How the illegal weed market games Google

THE BIG IDEA

Hi all,

There is a lot of industry news this week. Not much of it good. Hope your businesses are bucking the trend.

In the newsletter:

  • EXCLUSIVE: How the illegal market games Google

As always, your feedback is welcome at alex@weedweek.com.

Enjoy the weekend,

Alex 

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EXCLUSIVE: How the illegal weed market games Google

In April, Google disabled its business listing for The Artist Tree’s shop on LA’s Beverly Blvd.

The suspension came after the listing, on Google’s equivalent of local directory Yelp, was bombarded with negative reviews, many of which said the business was fake, or did not exist, Artist Tree co-founder and cannabis counsel Lauren Fontein told WeedWeek. The reviews told people to shop at an unlicensed retailer where they could find better prices.

After Google disabled shop’s profile, The Artist Tree stopped appearing in Google Maps/My Business, Fontein said. New customers fell since they couldn’t find the shop on Google. After trying to reach the search giant without success, The Artist Tree hired a specialist. They communicated the problem to Google, which reinstated the listing more than a month after taking it down.

“It had a huge impact on our business,” Fontein said. Google My Business “is the primary way most people view listings because it’s the first result Google provides when you search.”

  • Google dispensary near me and the three shops and the map is what she’s talking about. 

As Fontein describes it, The Artist Tree attack appears to have be instigated by an unlicensed dispensary. But similar incentives exist for legal dispensaries to remove their competitors from the top of the search results.

Short of subpoenaing records from Google, it’s almost impossible to determine who instigated an apparent attack like this it, Matthew Shterenberg, co-founder of Deep Roots, a Santa Monica SEO agency for dispensaries said. “It’s typically a competitor, whether they’re legal or not, you don’t really know” (Shterenberg was speaking generally, not about The Artist Tree.)

Weed’s unique legal situation have forced Internet companies, and some other mainstream companies, to formulate policies for what kind of presence, paid and unpaid, that they allow plant-touching businesses to have.

  • Fontein, for example, said she found Yelp to be more vigilant than Google about policing fake reviews.

The Artist Tree incident highlights how Google’s cannabis policy across its various services can facilitate bad behavior by both licensed and unlicensed operators.

  • A Google spokesperson wrote: “Our policies clearly state that reviews must be based on real experiences and information, and our automated systems and trained operators work around the clock to monitor Maps for suspicious behavior – including incorrect edits to places. We make it easy for people to report misleading places and inappropriate content which helps us keep information authentic and reliable. On Search, we design our systems to rank high quality content at the top of results, including official web pages for businesses, and our advanced spam-fighting systems are highly effective at combating scammy, deceptive, or otherwise malicious content.”

In short, Google strives to reward high-quality information. However, illegal operators have access to the same tools and techniques as legal ones to convince Google that they offer high quality information.

“This doesn’t happen for a sub shop”

Like Facebook and Facebook-owned Instagram, Google doesn’t accept advertising from licensed cannabis businesses. But, weed companies can often claim, or at least try to squat on, some types of digital real estate, across both companies’ platforms.

However, Google’s My Business feature, and its search engine, don’t distinguish between licensed and unlicensed cannabis businesses. Its algorithm assesses legal and illegal dispensaries’ digital presence on the same criteria.

“It’s not a problem that’s unique to cannabis, just the cannabis industry doesn’t have much police to go to,” said Tim Naughton, founder of digital agency Heady Collective. “Illicit, unlicensed dispensaries get picked up simply by saying they exist.”

  • “It’s tough out there for a dispensary when people are willing to play black hat,” he said. “This doesn’t happen for a sub shop, it just doesn’t.”

Further complicating matters, he said anyone can suggest malicious edits to any Google My Business profile. Someone can, for example, suggest changes to its hours of operation.

  • Again, Google says it polices activity like this with automated systems and round the clock teams.

“Why aren’t they owning their own brand?”

When I typed the popular strain Jungle Boys Frosted Gelato into Google today, the first listing was for a review at A Proper High. The second listing was for a site JungleBoysFarm.com.

The site uses the Jungle Boys logo. Like many illegal storefronts, in my view, shoppers who don’t know what to look for could easily mistake it for the real thing. (The authentic Jungle Boys site is JungleBoys.com. Jungleboysofficial.com is another unlicensed site. )

There are several tells that JungleBoysFarm.com isn’t legit. They include:

  1. It sells weed by the pound
  2. It offers to ship out of state
  3. It accepts payment in Zelle (a mainstream money transfer service), “CashApp” and “Bitcions.”
google
jungleboysfarm.com checkout

Unlicensed sites like this manage to get a high placement on Google by convincing the search engine’s algorithm that they deserve one. A cannabis SEO expert who asked not to be named described the technique: “This site is implementing a MASSIVE spam backlink strategy to build relevancy for the terms they rank for. Looks like Google hit them pretty hard with a set of filters, or the sites that link to them. This is a low barrier for optimizing sites and is almost always a technique that will get you filtered and/or removed from the index eventually.”

Jeremy Johnson, who works for online menu startup Dispense, said that one reason the unlicensed sites can work is that some of the major online menu companies like Dutchie and Jane Technologies, which both serve thousands of dispensaries, use a technology called iFrames where individual product listings don’t register on Google.

If a dispensary sells Jungle Boys Frosted Gelato on an iFrames menu, consumers essentially can’t find that product listing on Google. “If you’re in a market where everyone uses iFrames it’s easy to counterfeit people and take advantage,” Johnson said.

  • In a statement, Jane CEO Socrates Rosenfeld wrote that the company “will soon be launching a native menu solution, Jane Boost, which will leverage that structured product information to allow a dispensary’s product pages to be directly indexed by search engines, allow for greater discoverability, and enable more efficient deep-linking.”
  • Dutchie currently offers a product suite called Dutchie Plus, aimed at MSOs, which is not an iFrames product.
  • Delivering better SEO for dispensaries is central to Dispense’s business model, and that of at least one other company, Tymber.

Neither Jungle Boys nor Cookies responded to a request for comment about the unlicensed sites leveraging their well-known brands.

“For a brand, like Jungle Boys, why aren’t they owning their own brand and investing in their own SEO?” Shterenberg of agency Deep Roots asked. If he owned a popular brand, “I would make sure when someone Googles my brand I was the site that popped up.”

EXCLUSIVE: How the illegal weed market games Google

In April, Google disabled its business listing for The Artist Tree’s shop on LA’s Beverly Blvd.

The suspension came after the listing, on Google’s equivalent of local directory Yelp, was bombarded with negative reviews, many of which said the business was fake, or did not exist, Artist Tree co-founder and cannabis counsel Lauren Fontein told WeedWeek. The reviews told people to shop at an unlicensed retailer where they could find better prices.

After Google disabled shop’s profile, The Artist Tree stopped appearing in Google Maps/My Business, Fontein said. New customers fell since they couldn’t find the shop on Google. After trying to reach the search giant without success, The Artist Tree hired a specialist. They communicated the problem to Google, which reinstated the listing more than a month after taking it down.

“It had a huge impact on our business,” Fontein said. Google My Business “is the primary way most people view listings because it’s the first result Google provides when you search.”

  • Google dispensary near me and the three shops and the map is what she’s talking about. 

As Fontein describes it, The Artist Tree attack appears to have be instigated by an unlicensed dispensary. But similar incentives exist for legal dispensaries to remove their competitors from the top of the search results.

Short of subpoenaing records from Google, it’s almost impossible to determine who instigated an apparent attack like this it, Matthew Shterenberg, co-founder of Deep Roots, a Santa Monica SEO agency for dispensaries said. “It’s typically a competitor, whether they’re legal or not, you don’t really know” (Shterenberg was speaking generally, not about The Artist Tree.)

Weed’s unique legal situation have forced Internet companies, and some other mainstream companies, to formulate policies for what kind of presence, paid and unpaid, that they allow plant-touching businesses to have.

  • Fontein, for example, said she found Yelp to be more vigilant than Google about policing fake reviews.

The Artist Tree incident highlights how Google’s cannabis policy across its various services can facilitate bad behavior by both licensed and unlicensed operators.

  • A Google spokesperson wrote: “Our policies clearly state that reviews must be based on real experiences and information, and our automated systems and trained operators work around the clock to monitor Maps for suspicious behavior – including incorrect edits to places. We make it easy for people to report misleading places and inappropriate content which helps us keep information authentic and reliable. On Search, we design our systems to rank high quality content at the top of results, including official web pages for businesses, and our advanced spam-fighting systems are highly effective at combating scammy, deceptive, or otherwise malicious content.”

In short, Google strives to reward high-quality information. However, illegal operators have access to the same tools and techniques as legal ones to convince Google that they offer high quality information.

“This doesn’t happen for a sub shop”

Like Facebook and Facebook-owned Instagram, Google doesn’t accept advertising from licensed cannabis businesses. But, weed companies can often claim, or at least try to squat on, some types of digital real estate, across both companies’ platforms.

However, Google’s My Business feature, and its search engine, don’t distinguish between licensed and unlicensed cannabis businesses. Its algorithm assesses legal and illegal dispensaries’ digital presence on the same criteria.

“It’s not a problem that’s unique to cannabis, just the cannabis industry doesn’t have much police to go to,” said Tim Naughton, founder of digital agency Heady Collective. “Illicit, unlicensed dispensaries get picked up simply by saying they exist.”

  • “It’s tough out there for a dispensary when people are willing to play black hat,” he said. “This doesn’t happen for a sub shop, it just doesn’t.”

Further complicating matters, he said anyone can suggest malicious edits to any Google My Business profile. Someone can, for example, suggest changes to its hours of operation.

  • Again, Google says it polices activity like this with automated systems and round the clock teams.

“Why aren’t they owning their own brand?”

When I typed the popular strain Jungle Boys Frosted Gelato into Google today, the first listing was for a review at A Proper High. The second listing was for a site JungleBoysFarm.com.

