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BUSINESS Monday 31 deceMber 2018
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Year 1 a mixed bag for businesses in California's pot market

By MICHAEL R. BLOOD ing plant and a statewide
LOS ANGELES (AP) — It was distribution system.
supposed to be a great Company president Steve
year for marijuana entre- Gutterman praised the
preneur Brian Blatz. state's efforts to open the
When California broadly legal market — the con-
legalized pot on Jan. 1, the sumer is getting quality,
lawyer with a background safe products. But he said
in banking and health care he'd welcome a more ag-
had been working for a gressive push against illegal
year to set up a trucking operators, and pot compa-
company that would whisk nies need access to bank-
fragrant marijuana buds, ing — most financial institu-
infused juices and other tions won't do business with
products from fields and cannabis companies be-
production plants to store cause it remains illegal at
shelves. the federal level.
On its website, Long Beach- "There has been good and
based Verdant Distribution bad," he said, but "Califor-
said the company's goal nia is a great place for us."
was to be the United States' That's not the case for
pre-eminent business for many retail businesses in
transporting cannabis. In this Monday, Jan. 1, 2018 file photo, a customer purchases marijuana at the Harborside mari- Los Angeles.
But it's all gone. The trucks juana dispensary in Oakland, Calif., on the first day that recreational marijuana was sold legally Drive through California's
were sold to cover debt, a in California. largest city and there are
warehouse vacated, its li- Associated Press plenty of shops and bill-
cense expired. boards advertising pot
The choppy rollout of Cali- At year's end, California's proach 50 percent in some cannabis like alcohol, al- sales, and some businesses
fornia's legal market sad- effort to transform its long- communities. The number lowing people 21 and older provide Apple store-like
dled the company with standing illegal and medic- of testing labs remains tight. to legally possess up to an settings to pick from buds
costly delays, but it was inal marijuana markets into Meanwhile, shifting rules ounce and grow six mari- with names like Blue Dream
undone by an abrupt state a unified, multibillion-dollar and start-up costs are tak- juana plants at home. and Chocolate Gelato.
rule change that allowed industry remains a work in ing a toll. What's emerged is a patch- But the number of shops is
just about any marijuana progress. It's a mix of suc- In Los Angeles, where work. Marijuana farms pro- part of the problem — hun-
business to become its own cess stories, struggles and the pace of licensing has liferate in Santa Barbara dreds are illegal. Here, and
distributor, undercutting crashes. lagged, Adam Spiker, who County and legal pot elsewhere, the illicit market
the need for stand-alone The illegal market contin- heads an industry group, shops are never far away that thrived for decades
companies like Verdant. ues to flourish — by some summed up the condition in San Francisco. But other continues to do robust busi-
In California's emerging estimates, up to 80 percent of most companies with places ban all commercial ness, often in plain sight.
market, "the challenges of the sales in the state one word, "Pain." marijuana activity, or allow Police do periodic crack-
are tremendous," said Blatz, still are under the table, He says tax rates need to cultivation but not sales. downs on individual busi-
who is now advising clients snatching profits from legal be cut to entice buyers The state's top pot regu- nesses, but it barely makes
in the fledgling industry. storefronts. into the legal market, and lator, Lori Ajax, said her a dent in the illicit market-
"Suddenly, the whole game With many communities the city needs to rapidly goal in 2019 will be to get place.
changes on you." banning marijuana sales, expand the number of li- more licensed businesses In a letter to Los Angeles
In a nation increasingly limiting the number of li- censes for shops to sell can- in the marketplace, while officials in November, the
embracing legal canna- censes or simply not creat- nabis. increasing enforcement United Cannabis Business
bis, California stands out ing rules for the legal mar- "The encouraging sign, the against illegal operators. Association said legal shops
as the country's biggest ket to operate, the supply state is open for business," One of the fortunate ones are struggling to keep their
pot shop . Top-shelf mari- chain is fragile, leaving said Spiker, executive di- has been Arizona-based doors open while illegal
juana, concentrates, balms some shops with sparsely rector of the Southern Cali- Harvest Health & Recre- storefronts flourish, selling
and munchies are being stocked shelves. A battle fornia Coalition. But "if you ation, which has operations products for as much as 50
produced and sold. Some over home deliveries of have limited access to re- in a dozen states and over percent below legal rivals.
companies are doing well, pot in communities that tail, that's going to force a 400 employees, including Those illegal shops "do not
especially those with deep have banned marijuana lot of companies to fail." in California, and recently pay taxes, do not pay the
pockets that can handle businesses could end up in A year into broad legal started trading on the Ca- cost of ... city and state
the market's twists and court. sales, "no one has it figured nadian stock exchange. By regulations, and do not
turns. A promised state tax wind- out in California," he said. the end of next year, the follow required worker pro-
But many are not. And fall has yet to arrive, while "It's so new, so big, so turbu- company expects to have tections," wrote the group,
some, like Blatz's company, businesses complain about lent." at least 20 retail shops in which represents legal
already are casualties. hefty tax rates that can ap- In general, California treats California, a manufactur- retailers.q