Strategic Planning

Our strategic planning process is underway. Initial survey results indicate the following priorities:

  1. Protections for small businesses: 7.02
  2. Cultivation licenses: 7
  3. Taxes: 6.36
  4. Sustainability and Environmental Protection: 6.36
  5. Distribution: 5.46
  6. New license types: 5.12
  7. Cooperative ownership: 5.08
  8. Equity and Diversity of Ownership: 4.88
  9. Track and Trace: 4.37
  10. Vertical Integration: 4.2

The number following the topic is the weighted value of priority. Scores are on a 1-10 scale, with 1 being high priority and 10 being low priority. There are 3 basic affinity groups: 6 and above = high priority; 5 to 6 = medium priority; 5 and below = low priority.

Protections for Small Businesses

Protections for small businesses is the most important priority for 2017. This includes, in ranked order:

  1. Limits on the size of cultivation: 3.22
  2. Vertical integration only for specialty and small cultivators: 2.53
  3. No vertical integration: 2.48
  4. Limits on the number of retail locations per licensee: 2.37

Scores indicate priority on a scale of 1 to 4.

To summarize: protecting small businesses ensure that opportunity is available to all.

Cultivation Licenses

Our members feel that limits on cultivation are appropriate to prevent a race to the bottom and ensure continued diversity of independent producers, varietals and to ensure a quality over quantity marketplace. Generally, our members think that a limit at 1 acre (cumulative total per owner) is an appropriate limit. This will ensure that all farmers can include cannabis as a part of their diversified crop portfolio. Additionally, many members pointed out that small farms tend to treat workers better and pay better wages. Finally, limiting the scale of cultivation will ensure ample turnover in ownership, ensuring sustained opportunity for entrepreneurialism and new owner-operators.

Responses indicate a lack of clarity about “indoor,” “outdoor,” and “mixed light.” Of those who responded, 22 percent would organize the license types by harvest cycles rather than light source; 37 prefer light source, while 41 percent are undecided.

State law mandates that there will be a limit on the number of Type 3 licenses issued. 27 percent of our members think think no Type 3 licenses should be issued in 2018; 13 percent think there should be less than 250; 13 percent think there should be between 250 and 500; 7 percent think there should be more than 500, while 40 percent think there should be unlimited Type 3 licenses. There is a breaking point 500 licenses; 53 percent favor less and 47 percent favor more.

Many (30 percent) indicate that there is no need to limit type 3 licenses at the state level, as local permits will be limitation enough. 8 percent prefer regional allocation, 5 percent prefer a first come first serve basis, while 4 percent prefer a lottery.

Taxes

Our membership has mixed perspectives on taxes:

-       8 percent do not think there should be any taxes on cannabis

-       55 percent support taxes on adult use but not medical

-       27 percent support taxes on all cannabis

In addition, members expressed that:

-       There should be reduced rates, exemptions and incentives for small businesses

-       Taxes should be imposed on corporate businesses, but not family businesses

About 10 percent supported AB 2243 and 4 percent supported SB 987.

In addition to the rate and structure of the tax we also asked for input regarding the appropriations of tax revenue:

  1. Schools
  2. Environmental restoration
  3. Public health
  4. Roads
  5. Environmental enforcement
  6. Law enforcement

In addition, members expressed interest in research and public awareness about cannabis, the general fund as well as job training and economic development in communities that will be impacted by the transition to regulation.

Taxes are sure to remain an important component of the cannabis policy conversation. Our strategy will depend on the outcome of Proposition 64. Please review the taxes section of the legislative affairs update for more information about our principles and priorities. Given the 2/3 majority required to pass a tax, it is likely that this is an area of policy where we will need to make significant compromises. We will be mindful of our members priorities but must be prepared to be mindful of other stakeholders perspective as well if we are to remain relevant in this conversation.

Sustainability and Environmental Protection

Our members are most concerned with the following impacts:

  1. Pesticides and poisons: 3.43
  2. Water supply and diversion: 3.32
  3. Water Quality and runoff: 3.24
  4. Fertilizer and nutrients: 2.5
  5. Energy conservation: 2.49

Scores indicate priority on a scale of 1 to 5.

