Marijuana goes mainstream
In Oregon, the legal marijuana industry has joined the establishment.
On Wednesday, Oct. 16, the Portland Business Alliance held its second breakfast forum in five years on the future of the industry. The first was held shortly after voters legalized recreational marijuana and the laws governing it were still being written, creating considerable uncertainty about its potential. But the forum was all about business, including how the industry is similar and different from other businesses.
Oregon voters legalized recreational marijuana in 2014, and the regulations were finalized in 2015. Since then, one report has found that by 2017, it was contributing more than $1 billion to the state economy. Recreational marijuana sales totaled $625.4 million between July 2018 and August 2019, generating $106.3 million in state taxes. Today, the industry is officially estimated to employ up to 15,000 workers, a number that increases substantially during the harvest season.
As discussed by a panel of experts, since legal sales began, the industry has already experienced the swings that characterized the nationwide liquor industry after the end of prohibition. Many of the new businesses were small and boomed until overproduction caused prices to fall, prompting a wave of consolidations that is still ongoing. That is benefiting those small owners who want to sell, but it is forcing others to get creative and brand themselves to survive.
"The cannabis industry has evolved like the alcohol industry in just a few short years," said Matt Maletis, a commissioner with the Oregon Liquor Control Commission, which is charged with regulating the industry.
Other panelists said the similarities with existing businesses were striking. Hunter Neubauer, the co-founder of Oregrown, Inc., described his company as a "vertically integrated," meaning it is involved in all aspects of the industry, from cultivation to processing to retail sales. The term was familiar to most of the business people at the downtown Hilton Hotel. And Amy Margolis, a Portland attorney specializing in the industry, complained about the lack of venture capital for women owners.
"Women owners are only receiving 2% of venture capital, and the percentage for women of color is just .2%," said Margolis, reflecting a common lament of women in all businesses.
But the panelists noted remarkable differences as well. Neubauer noted that legal marijuana sales and distribution in Oregon could only be conducted within the state, creating what he called a "market in a box." The same is true of the other 10 states that have legalized recreational marijuana. Neubauer said eliminating such restrictions and allowing interstate commerce would enable the industry to grow even faster.
Because the federal government still considers marijuana an illegal drug, banks will not offer services to the businesses. This has created what Margolis called a forced-cash-only business that endangers public safety by encouraging robberies and the involvement of organized crime.
"How many of you have sat in a bank parking lot and counted out $50,000 in cash?" asked Neubauer? No hands went up in the audience. The U.S. House of Representatives recently passed a bill allowing banks to serve marijuana-related business, but it has not yet passed the U.S. Senate.
Mason Walker, the CEO of East Fork Cultivars, told the audience that he was a defendant in a federal racketeering lawsuit, probably a first for the PBA, which is also the region's Chamber of Commerce. The suit is civil, not criminal, and was filed by a non-marijuana business owner who claims he was economically harmed by a marijuana business located next door that only marginally did business with Walker's company. Although Walker claimed the suit is "frivolous," the judge hearing it dismissed a motion to dismiss it, however.
The industry is also dealing with the recent concerns over serious and even fatal illnesses related to vaping. Hundreds of people have been sickened and a few have died across the country consuming marijuana-related and other products in electric cigarettes. Oregon Gov. Kate Brown has cracked down by banning the sale of flavored vaping products regulated by the OLCC for six months and appointing a task force to study the situation and make further recommendations.
Although the ban is hurting sales of some marijuana-related products, the panelists were all supportive. Walker, whose company is being hit the hardest, said he does not believe the marijuana in the vaping products is causing the illnesses, but that more study is urgently needed because of the undeniable harmful health effects.
"We're very concerned about the situation, but we're focused right now on harm reduction," said Walker, adding that a complete ban would prompt many users to buy products on the black market, which has no regulations.
The panelists also called for more study and regulation of CBD, a marijuana-related product that does not contain THC, the intoxicant that gets people high. Although Walker said CBD has health benefits, he lamented what he called the current "fad" about it that is supporting the sale of "snake oil" versions that do not meet any standards. He and Margolis called for the Federal Drug Administration to research and regulate CBD to make it more legitimate product
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