The site uses the Jungle Boys logo. Like many illegal storefronts, in my view, shoppers who don’t know what to look for could easily mistake it for the real thing. (The authentic Jungle Boys site is JungleBoys.com. Jungleboysofficial.com is another unlicensed site. )

There are several tells that JungleBoysFarm.com isn’t legit. They include:

  1. It sells weed by the pound
  2. It offers to ship out of state
  3. It accepts payment in Zelle (a mainstream money transfer service), “CashApp” and “Bitcions.”
google
jungleboysfarm.com checkout

Unlicensed sites like this manage to get a high placement on Google by convincing the search engine’s algorithm that they deserve one. A cannabis SEO expert who asked not to be named described the technique: “This site is implementing a MASSIVE spam backlink strategy to build relevancy for the terms they rank for. Looks like Google hit them pretty hard with a set of filters, or the sites that link to them. This is a low barrier for optimizing sites and is almost always a technique that will get you filtered and/or removed from the index eventually.”

Jeremy Johnson, who works for online menu startup Dispense, said that one reason the unlicensed sites can work is that some of the major online menu companies like Dutchie and Jane Technologies, which both serve thousands of dispensaries, use a technology called iFrames where individual product listings don’t register on Google.

If a dispensary sells Jungle Boys Frosted Gelato on an iFrames menu, consumers essentially can’t find that product listing on Google. “If you’re in a market where everyone uses iFrames it’s easy to counterfeit people and take advantage,” Johnson said.

  • In a statement, Jane CEO Socrates Rosenfeld wrote that the company “will soon be launching a native menu solution, Jane Boost, which will leverage that structured product information to allow a dispensary’s product pages to be directly indexed by search engines, allow for greater discoverability, and enable more efficient deep-linking.”
  • Dutchie currently offers a product suite called Dutchie Plus, aimed at MSOs, which is not an iFrames product.
  • Delivering better SEO for dispensaries is central to Dispense’s business model, and that of at least one other company, Tymber.

Neither Jungle Boys nor Cookies responded to a request for comment about the unlicensed sites leveraging their well-known brands.

“For a brand, like Jungle Boys, why aren’t they owning their own brand and investing in their own SEO?” Shterenberg of agency Deep Roots asked. If he owned a popular brand, “I would make sure when someone Googles my brand I was the site that popped up.”

DOGWALKERS

Lipson bros. out at Dutchie

Ross and Zach Lipson, co-founders and execs at once high-flying tech startup Dutchie are stepping down. Executive chair Tim Barash, a former a c-suite exec with restaurant software company Toast, will replace Ross Lipson as CEO. 
MJBiz

The company offers a suite of tech products for dispensaries. It’s probably best known for its online menus, used by thousands of dispensaries.

In October 2021, Dutchie raised a $350M Series D led by Tiger Global, a then-high flying mainstream tech investor, and touted its $3.75B valuation. Then in June Forbes reported shares had traded privately at an implied $1.7B valuation, which Ross Lipson denied at the time. That month it laid off about 8% of its workforce. It employed 700 at the time.

QUICK HITS

State:

  • SFGate checks in on the state’s new $11M testing lab which aims to cut down on labeling fraud. The state lab is based at the University of San Diego.
  • The state Office of Environmental Health Hazard Assessment (OEHHA) has adopted safe harbor warning regulations for cannabis smoke and THC under California Proposition 65.
    Mondaq

Business:

Local:

Oregon:

Nevada:

Criminal Justice:

  • A self-described consultant and “accomplice” of a former San Diego Co. sheriff’s deputy who is now in prison, was sentenced to a year in federal prison for “corrupt conduct” regarding unlicensed dispensaries. 

Fun and interesting:

NOTABLES

Company Milestones:

Job Moves:

Upcoming:

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Weed’s free speech fight

THE BIG IDEA

Hi all,

You may have noticed WeedWeek‘s pub date slipping around a bit recently. This owes to a few factors, but one is a tech overhaul that’s now almost done. I’ll be off for the holiday and the newsletter will return on Thursday, December 1. After that, Thursday will be the target pub date every week. 

In the newsletter:

  • Weed’s free speech wars

I’m thankful for your ongoing interest and support. Have a great one.

Alex  

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Send tips, press releases, concerns, feedback and criticism to hello@weedweek.com

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CHECK OUT THE NEW WEEDWEEK JOB BOARD

Weed’s free speech wars

710 Labs has cred to spare.

In Florida and California, it maintains The List, a direct sales service for drops of its choicest concentrates. Last I saw it required a minimum pretax order of $300 and they sell out within 24 hours. Hash heads who miss too many sales, get dropped themselves.

Recently, 710 promoted a Zoom “Live Sesh” on how to find high quality flower. It featured High Times’ VP content Jon Cappetta, Trichome Institute founder Max Montrose and comedian Melissa Ong. But instead of high-spirited geekery, Ong started with a reference to her “emotional support ketamine” and white slaves.

With Cappetta and Montrose looking confused, Ong mused about writing a song about “when a white person eats me out and I nut in their face.“ It’d be called “Reparations Bitch!” The video goes on for 30 more minutes.

“Embarrassing for 710” captures the tone on one cannabis Reddit thread. Several commenters called it racist. 710 took down the video. (It can be seen here.)

“We do not agree with or condone her comments and her behavior on the sesh. If we had to do it over, we would have ended it,” Nick Fotis, 710’s CMO wrote to WeedWeek. The next one “will be purely informational.” Fotis noted that it wasn’t a paid appearance for Ong.

What did 710 expect? @melissaong69420 didn’t top 4M TikTok followers by being safe for work. One can imagine a similar incident with some edgier brands in the mainstream economy. But as with anything weed, there’s another layer to it. Cannabis is both an outlaw industry and one deeply invested in its own normalization. So what are and aren’t people in the cannabiz allowed to say? And what does that mean for brand marketing strategies?

Two more recent incidents show just how tricky these questions can be.

An overtly troll-ish gesture

Last week at MJBiz Con, photos of white guys wearing “Buy weed from rich white men,” T-shirts went viral. 

The shirt is even more provocative because it steals its motif from Buy Weed From Woman, a Black-woman owned design company in New Jersey. Most, but not all, commenters on social expressed their disgust, while others suggested the shirt intended to call attention to racism, or that opposing its message was racist.

In eight years of covering cannabis, I can’t remember such an overtly troll-ish gesture. My guess is it owes something to the growing reality that not everyone in weed is going to make it. And not everyone supports equity, especially when their company is at stake.

I don’t know who was wearing the shirt, but the quote is attributed to RR Stanley, a meme-er who according to this article may or may not exist. I reached out to a possibly affiliated brand and did not hear back.

The shirt channels roughly the same political forces that have catalyzed populist movements around the world. In other words, messages like this can be a very effective marketing strategy. We’re going to see more of them.

“If you see things like this, report it,”

Also this month, Cookies boss Berner re-released his 420-friendly app Social Club 🙂.

When it had first come out in 2019, Berner described Social Club as a marketing channel for Cookies, an alternative to Instagram which routinely blocks weed accounts. The app touted itself as “censorship free,” and within months, it was overrun with vile memes and had to be put on hiatus. (Spokespeople for Cookies didn’t respond to requests for comment.)

The next time, Berner said, Social Club would have to be a business, one he has suggested would accept advertising from other brands. That will require a much more rigorously patrolled app. Yesterday, days after re-launch, Berner said in a post that several accounts had been removed for selling fentanyl and pills.

“That’s not acceptable on this app,” Berner said. “If you see things like this, report it,” He said the app would likely build a moderation team.

  • Social club is also on the lookout for “nudity and violence.”

Social Club, of course, has the right to ban whatever it wants from its app. And as Berner has said, it’s stupid to do anything illegal on a smartphone. But many many in the cannabis community will gravitate to an edgier message. My Instagram feed is full of sexy and vulgar weed memes that some weed brands wouldn’t want to appear next to. One of a dog’s (or pig’s) butt shaded to look like Christ on the cross comes to mind.

Would that be allowed on Social Club? The app’s success might depend on the answer.

Weed’s free speech wars

710 Labs has cred to spare.

In Florida and California, it maintains The List, a direct sales service for drops of its choicest concentrates. Last I saw it required a minimum pretax order of $300 and they sell out within 24 hours. Hash heads who miss too many sales, get dropped themselves.

Recently, 710 promoted a Zoom “Live Sesh” on how to find high quality flower. It featured High Times’ VP content Jon Cappetta, Trichome Institute founder Max Montrose and comedian Melissa Ong. But instead of high-spirited geekery, Ong started with a reference to her “emotional support ketamine” and white slaves.

With Cappetta and Montrose looking confused, Ong mused about writing a song about “when a white person eats me out and I nut in their face.“ It’d be called “Reparations Bitch!” The video goes on for 30 more minutes.

“Embarrassing for 710” captures the tone on one cannabis Reddit thread. Several commenters called it racist. 710 took down the video. (It can be seen here.)

“We do not agree with or condone her comments and her behavior on the sesh. If we had to do it over, we would have ended it,” Nick Fotis, 710’s CMO wrote to WeedWeek. The next one “will be purely informational.” Fotis noted that it wasn’t a paid appearance for Ong.

What did 710 expect? @melissaong69420 didn’t top 4M TikTok followers by being safe for work. One can imagine a similar incident with some edgier brands in the mainstream economy. But as with anything weed, there’s another layer to it. Cannabis is both an outlaw industry and one deeply invested in its own normalization. So what are and aren’t people in the cannabiz allowed to say? And what does that mean for brand marketing strategies?

Two more recent incidents show just how tricky these questions can be.

An overtly troll-ish gesture

Last week at MJBiz Con, photos of white guys wearing “Buy weed from rich white men,” T-shirts went viral. 

The shirt is even more provocative because it steals its motif from Buy Weed From Woman, a Black-woman owned design company in New Jersey. Most, but not all, commenters on social expressed their disgust, while others suggested the shirt intended to call attention to racism, or that opposing its message was racist.

In eight years of covering cannabis, I can’t remember such an overtly troll-ish gesture. My guess is it owes something to the growing reality that not everyone in weed is going to make it. And not everyone supports equity, especially when their company is at stake.

I don’t know who was wearing the shirt, but the quote is attributed to RR Stanley, a meme-er who according to this article may or may not exist. I reached out to a possibly affiliated brand and did not hear back.

