Home»Feature»A Budding Economic Boom: Experts Provide Insights to Oregon’s Newest Big Industry: Weed

A Budding Economic Boom: Experts Provide Insights to Oregon’s Newest Big Industry: Weed

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It is two years since recreational marijuana was legalized in Oregon, and the business-end of weed has quickly emerged and matured into a multi-billion dollar industry, from farmers to retails, and side-businesses like marketing and equipment suppliers. To gauge the economic forecast for the industry, we asked a handful of leading industry thinkers.

 

Ashley Preece, Executive Director and partner founder, The Cannabis Certification Council

RVM: Two years after recreational marijuana was legalized, are you seeing certain types of businesses succeed and others not? 

AP: Absolutely, every sector of the industry has been affected by the transitions and oversight from Oregon Liquor Control Commission (OLCC) and Oregon Health Authority (OHA). I’ve witnessed brands dissolve while new ones surface. The stage has completely shifted. The stories we’ve all see unravel are both inspiring and devastating; some like castles burning.  So many beautiful small cottage producers and processors that had supported their families for decades now face devastating repercussions due to new regulations and price fluctuation… it makes my heart ache. With this we also should acknowledge the good that has come from legalizing and regulating. We mitigate the black market and collect taxes for beneficial state purposes.  We can assure our cannabis is clean and free of toxic pesticides. We can track our strains from seed to sale giving consumers accurate information about their purchases. Any adult can access the plant and grow their own!  

RVM: What are three adjectives you would use to describe the type of person who is succeeding in the industry? 

AP: Professional, savvy, and skilled.

RVM: What parts of the industry do you think are economically the strongest:  retail, growing, equipment suppliers? 

AP: From my research I see producers and processors as the soundest models right now but I foresee a more refined dosage and medical wave coming as well as technological ancillary business, think phone apps and tracking systems.

RVM: Are there any trends towards consolidation?  For example, like Starbucks emerged in the early 90s as the dominate coffeeshop, are there similar trends in marijuana retail?  If so, what are the vices and virtues of such trends?  

AP: A big yes here! You don’t have to dig too far to see acquisitions and monopolies happening.  At the local level, we’re seeing big brands becoming bigger brands and soon we’re going to see it nationally. Nothing is wrong with a solid business model that can scale but we must stay true our planet and the people in the process of expansion. Business and communities succeed with ethical practices. Our planet and ecosystems will support our species if we cultivate responsibly.  

RVM: Obviously, there are frustrations with banking and federal guidelines. Is this slowing down growth any/much?  Do you foresee a solution soon for this issue? 

AP: Banking is a mess and creates a grey market and money laundering. It’s unfortunate and unnecessary but until cannabis is re/de-scheduled we have no options. With Cascadia Labs, we went through 3 banks in 3 years, it was a joke. This week a bank denied our nonprofit application for The Cannabis Certification Council. We must go to another bank and potentially change our name to an acronym. I don’t have a crystal ball but with our current administration we won’t see any shifts soon. I tried to access Maps Bank but it isn’t available in my area… I would have guessed that by now someone would have assessed the risks and created a nationally acknowledged cannabis friendly bank.  Wouldn’t that be a delight!

RVM: What other limitations are slowing economic growth? 

AP: Since we can’t go to a bank for support many entrepreneurs try to raise money on their own through friends and family and sometimes holding companies. Potential investors and funders are skeptical to participate leaving many businesses stagnant. Raising money is hard enough but with all the federal red tape our industry is in a unique window. Many people see this as a virtue where we can’t be infiltrated and we can control our industry. Craft cannabis is ideal and this temporary hold is just the place for us to procure a sustainable evolution of this rapidly scaling industry both socially and environmentally.

RVM: The first two years have been a boom industry. What are your economic predictions for the next two years. Continued boom industry? Leveling off?  

AP: The cannabis industry has been a jagged inclination since legalization and I don’t see that changing. We won’t crash, we won’t skyrocket, we will continually fluctuate in an upward lineage.  

 

Cedar Grey, CEO, Siskiyou Sungrown

RVM: Are there any trends towards consolidation?  For example, like Starbucks emerged in the early 90s as the dominate coffeeshop, are there similar trends in marijuana retail?  If so, what are the vices and virtues of such trends?  

CG: Consolidation is certainly occurring in the cannabis industry. Market forces favor larger scale business models and vertical integration (the combination in one company of two or more stages of production normally operated by separate companies). Possible benefits of consolidation could include lower consumer pricing, technological advances leading to cannabis medicines with greater efficacy, and new opportunities for ancillary businesses.

The drawbacks of consolidation include the extinction of small business and the eventual loss of product diversity. The trend of extinction of small business has a large and unfortunate impact upon Southern Oregon. Small businesses are much more likely to be locally owned, employing locals, returning dollars to our communities, and valuing community feedback. Small businesses are also more likely to produce artisanal products, and operate at a scale that harmonizes with existing community systems. Though consolidation is inevitable given market forces, Southern Oregon will benefit greatly by enacting policy that advantages small, locally owned business.

