-60 days asking for your money.

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A masked and gloved SVH hits dispensaries in 2020.
A masked and gloved SVH hits dispensaries in 2020. Photo Credit: SVH

Now, the current landscape in 2023 looks like this; shops are millions of dollars in debt to brands and distributors, so they pay a little bit of what they owe to the name brands that draw in the customers, then make everyone else wait. Meanwhile, there are hundreds of hungry new brands vying for shelf space that will gladly extend those 30 (cough cough 90) day terms just to grab some market share, and the cycle continues. There is no real brand loyalty from the dispensaries, and the trend is to beat everyone up on price which forces brands to lose money to be on the shelves. The sad fact is, if a brand can’t offer orders on terms, give tons of free product away, and provide extra in-store sales support, they don’t stand a chance at getting their products out there.

It’s also become very difficult for salespeople in the industry to make real positive traction because brands don’t have the budget for a proper customer service infrastructure. Not to mention, if shops are not paying the distro partners and the brands aren’t getting paid, then salespeople are not getting paid until the brand collects payment, which can take several months unfortunately. Sales professionals are faced with the choice to work extended hours and take on additional duties just to make a little money every few months and accept that as the norm, or leave the industry and find other ways to make a steady income. This has led to a huge turnover rate in the industry, and sadly the people with a passion for the plant are being pushed out, and less experienced individuals are filling those empty seats at a fraction of the cost to the brands.

So can California survive this post-pandemic apocalypse, and if so, how? For starters, we need a better tax rate on cannabis. After all, why should we continue to line the state’s pockets when their agencies fail to protect legal shops from tax hikes, limited license availability, zoning laws, and the illicit black market? Brands need to band together and demand COD only until a long-term relationship can be established for terms even to be considered an option. Then there needs to be a legitimate banking and/or financial solution so that if “credit” is extended to a dispensary, there are legal ways to go after deadbeat shops that don’t pay their bills. Brands should also set MAP pricing (a minimum advertised price), which evens the playing field so that some shops can’t price gouge or dip below a product’s perceived value. Shops need to offer better staff training and sales incentives to their employees so they get better at ordering the right products in the right quantities while arming their budtenders with the knowledge to dive deeper into every individual customer’s needs to offer them products for the results they wish to achieve.

Clearly, the pandemic period created some massive ups and downs to an already bumpy roller coaster ride, and there are many other factors that can be re-addressed and looked at from new perspectives that can clean up the rubble and rebuild California’s once-thriving cannabis market. It’s my hope that the realities shared in this article will spark up more conversation around today’s current market struggles and help spawn new ideas and ways that we can all work together to restore glory to the highly esteemed California cannabis industry.

Follow Scott on social media: @highervibesvh @highervibessolutions

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