The shirt channels roughly the same political forces that have catalyzed populist movements around the world. In other words, messages like this can be a very effective marketing strategy. We’re going to see more of them.

“If you see things like this, report it,”

Also this month, Cookies boss Berner re-released his 420-friendly app Social Club 🙂.

When it had first come out in 2019, Berner described Social Club as a marketing channel for Cookies, an alternative to Instagram which routinely blocks weed accounts. The app touted itself as “censorship free,” and within months, it was overrun with vile memes and had to be put on hiatus. (Spokespeople for Cookies didn’t respond to requests for comment.)

The next time, Berner said, Social Club would have to be a business, one he has suggested would accept advertising from other brands. That will require a much more rigorously patrolled app. Yesterday, days after re-launch, Berner said in a post that several accounts had been removed for selling fentanyl and pills.

“That’s not acceptable on this app,” Berner said. “If you see things like this, report it,” He said the app would likely build a moderation team.

  • Social club is also on the lookout for “nudity and violence.”

Social Club, of course, has the right to ban whatever it wants from its app. And as Berner has said, it’s stupid to do anything illegal on a smartphone. But many many in the cannabis community will gravitate to an edgier message. My Instagram feed is full of sexy and vulgar weed memes that some weed brands wouldn’t want to appear next to. One of a dog’s (or pig’s) butt shaded to look like Christ on the cross comes to mind.

Would that be allowed on Social Club? The app’s success might depend on the answer.

DOGWALKER

SCOOP: Eaze spins off Momentum equity program

Delivery app Eaze has spun off the Momentum equity program, an accelerator it started for equity entrepreneurs. Over three cohorts it gave 30 businesses $50,000 (non-equity)  grants each.

Jennifer Lujan who started the program at Eaze and will continue running it outside the company are still in business. While the structure of the next cohort and the sources of funding remain up in the air, Lujan said she hoped to have another cohort next year. 

  • Eaze will continue providing an unspecified amount of financial support. It will also give the startups space on the app’s social equity menu.

Lujan said the new organization is exploring companies, governments and other funding sources.  

QUICK HITS

State:

Business:

Local:

Crime:

Fun and interesting:

NOTABLES

Company milestones:

Upcoming:

Exclusive: Who owns Advanced Nutrients?

THE BIG IDEA

Hi all,

I’m excited to see many of you in Vegas this week. (Send invites to alex@weedweek.com)

In the newsletter:

  • EXCLUSIVE: Who owns Advanced Nutrients?

Plus lots more,

Alex

*

Our advertising policy.

*

Send tips, press releases, concerns, feedback and criticism to hello@weedweek.com

*

Was this email forwarded to you? WeedWeek California Pro is the only publication for people who make money in the world’s largest cannabis market. Get a two-week trial subscription for just $1.

CHECK OUT THE NEW WEEDWEEK JOB BOARD

CHECK OUT THE NEW WEEDWEEK JOB BOARD

WW EXCLUSIVE: WHO OWNS ADVANCED NUTRIENTS

(Alex Halperin)

In November 2013, Michael “BigMike” Straumietis, co-founder and CEO of Advanced Nutrients fertilizer, put out a press release. It said he had bought out his two co-founders to become the company’s sole owner. The takeover “will allow BigMike to finally bring his dreams to reality,” it reads.

Over 15 years, Advanced Nutrients had grown from its humble origins as a British Columbia (B.C.) hydroponics shop into one of the biggest aboveground cannabis companies. Even on the west coast, legalization was years off, but AN produced an ancillary product that could be sold anywhere.

The “Nutes” brand connected with growers and became a cultural signifier. Colorful product names like Big Bud, Voodoo Juice and Rhino Skin helped it build an international following.

Today, 10 years after his  press release, BigMike says AN had reached more than $100M in annual sales in 107 countries. He calls it “the most profitable cannabis company in the world.

This allows BigMike, who is 6’7’’, to live “one hell of an awesome life.” In 2015, The Daily Mail dubbed him “king of Instagram” for his posts of private jets, sports cars and young, attractive women, their cleavage bursting with weed. Last fall, he hosted BigMike’s HalloWeed Bazaar, one of his “marijuana mansion” parties, at a 10-acre Beverly Hills estate. “Pillars bursting into flames and fire performers greeted guests, while sword swallowers, water dragons, and contortionists delivered 360 degrees of show stopping spectacles,” BigMike described it in a blog post. 

The “freakishly alive” carnival atmosphere featured palm and tarot card readers, and a Ferris wheel. The “indulgent fare” — BigMike is known to furnish epic raw bars — accompanied drinks, a dab bar, a candy room and “endless platters of AAA bud.” A-list DJ A-Trak presided.

In the 10 years since the press release, BigMike had evidently come some way to bringing his dreams to reality. However, the announcement was incorrect in one key detail. While Big Mike would apparently take control of Advanced Nutrients, at the time of the announcement he hadn’t bought out his two co-founders. This is stated in subsequent court filings from both of BigMike’s two co-founders, as well as this one from Advanced Nutrients, where BigMike remains CEO.

So who owns Advanced Nutrients? The litigation is well into its second decade.

Read the WeedWeek exclusive…

DOGWALKER

Public health group scores Calif. markets for youth protections

Getting it Right from the Start, the public health group which sponsored this year’s unsuccessful, industry-opposed labeling bill, scored California markets which allow retail sales for blocking youth access and supporting social equity.

  • City of San Luis Obispo rated highest among localities with storefronts and San Benito County was tops among jurisdictions that allow only delivery.
  • Counties which allow storefronts and scored below 25 (out of 100) included San Francisco, Santa Cruz, Calaveras and Inyo. 

 

QUICK HITS

National:

State:

Business:

Local:

Fun and interesting:

NOTABLES

Company milestones:

Award:

Opportunity:

  • The state Department of Food and Agriculture is accepting grant applications for a growing sustainable cannabis pilot program.
    Cannabis Business Times

Upcoming:

“Astronomical” potential liability

THE BIG IDEA

Hi all,

Like many of you, I’m getting excited for MJBiz. Invite me to your parties by replying to this email.

In the newsletter:

  • “Astronomical” potential liability

Plus lots more. 

Enjoy,

Alex

 

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Our advertising policy.

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Send tips, press releases, concerns, feedback and criticism to hello@weedweek.com

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The Jeeter lawsuit: What’s next?

If a proposed class action lawsuit alleging false advertising at a leading pre-roll brand gains traction, it represents a significant threat to licensed cannabis businesses, three lawyers told WeedWeek. The complaint, filed last month by two consumers against the California manufacturers of Jeeter prerolls, alleges the company “systematically overstat[es] the THC content to deceive consumers into thinking that the effects of their prerolls are more potent than they truly are.”

Jeeter has called the allegations “baseless and ridiculous” and said it looks forward to the truth coming to light.

With many consumers looking for the most THC for the lowest price, potency inflation is widely acknowledged to be a problem in several legal states. A recent lawsuit alleges a potency inflation conspiracy in Arkansas.

“It’s not only. the other labs,” Robert Martin, co-founder and former CEO of Oakland lab CW Analytical, which closed last December after 13 years, told WeedWeek. Potency inflation “is being perpetrated from cultivator to labs, to distributors, to retail with all parties knowingly selling incorrectly labeled cannabis.  My clients asked me directly to inflate the numbers and when I declined they told me they were going elsewhere to get the numbers they want.”

The Jeeter suit cites potency inflation data from tests conducted by WeedWeek. We tested nine preroll products – two from Jeeter – made by seven brands and found all nine labeled more than 10% above the tested THC content. California regulators permit a 10% margin of error. 

  • WeedWeek’s test made clear that it was not adequate to draw conclusions about any individual product or brand.

Disclosure: After the complaint was filed, WeedWeek received a letter from a lawyer representing defendant Dreamfield Brands demanding that we preserve documentation in light of potential future litigation. The letter alleged that “there is an issue regarding the circumstances in which testing was performed on the several Jeeter products and statements and accusations made by your publication about the knowingly flawed testing.”

  • WeedWeek’s response: The allegation has no merit. The test the defendant’s lab disputed was not flawed, and its result was consistent with three other tests on Jeeter products. 

“Follow the legal breadcrumbs”

In its approach, the Jeeter case resembles several recent suits filed against food companies for false advertising, lawyers said. The case’s merits depend at least in part on whether the plaintiffs can prove the labels were incorrect.

  • The plaintiff’s law firm Dovel and Luner boasts of a trial win rate above 85% and that “We get paid only for success.” 
  • “These guys are good lawyers,” Andrew Cooper, counsel at Falcon, Rappaport, Berkman, said. “They are also opportunistic…  they take business litigation matters on a contingency fee, which while a growing model, is still uncommon.  So they are good at assessing risk since it is all theirs if they take a case.”

“It is impossible to tell whether this is a strong case or not at this time,” Robert Finkle, managing partner at Armada Law Corp. said.  If the plaintiffs can prove their case, however, “the potential exposure to liability is astronomical” given Jeeter’s reported sales volume of 3.5M California prerolls a month.

“Once class-action lawyers identify a type of case in which they see potential value, they will follow the legal breadcrumbs so to speak – and continue to pursue others for the same issue,” Jodi Green, Long Beach-based special counsel at Miller Nash said.“This should serve as a wake-up call to all brands” Green said, to work with well-vetted partners, and take independent steps to verify compliance with advertising and labeling laws to minimize potential exposure.

  • “All parties in the supply chain [including labs] who may have been involved in false advertising are potential targets,” Finkle wrote.
  • Bigger brands have “bigger targets on their backs,” Cooper wrote.

Industry trade groups U.S. Cannabis Council and National Cannabis Industry Association declined to comment.

Does it matter?

It’s too early to tell what, if anything, the threat of litigation means for the THC percentages consumers see on packaging.

Tyler Williams, founder and Chief Technical Officer at CSQ, a developer of certification standards for various industry operations said three things could help combat the problem:

  1. Standardized testing methods,

  2. Regulators making spot checks on labs

  3. A reporting system to allow labs to report lab shopping and pressure tactics by brands or manufacturers.

The idea of standardized testing methods has been downplayed by some who say the inflated results are the result of bad actors, not a dispute over methods.

