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March 30 2022,
TOGETHER WITH
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We are excited to introduce MATTIO+FIORE Media, a best-in-class 360° full-service agency specializing in cannabis companies.
We’re excited to introduce the first issue of WeedWeek California Pro, the only publication for people who make money in the world’s largest cannabis market.
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SHAKE UPS
LA SET TO OVERHAUL LICENSE PROCESS
LA’s Department of Cannabis Regulation held a webinar yesterday on forthcoming changes to the city’s cannabis ordinance.
Built on top of entrenched grey and illegal markets, the city known as the world’s largest market has struggled with a host of challenges since the California REC market opened in 2018.
Cat Packer, the department’s first executive director stepped down in early March. Her former deputy Michelle Garakian has the reins on an interim basis.
Largely in response to frustrated applicants, the city began an ordinance review process in September. Among other goals, the new draft ordinance aims to clarify and accelerate licensing, with an emphasis on ensuring a smoother process for social equity applicants.
Among its proposals:
A lottery, probably next year, would determine winners of the “phase 3, round 2” process for social equity applicants seeking retail licenses.
They no longer have to be holding the property to apply for a license, but the definition of who qualifies as a social equity applicant is narrower.
City cultivation licenses would be reserved for social equity applicants through January 1, 2025.
Emily Hackman, a license specialist with law firm Vicente Sederberg, said one big takeaway is DCR would have to meet codified deadlines for responding to applicants
The new ordinance could be approved by city council as soon as April, but they will also have opportunities to modify and delay it.
One-third of packages would have to be covered with warnings about DUI, use during pregnancy and cannabis’ potential to contribute to mental health problems, especially when THC is consumed frequently or in high doses.
One of the messages would say: “WARNING: Buy Legal! Illegally sold cannabis is more likely to contain unsafe additives or harmful contaminants such as mold or pesticides.”
In a March 25 letter to Sen. Richard Roth, (D-Inland Empire), chair of the Committee on Business, Professions and Economic Development, CCIA executive director Lindsay Robinson argued the bill would:
Create additional regulatory burdens for an industry that has its share
Be redundant since products already have “significant and effective warning labels”
Lead to increased landfill waste and carbon emissions
Do nothing to reduce demand for illegal product
The bill’s supporters include the American Academy of Pediatrics, the American College of Emergency Physicians and the American College of Obstetricians and Gynecologists.
California ER visits with cannabis as the primary cause have increased from 9,793 in 2016 to 14,999 in 2019.
Dr. Lynn Silver, a pediatrician and senior advisor to with Getting It Right From the Start, a program by of the non-profit Public Health Institute, which promotes public health and equity on cannabis policy called the labels a “very low cost intervention.”
“I think it’s in the interests of the cannabis industry for consumers to have safer positive experiences and to avoid adverse experiences,” Silver said.
She expressed optimism that the bill would pass. “We hope to have the support of the cannabis industry as well.”
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Crypto can seem like a technology in search of a business model.
While the blockchain has obvious allure for the cannabiz, which can't access the financial system, it also comes with significant complications. The metaverse, meanwhile, is still in the land grab stage, but some see an opportunity to plant virtual seeds.
Ryan Hunter. CEO of early mover Crypto Cannabis Club, describes the company as a social club with NFTs as membership cards. CCC launched its collection of 10,000 NFTs in July on the Open Sea marketplace. They "minted out" and now trade for between $500 and $10,000 each, depending on whether the dude on the NFT has a hat, a green mohawk, alien skin or other traits seen as more or less desirable.
CCC makes a royalty payment on each sale.
Holders of CCC NFT's hang out together on social media and Discord, Hunter said. They're also entitled to discounts from CCC's more than 20 partner brands, which include Old Pal and Highsman.
NFT Holders also get a discount on CCC's brand, which sells eighths with "commemorative" NFTs. They don't confer the same privileges as the NFTs sold through Open Sea.
CCC's own cannabis brand has launched in California, available exclusively on the CampNova platform.
CCC has also acquired two properties in Cryptovoxels, a "virtual world" built on the Ethereum blockchain.
It's building one into a "virtual dispensary" where it can stream events and performances and link to its partners' sites.
The other property will have a game play experience, Hunter said.
These virtual spaces can can blend into IRL. When we spoke on Friday, Hunter was in Playa del Carmen, in Mexico's Yucatan, where holders of CCC NFT's were converging from several countries for a beach weekend. Activities are free for the Open Sea NFT holders after airfare and hotel.
Hunter said he expected 80 people to show up. A spokesman said later said about 30 made it.
Next on CCC's event agenda is a 4/20 event in LA.
EQUITY
SAN DIEGO CO. BEGINS LISTENING TOUR
San Diego County, the second most populous in the state, also has one of the lowest concentrations of dispensaries (See chart below). Now it’s seeking to develop an equity program and crack down on the illegal market.
