Authored By: Jeffrey Rosen

(415) 974-1114

jdr@tailoredbenefits.com

tailoredbenefits.com

@TailoredBen_

The state requirement that all growers use licensed distributors as intermediaries to get their product to market, has resulted in a bottleneck in many rural marijuana farming areas. This is especially visible in Trinity County, which is famously remote and therefore was a perfect stomping ground for illicit cannabis growers for decades.  It means the county’s growers may be left out of the legal supply chain, which curbs the supply of product to retailers.  But now, that remoteness has become a liability instead of an advantage.  Trinity County, is feeling the pain of the distribution crunch.  Trinity’s issues are something the state’s entire industry should pay attention to for these reasons; Distribution is an ongoing challenge across California compounding the problem of retailers that suffer from bare shelves.

Local regulatory hurdles are significant and aggravate distribution challenges statewide. For example, the most immediate problem, said Karla Johnson, who runs Flowerdaze Farm in Trinity with husband Jacob, is the county planning department scaring off potential distributors with a lengthy checklist of infrastructure requirements.

The same was true for growers interested in getting transport-only licenses, which are simpler to obtain than full state distribution permits.  There are as well, systematic roadblocks ahead such as Trinity farmers is convincing distributors their outdoor-grown flower is worth the multi-hour drive north, and many cultivators lack long-standing relationships with distribution companies.  The legal supply chain access issue also is not limited to Trinity County, said Kristin Nevedal, chair of the International Cannabis Farmers Association.  The system favors an urban model, though that may not have been the intention.   As of early September, California had issued 415 temporary business licenses for distributors. However, the state Department of Food and Agriculture had issued 4,823 cultivation licenses, including 903 in Humboldt County and 634 in Mendocino County. Food for thought for those on the outskirts.

We are still not far from the July 1st changeover date and still it is reported that close to 20% of marijuana products in California have failed tests for potency and purity.  Industry insiders claim the rate has more to do with unrealistic standards and technical glitches than protecting consumer safety.  Testing has been especially tough on cannabis-infused cookies, candies and tinctures: About one-third have been blocked from store shelves.  From July 1 through Aug. 29, there were 10,695 samples tested and 1,904 fell short, according to the state’s Bureau of Cannabis Control (BCC) and some samples failed for multiple reasons: like Inaccurate claims on package label – 1,279 failures; Pesticides – 403 failures; Microbial impurities (mold, E. coli, salmonella) – 114 failures and other factors.  Not sure what more there is to say on the subject.  It’s kind of like voting, do it often.

The Marlboro Man singing “It’s not easy being green”.  How frightening is that.  Well, they are here, if only a toe or two, but they are surely coming.  The entry of Altria’s owner of Marlboro maker Philip Morris USA and an investor in alcohol giant Anheuser-Busch InBev would be another major milestone for the marijuana sector, coming on the heels of Constellation Brands bombshell investment in Canopy Growth last month.  The latest news reveals that the cigarette giant, Philip Morris has announced that it will invest $20 million in a medical cannabis technology company in Israel.  The company is Syqe Medical, an early-stage Israeli company. Syqe Medical has developed a metered-dose inhaler that allows medical cannabis to be delivered in a safe and precise manner. The Company’s technology turns cannabis into a granulate and allows it to be taken in metered doses. While the official announcement indicated that Syqe Medical will develop technologies for Philip Morris that will help reduce health risks associated with smoking, it is apparent that this investment is primarily about the global cigarette company getting a market lead in the emerging global and increasingly legal cannabis industry. This investment by Philip Morris is a reminder that Israel is the world leader in cannabis plant sciences and medical cannabis research.

CNN medical correspondent Dr. Sanjay Gupta described Israel as “the medical marijuana research capital”

in his documentary Weed, and dedicated a portion of the program to Israel’s advances in cannabis research. Gupta was amazed to see how seamlessly Israel had integrated cannabis into its health-care system. Israel’s role today as the world leader in cannabis research started with the research done by Professor Raphael Mechoulam, a chemist at the Hebrew University of Jerusalem, who is widely-acknowledged as the father of cannabinoid research.

The 2018 California legislative session in Sacramento – which wound to a close Aug. 31 – was a blend of highs and lows for licensed cannabis companies, with some major victories scored literally on the last day while other high-profile bills died. Some wins for marijuana businesses involved changes to the provisional licensing process and greater clarity on standard deductions cannabis businesses can take on state taxes.  Legislative disappointments included failed attempts to both drop the state cannabis excise tax rate and create a state-run MJ industry banking system. The good news for next year: Most lawmakers now take marijuana business concerns seriously, and the industry has proved to be an economic powerhouse, according to both Lindsay Robinson, executive director of the California Cannabis Industry Association (CCIA), and Amy Jenkins, lead lobbyist for the organization.  On many cannabis bills, she noted, “we were able to garner significant support from both Republicans and Democrats. Three years ago, that would have been unthinkable.”  Senate Bill 1459, was passed which established a provisional business license for cannabis companies that are in the process of getting their full annual permits.  The provisional license is a stopgap measure that will enable many temporary license holders to continue operations legally after Dec. 31 – when all temporary licenses expire – while obtaining a full annual license.

Lawmakers approved this last-minute measure Aug. 31.  Senate Bill 311, was passed which will allow licensed distributors to transport cannabis products to – and sell to – other distributors instead of only to retail shops, micro-businesses and testing labs, thereby giving more flexibility to the state’s MJ supply chain.  Assembly Bill 1863 will enable and permit licensed marijuana companies to deduct standard business expenses under the state personal income tax.  Assembly Bill 1741 will allow cannabis businesses to pay state taxes by means other than electronic-funds transfer, a step needed by many companies that do not have access to banks. They could also pay by cash or money order, for instance.  That being said, there were many that died in session like the banking solution. Progress is progress, but sometimes it feels like it takes a lot of time to move the ball over the line.

Tailored Benefits is an employee benefits company that has had cannabis clients for over eleven years.

Jeffrey Rosen, Tailored Benefit’s founder, practiced law for ten (10) years in San Francisco, Silicon Valley & Taipei, Taiwan. He has run an employee benefits company for over twenty years. Tailored Benefits’ has evolved over the past several decades to play an integral part in the cannabis industry and specifically Employee Benefits. With the surge in demand for cannabis employees, Tailored Benefits’ specific cannabis employee benefit solutions is how you can set yourself apart, attract and retain valuable employees.

If you need more information on how to insure your cannabis business, Tailored Benefits is here to guide you and keep you informed on local and federal policies.

All the best,

Jeffrey Rosen, President

(415) 974-1114

jdr@tailoredbenefits.com

@TailoredBen_