However, Darwin Millard, a manufacturing and extraction expert who calls himself the Spock of Cannabis, agreed about the benefits of standards. It is good for business. No one trusts the labs, so if the labs can say they are using standardized test methods, then the burden of proof shifts from them to the standards development body that created the test methods,” he wrote. “The only labs not in favor of this have a vested interest in maintaining their “proprietary” test methods.

Trent Hancock, a co-founder at Oregon-based Creswell Organics and a lab reform activist has called for more far-reaching reforms.  In a September article for Ganjapreneur he argued, “The current ‘chain of custody’ for samples being tested is completely compromised because the growers and processors determine which product is sampled, and which products go to dispensaries under that test result.” (Hancock has been complimentary about WeedWeek’s reporting.)

The Jeeter lawsuit: What’s next?

If a proposed class action lawsuit alleging false advertising at a leading pre-roll brand gains traction, it represents a significant threat to licensed cannabis businesses, three lawyers told WeedWeek. The complaint, filed last month by two consumers against the California manufacturers of Jeeter prerolls, alleges the company “systematically overstat[es] the THC content to deceive consumers into thinking that the effects of their prerolls are more potent than they truly are.”

Jeeter has called the allegations “baseless and ridiculous” and said it looks forward to the truth coming to light.

With many consumers looking for the most THC for the lowest price, potency inflation is widely acknowledged to be a problem in several legal states. A recent lawsuit alleges a potency inflation conspiracy in Arkansas.

“It’s not only. the other labs,” Robert Martin, co-founder and former CEO of Oakland lab CW Analytical, which closed last December after 13 years, told WeedWeek. Potency inflation “is being perpetrated from cultivator to labs, to distributors, to retail with all parties knowingly selling incorrectly labeled cannabis.  My clients asked me directly to inflate the numbers and when I declined they told me they were going elsewhere to get the numbers they want.”

The Jeeter suit cites potency inflation data from tests conducted by WeedWeek. We tested nine preroll products – two from Jeeter – made by seven brands and found all nine labeled more than 10% above the tested THC content. California regulators permit a 10% margin of error. 

  • WeedWeek’s test made clear that it was not adequate to draw conclusions about any individual product or brand.

Disclosure: After the complaint was filed, WeedWeek received a letter from a lawyer representing defendant Dreamfield Brands demanding that we preserve documentation in light of potential future litigation. The letter alleged that “there is an issue regarding the circumstances in which testing was performed on the several Jeeter products and statements and accusations made by your publication about the knowingly flawed testing.”

  • WeedWeek’s response: The allegation has no merit. The test the defendant’s lab disputed was not flawed, and its result was consistent with three other tests on Jeeter products. 

“Follow the legal breadcrumbs”

In its approach, the Jeeter case resembles several recent suits filed against food companies for false advertising, lawyers said. The case’s merits depend at least in part on whether the plaintiffs can prove the labels were incorrect.

  • The plaintiff’s law firm Dovel and Luner boasts of a trial win rate above 85% and that “We get paid only for success.” 
  • “These guys are good lawyers,” Andrew Cooper, counsel at Falcon, Rappaport, Berkman, said. “They are also opportunistic…  they take business litigation matters on a contingency fee, which while a growing model, is still uncommon.  So they are good at assessing risk since it is all theirs if they take a case.”

“It is impossible to tell whether this is a strong case or not at this time,” Robert Finkle, managing partner at Armada Law Corp. said.  If the plaintiffs can prove their case, however, “the potential exposure to liability is astronomical” given Jeeter’s reported sales volume of 3.5M California prerolls a month.

“Once class-action lawyers identify a type of case in which they see potential value, they will follow the legal breadcrumbs so to speak – and continue to pursue others for the same issue,” Jodi Green, Long Beach-based special counsel at Miller Nash said.“This should serve as a wake-up call to all brands” Green said, to work with well-vetted partners, and take independent steps to verify compliance with advertising and labeling laws to minimize potential exposure.

  • “All parties in the supply chain [including labs] who may have been involved in false advertising are potential targets,” Finkle wrote.
  • Bigger brands have “bigger targets on their backs,” Cooper wrote.

Industry trade groups U.S. Cannabis Council and National Cannabis Industry Association declined to comment.

Does it matter?

It’s too early to tell what, if anything, the threat of litigation means for the THC percentages consumers see on packaging.

Tyler Williams, founder and Chief Technical Officer at CSQ, a developer of certification standards for various industry operations said three things could help combat the problem:

  1. Standardized testing methods,

  2. Regulators making spot checks on labs

  3. A reporting system to allow labs to report lab shopping and pressure tactics by brands or manufacturers.

The idea of standardized testing methods has been downplayed by some who say the inflated results are the result of bad actors, not a dispute over methods.

However, Darwin Millard, a manufacturing and extraction expert who calls himself the Spock of Cannabis, agreed about the benefits of standards. It is good for business. No one trusts the labs, so if the labs can say they are using standardized test methods, then the burden of proof shifts from them to the standards development body that created the test methods,” he wrote. “The only labs not in favor of this have a vested interest in maintaining their “proprietary” test methods.

Trent Hancock, a co-founder at Oregon-based Creswell Organics and a lab reform activist has called for more far-reaching reforms.  In a September article for Ganjapreneur he argued, “The current ‘chain of custody’ for samples being tested is completely compromised because the growers and processors determine which product is sampled, and which products go to dispensaries under that test result.” (Hancock has been complimentary about WeedWeek’s reporting.)

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The Juul-ization of weed

THE BIG IDEA

Hi all,

It’s been a fun few days at WeedWeek. The Jeeter lawsuit based on my reporting got picked up by the L.A.Times, CNBC, Stephen Colbert and elsewhere. I plan to return to the story next week.

In the meantime, here’s something else I hope you find interesting:

  • The Juul-ization of weed

Read up,

Alex

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The Juul-ization of weed

Juul Labs, the signature brand of the last decade’s e-cigarette craze, is having a tough fall.

Last month, it agreed to pay nearly $440M to dozens of states for marketing to teenagers. (The company admitted no wrongdoing.) It awaits an FDA decision on whether it can continue selling its products and has reportedly called on two investors in a bid to stave off bankruptcy. Starting next week in San Francisco, it faces a class action trial against school districts nationwide.

What got Juul in this much trouble, of course, was selling mango and crème brulee flavored nicotine juice pods in ways that infuriated parents. Flavored nicotine products like these are now federally banned, though there’s a big loophole.

But despite Juul’s struggles, some high profile California brands, including Jeeter and Raw Garden, are selling vapes that edge closer to the third rail for any adult product: appealing to kids. They could have implications for the broader cannabis industry as it prepares for the big dance of federal regulation.

Until now, for the most part, the industry and regulators have observed a detente: The industry can sell fruit-flavored gummies, infused chocolate and dessert-inspired strain names as long as they don’t obviously try to attract kids. For example, many states prohibit fruit-shaped gummies.

But with California regulators occupied elsewhere, some companies are pushing the envelope on what they can sell. There are “definitely brands that throttle the line,” Harris Bricken attorney Griffen Thorne said. (He wasn’t referring to any particular brand.)

What is a Juul-like vape?

The cannabis and nicotine vape industries have common roots. Cannabis vape maker Pax spun out of Juul in 2017. But the companies are no longer operationally connected. The industries have similarly split; both cannabis and vapes have had their share of struggles, but they rarely overlap. And cannabis brands, for the most part, have sought to avoid any suggestion of marketing to kids.

So what’s the difference between a cannabis vape cartridge and a more Juul-ish weed product? It’s a judgement call based largely on a product’s potential to be used by the industry’s opponents. Cartoony brands like Jeeter Juice and Raw Garden’s new 90%+ THC Everdrop cartridges marketed with fruit images aren’t playing it safe. Neither are StateHouse Holdings’ (formerly Harborside) Sublime Fuzzies Fruities infused joints. (None of the companies responded to questions.)

 

Jeeter Juice https://www.jeeter.com/product-categories/liquid-diamond

 

juul
@everdropofficial

 

https://sublimefuzzies.com/products/

A judgement boils down to two questions: 1) What does the packaging and marketing look like? 2) How do the products taste?

The packaging question is more straightforward. Every state has its own rules but they generally bar, in broad language, any kind of cannabis packaging and marketing that could be perceived as appealing to kids.

Flavor is a more complex issue, because it involves the additives giving the products their flavor. Whether something tastes kid-friendly is harder to quantify than how it looks, but there are certain flavors, those evocative of candy and ice cream, for examples, that raise red flags.

  • For now, California doesn’t restrict any specific vape additives, but the DCC has proposed regulations, likely to take effect early next year, that would limit the flavors added to inhaled products “to those that are naturally occurring and contribute to the flavor of cannabis.”
  • New York’s proposed MED rules are stricter, banning “any flavors or flavoring agents, except for cannabis-derived or hemp-derived terpenes.”

The industry’s current flavor equilibrium holds because it’s understood that a joint of cherry chem doesn’t taste that much like cherry flavored nicotine juice or an actual cherry. But the distinction has gotten blurrier.

“Enjoyable and uplifting products for adults.”

Oregon’s top selling vape brand, Buddies, has a fruit line called BBrand, with flavors like strawberry and lime sorbet. The brand is also available in California and Washington.

BBrand Lime Sorbet, https://weedmaps.com/brands/buddies-brand/products/buddies-brand-bbrand-lime-sorbet-fruit-flavor-vapes

Buddies’ Chief Revenue Officer Colin Hobbs said the vapes are “Enjoyable and uplifting products for adults.” He’s close to 40 and said he prefers a flavored vape. Evidently, he’s not alone. In Oregon, BBrand accounts for eight of the top ten vape SKUs, he said.

“Juul was absolutely targeting kids,” Hobbs said, but that’s not what BBrand does. He called cartoonish packaging “against our ethos,” and didn’t seem too worried about federal legalization changing the rules anytime soon.

Like many of its fruit-flavored competitors, the brand flavors its products with natural botanical terpenes derived from fruits. In the wake of the 2019 vape crisis, Oregon banned non-cannabis derived terpenes from cannabis products but they’re now allowed again. Hobbs said BBrand packaging hasn’t been a problem in the states where its available.