This week a company contracted by the county, Womxn’s Work Consulting kicked off a listening tour to discuss what equity could look like.
Aside from familiar equity issues, participants made intriguing, but unlikely suggestions like community cannabis gardens, farmers markets and government purchase quotas.
Womxn’s Work is also conducting a community survey on what equity should look like and who should benefit. The responses will inform how the county shapes the program.
The listening tour continues Saturday at 10 a.m. You can tune in on Zoom.
Our first chart of the week digs into WeedWeek‘s maps and state data to find the California counties with the fewest retail licenses per person, (storefront and non-storefront).
The graph takes us from Los Angeles County, where 328 active licenses amounts to just one per 30,000-ish people to Placer County which has one active license for its population of just over 400,000 people. It’s Golden State Patient Care, in Colfax, in case you’re hard up.
To be included, a county had to have at least 1 pot shop and 100,000 people.
Mike Tyson’s Tyson 2.0 (“undisputed cannabis”) brand acquired a majority stake in former pro wrestler Ric Flair’s Drip business entity enabling it to launch a new line of celebrity branded products.
SoCal flower brand Stone Road is expanding to Massachusetts. It’s also available in Michigan and Oklahoma.
Collin Palmer, head of formulations at PAX with Chris Sayegh “The Herbal Chef,” and PAX COO Steven Jung smile for the camera at a tasting event for PAX’s new Live Rosin with Natural Diamonds vape pods. Sayegh hosted the event at Nostalgia Bar & Lounge, his restaurant in Santa Monica.
Photo by Kaitlin Parry @shootpeople_ , Courtesy of PAX
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Pro
What Calif.'s top 25 flower brands say about the market
This story has been updated with a statement from Wonderbrett CEO Matt Costa.
Headset data on California’s highest-grossing flower brands depicts a hypercompetitive market where the 25 bestsellers account for barely one-third of sales. Insiders say the list, shared exclusively with WeedWeek, shows how premium brands are struggling to adapt in the face of improving quality from greenhouse grows and an abundance of inexpensive, high quality product.
Flower’s market share has fallen to about 37% of the total state market but it still represents the single most important product category. California’s flower market does nearly $2B in sales annually.
The top sellers include a range of flower types, from budget green house to top shelf indoor
Colorado, the second largest state market, has just over $2B in total cannabis sales.
“At the very top, quality still seems to matter,” Arun Kurichety, COO at brand incubator Petalfast said. “But past some of those top tier brands, most cannabis products are still competing on potency and price.”
A sales executive at a premium indoor flower brand that has seen some slippage confirmed the assessment: “It comes down to price pressure from value indoor brands.”
Relative to edibles and vapes, execs say flower struggles to command brand loyalty amid an excess of quality products and a culture of buyers always hunting for the latest fire. Plus the barrage of deals available encourage brand hopping. Some execs see a race to the bottom.
Joey Brabo, co-owner and critic with media company Respect My Region, noted that the top five brands, whatever their subcategory, all probably get a boost from their large product selection. “They’re able to take up a lot of shelf space,” he said.
An exec at a large delivery service said that as the market continues to be very challenging, he’s seeing more brands turn to buying white label flower, which delivers higher margins than growing their own.
In 2018, one observer noted, “house” brands were accounted for about half of the top 30 brands. By 2019, it had dropped to 14% and has held around there since. “In short, the flower market has turned to brands and I believe that is a good thing.”
Amid market conditions like this, conventional wisdom dictates that consolidation is coming. “I almost hope that the market doesn’t quite consolidate the way everyone is predicting,” Evan Schneider, a former exec with delivery service Amuse said. “It would be a shame to lose all the incredible brands that have developed over the years.”
Brands on the move
Here are some of the brands that caught insiders’ attention:
Almost everyone mentioned Yada Yada, which launched last year. Greenhouse-grown in Santa Barbara Co., it competes with formidable operators like Glass House and Pacific Stone. Yada Yada’s approach takes pop on the shelf yellow packaging and puts it on affordable bags of unconventional sized products. So consumers get 5g for the price of many an eighth. “Yada Yada is a relatively new top seller for us,” The Artist Tree co-founder Lauren Fontein said. “It performs well because of its entry level price point.”
Indoor premium brand Cannabiotix, known for its Cereal Milk strain, has won a cult following for consistently high quality flower. It’s prize as the state’s top grossing brand is 3.9% market share. Still, under these circumstances that looks like a moat. Second place Glass House, is at 2.3%.
In January 2021, I wrote, based on Headset rival BDSA’s data, that Connected and its sister brand Alien Labs could see the highest gross while selling flower for twice the price of their competitors. The new Headset data shows that the two brands combined gained market share, though they do not have as dominant a position.* Both brands remain favorites of connoisseurs, though observers suggested that as brands scale their prices and quality can come under pressure. Greg Fodell, Connected’s VP, corporate development, acknowledged that market conditions could hit its prices, but said testing at Connected’s newly-opened facility shows product quality has improved.