RVM: The first two years have been a boom industry. What are your economic predictions for the next two years. Continued boom industry? Leveling off?  

CG: The first years have indeed seen a boom in the industry, and I expect this to continue for the foreseeable future. The industry and the science behind it are just getting started. The applications for cannabis in our society are countless, from medicine, to food, to fiber, to recreation. We live in one of the world’s finest sustainable cannabis production regions, and I expect cannabis to become our regions greatest economic engine within five years.

 

Keith Mansur

Keith Mansur, Publisher/Editor, Oregon Cannabis Connection

RVM: The first two years have been a boom industry. What are your economic predictions for the next two years. Continued boom industry? Leveling off?  

KM: I think the industry will continue to boom, unless there’s a crackdown from the feds. There is a lot of money being thrown at the industry, and much of it from naive people that don’t understand the industry. The “gold rush” attitude is apparent everywhere.

RVM: As recreational marijuana becomes more “normal,” is there anything lost?  

KM: Medical marijuana has been lost, to a significant degree. The OMMP is a shell of its former self and the grower/patient relationships that use to exist for many are almost gone. Medical marijuana, with affordable and personalized access, needs to be preserved for patients.

 

 

Alex Rogers, Executive Producer International Cannabis Business Conferences

RVM: What parts of the industry do you think are economically the strongest:  retail, growing, equipment suppliers?

Alex Rogers (L)

AR: Equipment suppliers have always been strong and will continue to be strong. Growing is strong, but the big bucks are now in big scale. Retail is great, but competition will thin that out, as well as other states legalizing will reduce canna tourism. I believe the best space for the industry is in ancillary businesses. We always here about how much “cannabis” is making in revenue, but we do not here about how much revenue the ancillaries are making directly and in directly off the cannabis industry. Be it insurance, extractor machines, conferences, clinics, consulting.  etc.. I believe that this is the best and safest space of the industry, currently.

RVM: Are there any trends towards consolidation?  For example, like Starbucks emerged in the early 90s as the dominate coffeeshop, are there similar trends in marijuana retail?  If so, what are the vices and virtues of such trends? 

AR: Everybody wants to be the next Starbucks or Walmart of pot. Well, we are a long way off from that. Also, anyone that says that, is an asshole. Who wants to be like those guys? 

We see more conglomeration than consolidation, in that conglomerates are buying up different niche companies, each of which have a different interests and goals within the industry. We will not see big consolidation until the Feds legalize, as currently, there are too many prohibitive measures that prevent businesses from growing too big. Once the Feds deal with interstate commerce, 280E and banking, that is when the game changes. 

Melissa and Jamin Giersbach, co-owners, Rogue Farmers, Talent Health Club, Highly Distributed, Essence Farm

Melissa and Jamin Giersbach

RVM: What parts of the industry do you think are economically the strongest:  retail, growing, equipment suppliers?
JG: Currently in today’s cannabis industry, the ancillary business things like equipment, security, packaging and things that don’t fall under the 280e tax laws, are the most profitable industries. Right now the 280e tax laws are putting quite a burden on all of the businesses that are under OLCC licensing. 280e prevents businesses involved in cannabis from writing off basic expenses like rent, employee pay, and many other ordinary business expenses. Currently what we’ve heard from many businesses in the cannabis industry, that this is a very difficult time and no one is really making any money. In addition, many basic business expenses are much more expensive when you are a cannabis business. General liability insurance and workman comp insurance costs much more than a regular non cannabis business.  There are obviously exceptions to this but I think the majority would agree with the statement.    

With all the tax money that is being put into the system by our industry, I would like to see some business resources provided to us by the state. It would be really good if there was a Cannabis Resource Center that provided basic business support and services; put some of that money to work for the industry that is bringing it in to set us up for a great start. 
What we saw in the technology industry in the 90s when computers and the internet went from a small group dedicated to the hobby to the ubiquity we see today will likely mirror the cannabis industry… The innovators and companies with drive and endurance will likely emerge as the winners in this industry which is going to be just massive.  
RVM: Are there any trends towards consolidation?  For example, like Starbucks emerged in the early 90s as the dominate coffeeshop, are there similar trends in marijuana retail?  If so, what are the vices and virtues of such trends?
JG: Consolidation and vertical integration have been big topics in the cannabis industry. Many of the businesses in Colorado have led the way in this category. One of the advantages is that different entities are easier to write taxes off on. Also the ability to share in common resources and create management companies that can support the whole organization are all useful cost saving measures.

There are also disadvantages to being vertically integrated and consolidation. Generally as things get bigger, they tend to get less efficient. A lot of the innovation takes place in small business, and they are mostly quicker to move. On the product selection side there is a bias towards one’s own products and this early on in the industry can stifle innovation and consumer choice. We need to innovate, stay adaptable and remain brand neutral. This is just the beginning and there will be plenty of time to consolidate….today let’s just work together.  

 

 

 

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