  • The blame for the vape crisis, which made hundreds of users gravely ill, and killed several of them, usually falls on vitamin E acetate, a chemical found to be used by some unlicensed manufacturers.

In Colorado, Native Roots’ Revel vape line also uses botanically derived terpenes to produce flavors like wild blueberry and peppermint bark. VP of Marketing Buck Dutton said flavored vapes are popular and account for about 15% of the company’s vape sales. Unlike Juul, “our flavors such as Cantaloupe and Pumpkin Spice–are developed for an older, more discerning consumer,” he wrote.

NAtive roots
Native Roots Revel vapes, courtesy Native Roots

“We’re concerned”

“We’re aware of [flavored vapes] and we’re concerned about them,” said Dr. Lynn Silver, a pediatrician and program director at the non-profit Public Health Institute(PHI). This year the cannabiz defeated PHI’s legislative campaign to make California cannabis product labels much larger, brighter and more specific.  

  • Silver cited a study that 80% of kids who use tobacco started with a flavored product.

The issue for public health advocates isn’t just appealing to kids. Silver said there’s not good data on what additives are going into vapes at what ammounts. Not much research has been done on inhaling terpenes, but what’s out there indicates that pinene, for example, shows respiratory toxicity.

“Blanket approval of products because they’re botanically derived makes no sense,” Silver said. She favors a policy like Canada’s which bans almost all vape flavor additives.

As the federal legalization process begins, the industry must prepare for far more scrutiny and showboating on kids’ use than it has encountered before. Flavored vapes paint a target on the cannabiz far larger than the market share these products command. 

The vape crisis, and Juul’s travails, both this suggest ways flavored vapes could cause problems for the whole industry, not just flavored vape brands.

The Juul-ization of weed

Juul Labs, the signature brand of the last decade’s e-cigarette craze, is having a tough fall.

Last month, it agreed to pay nearly $440M to dozens of states for marketing to teenagers. (The company admitted no wrongdoing.) It awaits an FDA decision on whether it can continue selling its products and has reportedly called on two investors in a bid to stave off bankruptcy. Starting next week in San Francisco, it faces a class action trial against school districts nationwide.

What got Juul in this much trouble, of course, was selling mango and crème brulee flavored nicotine juice pods in ways that infuriated parents. Flavored nicotine products like these are now federally banned, though there’s a big loophole.

But despite Juul’s struggles, some high profile California brands, including Jeeter and Raw Garden, are selling vapes that edge closer to the third rail for any adult product: appealing to kids. They could have implications for the broader cannabis industry as it prepares for the big dance of federal regulation.

Until now, for the most part, the industry and regulators have observed a detente: The industry can sell fruit-flavored gummies, infused chocolate and dessert-inspired strain names as long as they don’t obviously try to attract kids. For example, many states prohibit fruit-shaped gummies.

But with California regulators occupied elsewhere, some companies are pushing the envelope on what they can sell. There are “definitely brands that throttle the line,” Harris Bricken attorney Griffen Thorne said. (He wasn’t referring to any particular brand.)

What is a Juul-like vape?

The cannabis and nicotine vape industries have common roots. Cannabis vape maker Pax spun out of Juul in 2017. But the companies are no longer operationally connected. The industries have similarly split; both cannabis and vapes have had their share of struggles, but they rarely overlap. And cannabis brands, for the most part, have sought to avoid any suggestion of marketing to kids.

So what’s the difference between a cannabis vape cartridge and a more Juul-ish weed product? It’s a judgement call based largely on a product’s potential to be used by the industry’s opponents. Cartoony brands like Jeeter Juice and Raw Garden’s new 90%+ THC Everdrop cartridges marketed with fruit images aren’t playing it safe. Neither are StateHouse Holdings’ (formerly Harborside) Sublime Fuzzies Fruities infused joints. (None of the companies responded to questions.)

 

Jeeter Juice https://www.jeeter.com/product-categories/liquid-diamond

 

juul
@everdropofficial

 

https://sublimefuzzies.com/products/

A judgement boils down to two questions: 1) What does the packaging and marketing look like? 2) How do the products taste?

The packaging question is more straightforward. Every state has its own rules but they generally bar, in broad language, any kind of cannabis packaging and marketing that could be perceived as appealing to kids.

Flavor is a more complex issue, because it involves the additives giving the products their flavor. Whether something tastes kid-friendly is harder to quantify than how it looks, but there are certain flavors, those evocative of candy and ice cream, for examples, that raise red flags.

  • For now, California doesn’t restrict any specific vape additives, but the DCC has proposed regulations, likely to take effect early next year, that would limit the flavors added to inhaled products “to those that are naturally occurring and contribute to the flavor of cannabis.”
  • New York’s proposed MED rules are stricter, banning “any flavors or flavoring agents, except for cannabis-derived or hemp-derived terpenes.”

The industry’s current flavor equilibrium holds because it’s understood that a joint of cherry chem doesn’t taste that much like cherry flavored nicotine juice or an actual cherry. But the distinction has gotten blurrier.

“Enjoyable and uplifting products for adults.”

Oregon’s top selling vape brand, Buddies, has a fruit line called BBrand, with flavors like strawberry and lime sorbet. The brand is also available in California and Washington.

BBrand Lime Sorbet, https://weedmaps.com/brands/buddies-brand/products/buddies-brand-bbrand-lime-sorbet-fruit-flavor-vapes

Buddies’ Chief Revenue Officer Colin Hobbs said the vapes are “Enjoyable and uplifting products for adults.” He’s close to 40 and said he prefers a flavored vape. Evidently, he’s not alone. In Oregon, BBrand accounts for eight of the top ten vape SKUs, he said.

“Juul was absolutely targeting kids,” Hobbs said, but that’s not what BBrand does. He called cartoonish packaging “against our ethos,” and didn’t seem too worried about federal legalization changing the rules anytime soon.

Like many of its fruit-flavored competitors, the brand flavors its products with natural botanical terpenes derived from fruits. In the wake of the 2019 vape crisis, Oregon banned non-cannabis derived terpenes from cannabis products but they’re now allowed again. Hobbs said BBrand packaging hasn’t been a problem in the states where its available.

  • The blame for the vape crisis, which made hundreds of users gravely ill, and killed several of them, usually falls on vitamin E acetate, a chemical found to be used by some unlicensed manufacturers.

In Colorado, Native Roots’ Revel vape line also uses botanically derived terpenes to produce flavors like wild blueberry and peppermint bark. VP of Marketing Buck Dutton said flavored vapes are popular and account for about 15% of the company’s vape sales. Unlike Juul, “our flavors such as Cantaloupe and Pumpkin Spice–are developed for an older, more discerning consumer,” he wrote.

NAtive roots
Native Roots Revel vapes, courtesy Native Roots

“We’re concerned”

“We’re aware of [flavored vapes] and we’re concerned about them,” said Dr. Lynn Silver, a pediatrician and program director at the non-profit Public Health Institute(PHI). This year the cannabiz defeated PHI’s legislative campaign to make California cannabis product labels much larger, brighter and more specific.  

  • Silver cited a study that 80% of kids who use tobacco started with a flavored product.

The issue for public health advocates isn’t just appealing to kids. Silver said there’s not good data on what additives are going into vapes at what ammounts. Not much research has been done on inhaling terpenes, but what’s out there indicates that pinene, for example, shows respiratory toxicity.

“Blanket approval of products because they’re botanically derived makes no sense,” Silver said. She favors a policy like Canada’s which bans almost all vape flavor additives.

As the federal legalization process begins, the industry must prepare for far more scrutiny and showboating on kids’ use than it has encountered before. Flavored vapes paint a target on the cannabiz far larger than the market share these products command. 

The vape crisis, and Juul’s travails, both this suggest ways flavored vapes could cause problems for the whole industry, not just flavored vape brands.

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R.I.P.

  • Writer and marketer Sean Cooley, known for his work at Weedmaps and Thrillist, died at 38.

NOTABLES

Company milestones:

Job moves:

  • Headset exec Jocelyn Sheltraw said she’s leaving the company for a new project to grow the next generation of cannabis influencers.
  • Law firm Dentons’ Oakland office welcomed back Kelly Fair, as a partner after she served as Canopy Growth’s first U.S. general counsel. 

SCOOP: Lawsuit alleges “systematic” potency inflation at Jeeter

THE BIG IDEA

Hi all,

Got another scoop for you today. Let’s get to it:

  • Lawsuit accuses Jeeter parent of “systematic” potency fraud

Read up,

Alex

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SCOOP: Lawsuit alleges “systematic” potency inflation at Jeeter

A potential class action suit alleges that the makers of Jeeter prerolls defraud customers by “systematically” overstating the THC content of their products. The suit, filed Thursday in California court, cites WeedWeek’s reporting which found widespread potency inflation in tests of seven leading California preroll brands, including Jeeter.

Desert Hot Springs (Riverside Co.)-based defendants Dreamfields Brands and Med For America, “have a direct financial incentive to overstate the THC content of their products,” the suit claims. Filed on behalf of two California plaintiffs by LA-based firm Dovel Luner, it alleges, “If defendants told the truth about the THC content of their products, they would have had to lower the price and plaintiffs and class members would have paid less.” The defendants didn’t respond to a request for comment.

The suit seeks unspecified total damages. A judge needs to approve the class action request for plaintiffs to invite additional Jeeter buyers to join the suit.

California regulations give labels a 10% margin of error for the THC percentage listed on labels. WeedWeek’s reporting found nine out of nine California prerolls, including two Jeeter products, were more than 10% inflated. The inflation on their labels ranged from 14% to more than 500%. For the Jeeter products it was between 28% and 100%.

  • The article also cautions that the testing data WeedWeek was able to accumulate is not sufficient to draw conclusions about any particular brand or product.

The complaint doesn’t cite any additional tests of Jeeter products. It says virtually all of Jeeter’s flagship infused prerolls are labeled above 35% THC and cites a Leafly article that calls 35% THC the biological “rough upper limit” for flower. (Infused prerolls, which contain concentrates and flower, probably have a higher biological upper limit than flower.)