Wonderbrett, which opened a flagship dispensary on LA’s trendy Fairfax Ave. last year saw a drop in share. The drop is “probably a reflection of how difficult it is to be a premium flower brand at the moment,” former Amuse exec Schneider, a fan of the brand, said.
Value brand Lolo, which has nearly doubled its market share this year, has the pithy slogan “cheap gas & white ash.” Indoor eighths go for $20 and smalls for $16. Bargain hunters snap up the 21g of pre-ground or “ready to roll” flower for $30.
*A note on the data: Headset says its California data comes from approximately 250 storefront and delivery retailers which it then “de-biases” to provide a picture of the entire market. Rival BDSA, which gathers and assesses data with roughly similar methods, declined to provide a comparable list. The two companies’ can differ on individual brands, and each has its partisans. (Headset is a client of WeedWeek advertiser Mattio Communications.)
Update: 7/13/22
Wonderbrett CEO Matt Costa provided the following statement:
The decline in market share can be attributed to two main factors. First and foremost, is the identification of the “good–acting” retailers and partners, and focusing on them as it relates to overall market share. Second, there is a massive problem in California as it relates to AR, with no repercussions for non or late payments. We are a for-profit–company that wants to hyper–focus on selling product, rather than giving it away, or financing other people‘s businesses. As a result of this serious market factor, we have consolidated our efforts to focus only onthe goodactors, which dramatically lowered the overall market sales potential.But, this will increase sales efficiency and company profitability. We believe this is a winning strategy given the state of our economyand one that’s necessary for Wonderbrett’s survival.
In addition, we held the line as it relates to wholesale sales price. This in turn has slowed topline sales because of consumer out-the-door pricing, which is grossly affected by retailer markups and excessive taxes. We are addressing this with our retailers and partners this quarter and will begin split–testing wholesale price points to find the sweet spot we want to live in. We are not and have never wished to be the biggest weed brand in California. Rather, we strive to be the best at what we do and believe that some level of scarcity is the best path for success in the premium category.
NEWSOM SIGNS TRAILER BILL, ENDS CULTIVATION TAX
California’s hated cultivation tax is no more after Gov. Gavin Newsom signed the cannabis trailer bill. While the law doesn’t go as far as some had hoped, it was generally welcomed by an industry desperate for tax relief.
Dale Sky Jones, executive chancellor at Oaksterdam University, described the unmourned cultivation tax as especially burdensome to small farmers.
By compounding throughout the supply chain, “taxing on the tax” it pushed consumers back to “their dude.”
“There’s an overall feeling that this is a win,” Vicente Sederberg attorney Andrea Golan said. She added that businesses are keeping a close eye on two provisions in the law:
Whether the state will raise the excise tax
The new law also requires companies with 10 non-management employees to commit to a labor peace agreement. The number was previously 20. Penalties up to and including license revocation suggest it will be strictly enforced, Golan said.
The law also:
Moves the collection point for state excise taxes from distributors to retailers, eliminating what many saw as a hassle and burden.
Puts new resources into enforcement against the illegal market.
CAN BE REAL BREAK THE CELEBRITY BRAND HEX?
B Real (Courtesy Dr. Greenthumb’s)
The newsletter One Weed Please recently asked Headset to pull data on celebrity brand sales and the results came back very clear: No one is smoking it. Only one celeb brand, Seth Rogen’s Houseplant, made the top 100. Cypress Hill’s B Real thinks his Dr. Greenthumb’s dispensary and premium Insane brand can be an exception.
SoCal-native B Real’s arrival in the cannabiz had an air of inevitability. He’s been rapping about the plant since the early 1990s and is one of the movement’s most exalted cultural icons. But unimpeachable street cred hasn’t been enough for Willie Nelson, Bob Marley and plenty of other brands that haven’t lit the world on fire.
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QUICK HITS
Regulation:
The state Department of Cannabis Control provided notice of modifications to upcoming regulations. Public comments can be sent to publiccomment@cannabis.ca.gov by 5 p.m. July 22.
A SoCal man who once competed for the Philippines in the Olympics will plead guilty to bilking investors for $28M in a bogus scheme to sell vape pens. AP
As a counterpoint to the Headset story above, the new Chart of the Week shows off how app Jointly uses customer reviews to rank California’s favorite flower brands. Unlike Headset, which taps into dispensary PoS systems, Jointly collects its data from consumers focused on whether a product helped them get whatever they hoped to get out of it.
“Our list isn’t as good at approximating best sellers but best performers,” in terms of consumers’ goals, CEO David Kooi said. “You’d think if it’s performing better for the people who buy it, they’d buy it more.” Currently pre-revenue, Jointly’s betting some of the data it collects will be valuable to retailers.
To be included, a brand needed at least 30 ratings from 25 different users:
Higher Way Travel’s first Baked on the Beach trip in Hawaii will be August 11-14 in Oahu.
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