High THC levels “allows Defendants to charge premium rates,” the complaint claims. However the THC labels on the packaging are “false.”

3.5M prerolls a month

In California’s challenging market, Jeeter’s streetwear-inspired brand has been a breakout success. College friends and co-CEOs Sebastian Solano and Lukasz Tracz launched it in 2018. They’d previously sold Life in Color, a party promotions company they’d founded in south Florida. “Jeeter” is south Florida slang for a joint.” In August, CNBC reported that the company projects more than $400M in revenue this year. 

Californians smoke about 3.5M Jeeter prerolls a month, the company says. There are now millions of potential “class members” who could join the lawsuit.

Among other claims, the complaint alleges violation of California’s False Advertising Law since “defendants misrepresentations and omissions were material.” In other words, the THC percentage on labels figures in consumer buying decisions. It also quotes a Jeeter site saying its infused prerolls “will get you to Mars quicker than Elon Musk.”

  • Jeeter products are also available in Arizona and Michigan. Neither market is involved in the lawsuit.

A “pernicious” problem

With buyers on the hunt for high-THC products, the problem of brands “lab shopping” until they find one that will give them the desired THC levels is a widely acknowledged across legal states. In July, a potential class action suit alleged the Arkansas subsidiary of Steep Hill Labs’ and its partner growers violated federal racketeering laws by inflating potency claims.

The complaint quotes UC Davis chemistry and forensics professor Dan Land who calls THC inflation a “pernicious” practice that is strongly incentivized with little risk of getting caught. In response to the issue, California’s Department of Cannabis Control has proposed standardizing testing methods. Critics of the idea say it won’t help since the results stem from bad actors looking to mislead their customers, not confusion over the testing process.  

SCOOP: Lawsuit alleges “systematic” potency inflation at Jeeter

A potential class action suit alleges that the makers of Jeeter prerolls defraud customers by “systematically” overstating the THC content of their products. The suit, filed Thursday in California court, cites WeedWeek’s reporting which found widespread potency inflation in tests of seven leading California preroll brands, including Jeeter.

Desert Hot Springs (Riverside Co.)-based defendants Dreamfields Brands and Med For America, “have a direct financial incentive to overstate the THC content of their products,” the suit claims. Filed on behalf of two California plaintiffs by LA-based firm Dovel Luner, it alleges, “If defendants told the truth about the THC content of their products, they would have had to lower the price and plaintiffs and class members would have paid less.” The defendants didn’t respond to a request for comment.

The suit seeks unspecified total damages. A judge needs to approve the class action request for plaintiffs to invite additional Jeeter buyers to join the suit.

California regulations give labels a 10% margin of error for the THC percentage listed on labels. WeedWeek’s reporting found nine out of nine California prerolls, including two Jeeter products, were more than 10% inflated. The inflation on their labels ranged from 14% to more than 500%. For the Jeeter products it was between 28% and 100%.

  • The article also cautions that the testing data WeedWeek was able to accumulate is not sufficient to draw conclusions about any particular brand or product.

The complaint doesn’t cite any additional tests of Jeeter products. It says virtually all of Jeeter’s flagship infused prerolls are labeled above 35% THC and cites a Leafly article that calls 35% THC the biological “rough upper limit” for flower. (Infused prerolls, which contain concentrates and flower, probably have a higher biological upper limit than flower.)

High THC levels “allows Defendants to charge premium rates,” the complaint claims. However the THC labels on the packaging are “false.”

3.5M prerolls a month

In California’s challenging market, Jeeter’s streetwear-inspired brand has been a breakout success. College friends and co-CEOs Sebastian Solano and Lukasz Tracz launched it in 2018. They’d previously sold Life in Color, a party promotions company they’d founded in south Florida. “Jeeter” is south Florida slang for a joint.” In August, CNBC reported that the company projects more than $400M in revenue this year. 

Californians smoke about 3.5M Jeeter prerolls a month, the company says. There are now millions of potential “class members” who could join the lawsuit.

Among other claims, the complaint alleges violation of California’s False Advertising Law since “defendants misrepresentations and omissions were material.” In other words, the THC percentage on labels figures in consumer buying decisions. It also quotes a Jeeter site saying its infused prerolls “will get you to Mars quicker than Elon Musk.”

  • Jeeter products are also available in Arizona and Michigan. Neither market is involved in the lawsuit.

A “pernicious” problem

With buyers on the hunt for high-THC products, the problem of brands “lab shopping” until they find one that will give them the desired THC levels is a widely acknowledged across legal states. In July, a potential class action suit alleged the Arkansas subsidiary of Steep Hill Labs’ and its partner growers violated federal racketeering laws by inflating potency claims.

The complaint quotes UC Davis chemistry and forensics professor Dan Land who calls THC inflation a “pernicious” practice that is strongly incentivized with little risk of getting caught. In response to the issue, California’s Department of Cannabis Control has proposed standardizing testing methods. Critics of the idea say it won’t help since the results stem from bad actors looking to mislead their customers, not confusion over the testing process.  

DOGWALKER

Industry makes case against Delta -8 and its brethren

The California Cannabis Industry Association published a white paper warning about the dangers of a “national, unregulated, hemp-derived, intoxicating cannabinoid market.” The California industry awaits a paper on the matter from the Department of Cannabis Control.

Called “Pandora’s Box,” the CCIA paper’s arguments include:

  • Hemp manufacturers are producing “novel, synthetic cannabinoids many times stronger than THC.”
  • Intoxicating, unregulated hemp products are “rife with contaminants, inaccurately labeled and brazenly marketed to children.”
  • Approval of novel manufactured cannabinoids such as THC-O and THC-P should be regulated by the U.S. Food and Drug Administration.

Read the paper

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Blood Orange Camino gummies (Courtesy: Kiva)

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Does a 5.5M Sq. Ft. greenhouse make sense?

THE BIG IDEA

Hi all,

Below you’ll find exclusive interviews with BFDs of California weed: Department of Cannabis Control (DCC) executive director Nicole Elliott and Graham Farrar, co-founder of Glass House, one of the state’s most talked about and controversial companies.

Our conversations ranged widely, but one thing they both have in common is a steadfast belief that interstate trade is good for the California market. 

Consider me a bit more skeptical. I lean more towards Rob Sechrist, president of mortgage REIT Pelorus Equity Group‘s, argument that, “California should figure out its own economics before they make it more complicated.”

Elliott and Farrar make their cases below. 

In the newsletter:

  • Does a 5.5M square feet greenhouse make sense?
  • Nicole Elliott, toughest job in weed

Read up,

Alex

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Does a 5.5M Sq. Ft. greenhouse make sense?

Glass House owes its status as one of California’s most controversial cannabis companies largely to a number: 5.5M. That’s the square footage of its new Ventura County greenhouse. It’s 126 acres, almost 100 football fields, the largest licensed grow in the country. The outsized facility has made Glass House the face of the mega-grows that have pushed prices down and hobbled many California farmers. And Glass House aims to push its production costs still lower.

The criticism isn’t entirely fair. At the moment, the big greenhouse is in the vicinity of 20% capacity. “There’s a ton of 20-acre grows in Lake County,” co-founder and president Graham Farrar said. No one’s blaming them for price collapses.

  • Glass House, which also grows next door in Santa Barbara County, estimates that it “powers” 6-7% of California flower. It’s a substantial share, but not one, I’d guess, that can dictate the market.
  • Johnny Casali, who owns Huckleberry Hill Farms in southern Humboldt, said they Glass House and other megafarms “just took advantage of the laws” that allow them to exist.

Speaking with Farrar, I wanted to better understand the business case for going so big with so much about legalization still up in the air. Farrar recently described the greenhouse to Forbes as a “call option” on federal legalization. (Stock analyst Aaron Edelheit explained why he’s bullish on Glass House.)

Like a lot of pot stocks, Glass House got a nice bump following President Biden’s announcement on rethinking cannabis’ legal status, But is Glass House — which also has a portfolio of California product and retail brands — well-positioned to benefit from interstate trade?

  • Among other things it will be competing directly against the big MSOs which have far more experience moving into new markets.
  • With interstate trade, there will be opportunity to grow where the growing costs least, states like Oklahoma with fewer environmental and labor regulations than California, but perfectly capable of hosting the high-tech, year-round greenhouses pioneered by Glass House and other big growers on California’s central coast.
  • The same product could be produced in, say, Colombia, for even less.

On paper, the economics may not be in his favor, but Farrar is betting on brand. “High-quality, sun-grown cannabis from California is what the country is going to want,” he said. He describes the ethos as “Casamigos of cannabis for the Whole Foods consumer.” Casamigos is a $40/bottle tequila brand started by George Clooney.

“Not every state is meant to grow cannabis just like not every state is made to grow oranges,” he said, and California is going to be a producer.

  • California’s top regulator Nicole Elliott strongly agrees.

The question is, ‘How much more will consumers be willing to pay for California weed?’

Graham’s answer is “Do you have a favorite non-Mexican tequila?” No, but I do enjoy some non-French wine.

There is going to be a national market for Emerald Triangle craft cannabis and some other California brands.  But does the California brand act more like tequila or wine? And if the latter, does it extend to a company like Glass House? (Like small farmers, Farrar strongly supports the proposed SHIP Act, which would legalize direct to consumer sales nationwide.)

Farrar thinks it does. As evidence, he says its the California brands, including some of Glass House’s own, popping up at grey market shops in New York City. In this weird video, Farrar’s co-founder Kyle Kazan visits one of those shops and marvels at how they got there.

California brands have a head start, but the race has scarcely begun. As weed ads reach more mainstream channels there is going to be a deluge of competition. The winners are TBD, of course, but Glass House has a marketing problem: Kazan used to be a cop. 

Farrar says Kazan deserves credit for his change of heart. It’s a fair point, one that deserves further discussion, but there are clearly some influencers who hold the grudge and will continue to hold it. Just like it’s greenhouse, Kazan’s former career makes Glass House an easy target, and that could work against it. (Here’s a recent WeedWeek interview with Kazan.)

  • One marketing point that could work in its favor is that greenhouse’s like Glass House’s use far less energy and emit far less greenhouse gasses than indoor grows.

Glass House’s path to becoming a $40 bottle of tequila doesn’t strike me as assured. But Farrar has a pretty good track record. He was on the founding team at lifestyle defining audio company Sonos. He knows the Casamigos/Whole Foods demo better than most of us.

Does a 5.5M Sq. Ft. greenhouse make sense?

Glass House owes its status as one of California’s most controversial cannabis companies largely to a number: 5.5M. That’s the square footage of its new Ventura County greenhouse. It’s 126 acres, almost 100 football fields, the largest licensed grow in the country. The outsized facility has made Glass House the face of the mega-grows that have pushed prices down and hobbled many California farmers. And Glass House aims to push its production costs still lower.

The criticism isn’t entirely fair. At the moment, the big greenhouse is in the vicinity of 20% capacity. “There’s a ton of 20-acre grows in Lake County,” co-founder and president Graham Farrar said. No one’s blaming them for price collapses.

  • Glass House, which also grows next door in Santa Barbara County, estimates that it “powers” 6-7% of California flower. It’s a substantial share, but not one, I’d guess, that can dictate the market.
  • Johnny Casali, who owns Huckleberry Hill Farms in southern Humboldt, said they Glass House and other megafarms “just took advantage of the laws” that allow them to exist.

Speaking with Farrar, I wanted to better understand the business case for going so big with so much about legalization still up in the air. Farrar recently described the greenhouse to Forbes as a “call option” on federal legalization. (Stock analyst Aaron Edelheit explained why he’s bullish on Glass House.)

Like a lot of pot stocks, Glass House got a nice bump following President Biden’s announcement on rethinking cannabis’ legal status, But is Glass House — which also has a portfolio of California product and retail brands — well-positioned to benefit from interstate trade?

  • Among other things it will be competing directly against the big MSOs which have far more experience moving into new markets.
  • With interstate trade, there will be opportunity to grow where the growing costs least, states like Oklahoma with fewer environmental and labor regulations than California, but perfectly capable of hosting the high-tech, year-round greenhouses pioneered by Glass House and other big growers on California’s central coast.
  • The same product could be produced in, say, Colombia, for even less.

On paper, the economics may not be in his favor, but Farrar is betting on brand. “High-quality, sun-grown cannabis from California is what the country is going to want,” he said. He describes the ethos as “Casamigos of cannabis for the Whole Foods consumer.” Casamigos is a $40/bottle tequila brand started by George Clooney.

“Not every state is meant to grow cannabis just like not every state is made to grow oranges,” he said, and California is going to be a producer.

  • California’s top regulator Nicole Elliott strongly agrees.

The question is, ‘How much more will consumers be willing to pay for California weed?’

Graham’s answer is “Do you have a favorite non-Mexican tequila?” No, but I do enjoy some non-French wine.

There is going to be a national market for Emerald Triangle craft cannabis and some other California brands.  But does the California brand act more like tequila or wine? And if the latter, does it extend to a company like Glass House? (Like small farmers, Farrar strongly supports the proposed SHIP Act, which would legalize direct to consumer sales nationwide.)

Farrar thinks it does. As evidence, he says its the California brands, including some of Glass House’s own, popping up at grey market shops in New York City. In this weird video, Farrar’s co-founder Kyle Kazan visits one of those shops and marvels at how they got there.

California brands have a head start, but the race has scarcely begun. As weed ads reach more mainstream channels there is going to be a deluge of competition. The winners are TBD, of course, but Glass House has a marketing problem: Kazan used to be a cop. 

Farrar says Kazan deserves credit for his change of heart. It’s a fair point, one that deserves further discussion, but there are clearly some influencers who hold the grudge and will continue to hold it. Just like it’s greenhouse, Kazan’s former career makes Glass House an easy target, and that could work against it. (Here’s a recent WeedWeek interview with Kazan.)

  • One marketing point that could work in its favor is that greenhouse’s like Glass House’s use far less energy and emit far less greenhouse gasses than indoor grows.

Glass House’s path to becoming a $40 bottle of tequila doesn’t strike me as assured. But Farrar has a pretty good track record. He was on the founding team at lifestyle defining audio company Sonos. He knows the Casamigos/Whole Foods demo better than most of us.

NICOLE ELLIOTT: TOUGHEST JOB IN WEED

DCC Executive Director Nicole Elliott. (Image courtesy: DCC)

Nicole Elliott, executive director of California’s Department of Cannabis Control (DCC) has the toughest job in weed. She oversees a tremendous market where all the legal industries’ challenges have compounded into something near unmanageable. Many of these challenges were baked in before Elliott took the helm and/or are beyond her power to change.

Still, Elliott is as prepared for the job as anyone reasonably could be. She was San Francisco’s first top regulator then served as Gov. Newsom’s liaison to the industry. We spoke about her top priorities, her recent visit to the Emerald Triangle and her plan to expand retail access. 

Where to begin?

QUICK HITS

Federal:

  • One thing that hasn’t gotten as much attention as it deserves is that U.S. Secretary of Health and Human Services Xavier Becerra has an outsized role in the federal review Biden has set in motion. Becerra is a former California Attorney General and legalization supporter.   

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SCOOP: MedMen sues founders for self-dealing

THE BIG IDEA

Hi all,

Sorry about the delay with today’s newsletter. 

  • SCOOP: MedMen sues its founders for overpaying themselves

Let’s get to it,

Alex

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SCOOP: MedMen sues founders for overpaying themselves

SoCal-based MSO MedMen sued its founders for self-dealing in the contracts they negotiated for themselves. (Legal research supported by Unicourt.)

The lawsuit alleges co-founders Adam Bierman and Andrew Modlin, along with former executive Christopher Ganan, “engaged in self-dealing in breach of their fiduciary duties” by negotiating themselves bonuses worth more than $9M “on entirely unreasonable terms.” MedMen paid out “at a time where MedMen was in substantial need of liquidity.”    

The complaint alleges that shortly before MedMen’s 2018 initial stock offering CEO Bierman executed employment agreements for himself, Modlin and Ganan that guaranteed them “onerous terms of compensation.” These include guaranteed payouts of $4M for Bierman and Modlin and $1M for Ganan if the company’s enterprise value ever reaches $2B.

MedMen is informed and believes, the filing reads, that the defendants “caused MedMen to reach the triggering market capitalization…all without any long-term benefit to MedMen.” MedMen’s market cap is currently around $70M Canadian.

MedMen recently used cannabis’ federal illegality as a defense in lawsuit over unpaid rent. 

The company’s rise and fall under Bierman was chronicled by Politico. Bierman and Modlin then returned to the California cannabis industry with retailer Coastal, which they then sued.  

The defendants didn’t respond to requests for comment.

SCOOP: MedMen sues founders for overpaying themselves

SoCal-based MSO MedMen sued its founders for self-dealing in the contracts they negotiated for themselves. (Legal research supported by Unicourt.)

The lawsuit alleges co-founders Adam Bierman and Andrew Modlin, along with former executive Christopher Ganan, “engaged in self-dealing in breach of their fiduciary duties” by negotiating themselves bonuses worth more than $9M “on entirely unreasonable terms.” MedMen paid out “at a time where MedMen was in substantial need of liquidity.”    

The complaint alleges that shortly before MedMen’s 2018 initial stock offering CEO Bierman executed employment agreements for himself, Modlin and Ganan that guaranteed them “onerous terms of compensation.” These include guaranteed payouts of $4M for Bierman and Modlin and $1M for Ganan if the company’s enterprise value ever reaches $2B.

MedMen is informed and believes, the filing reads, that the defendants “caused MedMen to reach the triggering market capitalization…all without any long-term benefit to MedMen.” MedMen’s market cap is currently around $70M Canadian.

MedMen recently used cannabis’ federal illegality as a defense in lawsuit over unpaid rent. 

The company’s rise and fall under Bierman was chronicled by Politico. Bierman and Modlin then returned to the California cannabis industry with retailer Coastal, which they then sued.  

The defendants didn’t respond to requests for comment.

DOGWALKER

Industry wins on testing

To combat potency inflation, the Department of Cannabis Control (DCC) had proposed that all product be tested through a standardized method. This created a big problem for edibles makers. Kiva submitted concerns in public comment that the method would not fully capture the cannabinoids in some edibles products forcing product makers to increase the content of THC and other cannabinoids in their products, potentially creating unpleasant or unsafe experiences for consumers. The DCC clarified that the method only applies to flower and pre-rolls. 

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Nevada pot sales fell slightly to a bit under $1B over the fiscal year. Casino.org

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A political “knife fight” in the beach cities

THE BIG IDEA

Hi all,

This newsletter’s coming in a bit late. Circumstances informed against me after a whirlwind trip to Vegas. I hope you still find it valuable.

In today’s issue:

  • The gloves come off in the beach cities

Read up,

Alex

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BEACH CITIES BRAWL CAPTURES CANNABIZ FRUSTRATIONS

beach cities
A mailer supporting Measure E in Redondo Beach

Bitterly contested ballot initiatives on whether to allow dispensaries in three SoCal beach cities could have far reaching implications for retailers trying to access consumers, an ongoing concern for California’s beleaguered cannabiz. The measures have attracted fierce criticism from local officials as well as some in the industry who say more similar initiatives could further hinder the state market.

The initiatives are funded by Catalyst Cannabis and Tradecraft Farms, two retailers eager to open in the affluent and heavily touristed markets of Manhattan Beach, Redondo Beach and Hermosa Beach (Los Angeles Co., 3x). In response, town officials have condemned the initiatives as a foreign invasion. Manhattan Beach Mayor Steve Napolitano and all three city council members signed a statement calling the vote “an abuse of the initiative process,” backed by out of town business interests.

Elliot Lewis, CEO of 13-shop chain Catalyst calls it grassroots democracy. Lewis has gained some renown for social media jeremiads where he describes himself as a fighter delivering #weedforthepeople in the face of “Chads” and MSOs “that ain’t ready for real competition.”

Lewis’ opponents accuse him of trying to secure for himself the kinds of anti-competitive carve outs he claims to oppose, and that…

Read the story…

 

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Eaze CEO Rogelio Choy departs

THE BIG IDEA

Hi all,

Lots to cover so let’s get to it:

  • SHO Products sues Puffco for patent infringement
  • CEO Rogelio Choy departs Eaze

PLUS: So much more.

I’ll be at MJUnpacked in Vegas next week. Will you? 

Alex

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AN EXCLUSIVE OFFER FOR WEEDWEEK PRO SUBSCRIBERS

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SCOOP: SHO Products strikes back, sues Puffco for patent infringement

SHO Products, maker of the Focus V Carta e-rig, sued Puffco for patent infringement this week, escalating its legal battle with the rival dabbing device maker.

First released in 2018, Puffco’s Peak rig, sometimes called the iPhone of bongs, helped destigmatize dabbing and make concentrates one of the hottest product categories in cannabis. Puffco and SHO are now fighting over the multi-billion market for sleek, portable e-rigs which Puffco expanded. 

The SHO lawsuit comes months after Puffco sued SHO for infringement on a separate patent also commercialized in Puffco’s Peak device line. Puffco alleged infringement of a patent for for “a portable vaporizing device with an atomizer and mouthpiece that are each independently removably attachable to the base.”

SHO’s new lawsuit alleges infringement of its patent for a “removable cup atomizer.” 

  • Both suits were filed in federal court in the Central District of California, which includes Los Angeles.

Patent litigation is technical, expensive and unpredictable, and the vast majority of cases settle before trial.

SHO’s response to the initial Puffco lawsuit focused on a procedural issue known as “prior art” which gives inventors one year to file a patent after publicly displaying their innovation. SHO claims  that Puffco’s pre-launch marketing for the Peak in early January 2018 came more than a year before it filed the patent application on January 14, 2019.

  • SHO argues that Puffco’s intellectual property had been publicized,  among other places, in a January 8, 2018 review of the device in Engadget, in since deleted Instagram posts and at the Consumer Electronics Show (CES) in Las Vegas.
  • In addition to the new lawsuit, SHO has filed a motion to dismiss Puffco’s case. It’s set to be argued on Monday.

Jeffrey Smyth, a Silicon Valley-based partner at IP law firm Finnegan, said SHO’s motion to dismiss, paired with its new law suit shows it’s taking a “pretty aggressive stance,” in the litigation. (Smyth is not involved in the case.)

A spokesperson for Puffco declined to comment.       

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(Disclosure: WeedWeek is represented by Bryan Cave, Puffco’s representation in the suit.)

Eaze CEO Rogelio Choy departs

Rogelio Choy, who led delivery service Eaze for four tumultuous years, has stepped down. He’s been replaced by executive Cory Azzalino.

“With a hyper focus on expanding retail and profitability, the company needs greater clarity and strategic vision in areas outside of my expertise,” Choy wrote in a parting email, the text of which was obtained by WeedWeek.

  • The note says the company, which operates in California, Colorado, Florida and Michigan, has $200M in revenue.
  • As of several months ago, Eaze accounted for one-third of the deliveries in California, but was struggling to reach profitability in the state’s hypercompetitive market.
  • In July, the company received a $15M credit facility to focus on growth in Colorado and Florida 

One of the industry’s original darlings, Bay Area-based Eaze launched in 2014 and has raised more than $250M from high profile investors including Silicon Valley technologist Jim Clark.

  • Described as the “Uber of weed,” the company initially operated a tech platform that enabled customers to buy cannabis online and facilitated delivery without touching the plant. In 2020 it pivoted to become a plant-touching company.

Choy joined Eaze in 2018 from the tech world and was promoted to CEO the next year. As Choy led the pivot, he cooperated with federal prosecutors as two former Eaze consultants faced trial, and were convicted, of conspiracy to commit bank fraud for a scheme that tricked credit card companies into processing transactions on Eaze’s non-plant touching platform. 

  • Former Eaze CEO Jim Patterson pleaded guilty to one count of bank fraud conspiracy and testified against the consultants.
  • Under Choy, Eaze was not accused of wrongdoing.

Eaze’s acquisition of Green Dragon, a profitable, family-owned operator, which closed early this year, initially looked like a comeback story. 

  • Green Dragon operated in Colorado and Florida.
  • However, in an April meeting, a recording of which was obtained by WeedWeek, Green Dragon executive Alex Levine said the deal did more to improve Eaze’s “entire situation.” “I don’t know where this company would be if this did not happen.”

In that meeting, Levine’s father Alex Levine described Eaze’s engineering team as its key asset and the smartest people at the company.

“We live or die by [the engineering] team,” Choy said.

  • The company has since reportedly laid off members of its engineering team. It also brought in a new CTO, Mervyn Lally, who previously worked for Experian.
  • Trey Handley, who previously worked for Green Dragon, remains the company’s CFO.
  • At the April meeting, a member of the engineering team who is no longer with the company said she believed it was the Green Dragon team, not Choy, running the company.
  • At the time, WeedWeek reported that Alex Levine and his stepmother Lisa Leder held two of the company’s eight board seats.

The April meeting took place against a backdrop of tense relations with Eaze’s workforce.

Before the Green Dragon acquisition, Eaze had relatively warm relations with California unions. But in April, the company faced picket lines at a Colorado grow house where the United Food and Commercial Workers (UFCW) Local 7 accused it of hard-edged anti-union tactics. At the same time, delivery drivers in San Francisco who had voted to unionize sought to negotiate a contract.  

Jim Araby, an organizer with UFCW Local 5 in the Bay Area said the San Francisco workers and Eaze had reached an agreement due to be ratified today. It is similar to a contract negotiated by Eaze drivers in Oakland but without a $1 payment for each completed delivery, he said.

“It’s the best we could get given the difficulties of the cannabis market,” Araby said.

  • Araby said the union is now working to organize Eaze workers at an Element 7 location in South San Francisco, which would give the union four of the six NorCal depots owned or operated by Eaze.

Eaze declined to comment for this article or make its new CEO Azzalino available for an interview.  

  • UFCW’s Araby said he believes the Levines and Lisa Leder, formerly of Green Dragon, still call the shots at the company.

Eaze CEO Rogelio Choy departs

Rogelio Choy, who led delivery service Eaze for four tumultuous years, has stepped down. He’s been replaced by executive Cory Azzalino.

“With a hyper focus on expanding retail and profitability, the company needs greater clarity and strategic vision in areas outside of my expertise,” Choy wrote in a parting email, the text of which was obtained by WeedWeek.

  • The note says the company, which operates in California, Colorado, Florida and Michigan, has $200M in revenue.
  • As of several months ago, Eaze accounted for one-third of the deliveries in California, but was struggling to reach profitability in the state’s hypercompetitive market.
  • In July, the company received a $15M credit facility to focus on growth in Colorado and Florida 

One of the industry’s original darlings, Bay Area-based Eaze launched in 2014 and has raised more than $250M from high profile investors including Silicon Valley technologist Jim Clark.

  • Described as the “Uber of weed,” the company initially operated a tech platform that enabled customers to buy cannabis online and facilitated delivery without touching the plant. In 2020 it pivoted to become a plant-touching company.

Choy joined Eaze in 2018 from the tech world and was promoted to CEO the next year. As Choy led the pivot, he cooperated with federal prosecutors as two former Eaze consultants faced trial, and were convicted, of conspiracy to commit bank fraud for a scheme that tricked credit card companies into processing transactions on Eaze’s non-plant touching platform. 

  • Former Eaze CEO Jim Patterson pleaded guilty to one count of bank fraud conspiracy and testified against the consultants.
  • Under Choy, Eaze was not accused of wrongdoing.

Eaze’s acquisition of Green Dragon, a profitable, family-owned operator, which closed early this year, initially looked like a comeback story. 

  • Green Dragon operated in Colorado and Florida.
  • However, in an April meeting, a recording of which was obtained by WeedWeek, Green Dragon executive Alex Levine said the deal did more to improve Eaze’s “entire situation.” “I don’t know where this company would be if this did not happen.”

In that meeting, Levine’s father Alex Levine described Eaze’s engineering team as its key asset and the smartest people at the company.

“We live or die by [the engineering] team,” Choy said.

  • The company has since reportedly laid off members of its engineering team. It also brought in a new CTO, Mervyn Lally, who previously worked for Experian.
  • Trey Handley, who previously worked for Green Dragon, remains the company’s CFO.
  • At the April meeting, a member of the engineering team who is no longer with the company said she believed it was the Green Dragon team, not Choy, running the company.
  • At the time, WeedWeek reported that Alex Levine and his stepmother Lisa Leder held two of the company’s eight board seats.

The April meeting took place against a backdrop of tense relations with Eaze’s workforce.

Before the Green Dragon acquisition, Eaze had relatively warm relations with California unions. But in April, the company faced picket lines at a Colorado grow house where the United Food and Commercial Workers (UFCW) Local 7 accused it of hard-edged anti-union tactics. At the same time, delivery drivers in San Francisco who had voted to unionize sought to negotiate a contract.  

Jim Araby, an organizer with UFCW Local 5 in the Bay Area said the San Francisco workers and Eaze had reached an agreement due to be ratified today. It is similar to a contract negotiated by Eaze drivers in Oakland but without a $1 payment for each completed delivery, he said.

“It’s the best we could get given the difficulties of the cannabis market,” Araby said.

  • Araby said the union is now working to organize Eaze workers at an Element 7 location in South San Francisco, which would give the union four of the six NorCal depots owned or operated by Eaze.

Eaze declined to comment for this article or make its new CEO Azzalino available for an interview.  

  • UFCW’s Araby said he believes the Levines and Lisa Leder, formerly of Green Dragon, still call the shots at the company.

DOGWALKER

Another legislative win

Among the dozen or so weed bills recently signed by Governor Gavin Newsom (D), AB 2210 has gotten relatively little attention. Sponsored by Assemblyman Bill Quirk (D-Bay Area), it allows temporary dispensary licenses to operate on premises that also have an alcohol permit. (The cannabis permit must operate in a distinct area without alcohol allowed.)  A smart source told me it will “open up 100s of venues to do cannabis retail,” and could be a game changer for improving access to licensed product.

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