There are several strategies to prevent environmental impacts. In ranked order, these include:

  1. Best management practices: 4.18
  2. Market development and consumer awareness: 3.54
  3. Enforcement: 3.00
  4. CEQA litigation: 2.37
  5. Bans: 1.90

Scores indicate priority on a scale of 1 to 5.

Distribution

Despite the level of controversy and media attention received by distribution it is a medium priority from our member’s perspective. Additionally, our members do not prefer a complete removal of the mandatory distribution model. Rather, our members support more nuanced refinements to the model. This is consistent with our strategy to date.

Priority refinements to the distribution model include:

  1. Voluntary distribution for Type 1 and Type 2: 6.95
  2. Direct Sales: On site sales for Type 1 and 2: 6.81
  3. Cooperative distribution: 6.22
  4. Direct Sales: Growers Markets: 6.2
  5. Direct Sales: Onsite sales for all cultivators: 5.94
  6. Voluntary distribution for all cultivators: 5.9
  7. Consumer Direct ship: 5.55
  8. Community Support Agriculture: 5.15
  9. Completely voluntary distribution: 4.92
  10. Auction House: 3.98

The number following the topic is the weighted value of priority. There are 3 basic affinity groups: 6 and above = high priority; 5 to 6 = medium priority; 5 and below = low priority.

In addition to the above listed refinements, we are also working with several members to explore options for “in-house” distribution to ensure that industry leaders that have developed this capacity are able to transition with as little disruption as possible.

Distribution remains a very important compromise of the regulatory framework; our work on this topic will be constrained by our coalition partners, including law enforcement, local government and labor. We continue to maintain ongoing dialog with stakeholders in each of these three areas.

New license types

Establishing new license types is a medium priority for our membership. The priority licenses are:

  1. Type 1C: Cottage Cultivation: 4.08
  2. Type 10C: Special Dispensary: Onsite sales: 3.22
  3. Type 10B: Special Dispensary: Delivery: 3.06
  4. Type 10D: Special Dispensary: Temporary and event sales: 2.89
  5. Type 6A: Food-makers license: 2.51

In addition to these licenses members also indicated and interest in the following:

  1. Nursery license specific for seed breeders
  2. Micro extractor
  3. Special licensing option for family farms and corporate farms
  4. Compliance consultant (Certified Regulatory Program)

New licenses are unlikely to be created prior to 2018. The regulatory agencies have their hands full with the initial legislative mandate. The regulatory agencies have the authority to create new license types. Working with the regulatory agencies to illustrate a need for a new license type is the most likely path forward. A distinction must be made between “omitted license” and “next step licenses.” Delivery was omitted from the framework; onsite sales is a next step and requires political deliberation.

After the cottage cultivation license, there are two affinity groups: between 3 and 4 and below 3. Delivery will remain the highest priority new license type to establish; see the discussion in the legislative affairs section of this report for more information.

Cooperative ownership

Generally, our members view cooperative ownership as an important option for achieving efficiencies without forcing independent businesses and workers to bear the cost. Our members rank the following types of coops in the following order of priority:

  1. Agricultural cooperative
  2. SB 420 “collective”
  3. Consumer cooperative
  4. Workers cooperative

We have been working on agricultural cooperatives since late 2014 and expect progress on this in the legislature in 2017. We are exploring options to add consumer and worker cooperatives to this campaign. Providing legal structure for the “collective” could be a very challenging and controversial process, but may provide significant benefit to patients, particularly those with low to no income.

Equity and Diversity of Ownership

Our membership feels that a diversity of ownership is critical to ensure communities impacted by prohibition are able to heal and transition. We would like to a see a business community that reflects California’s population. Many indicated this would have been a higher priority, except that protections for small businesses and low barriers to entry is a more effective way of ensuring everyone can participate. There is interest, especially at the local level, in developing and advancing equity programs similar to the program developed in Oakland. We will continue to work equity goals and principles into all of our work, and continue to prioritize small businesses with low barriers to entry. Particular attention must be paid to ensure historic cannabis convictions do not limit participation in the regulated marketplace.

Track and Trace

Less than 10 percent of our members currently use a track and trace solution. However, it is not a high priority. Generally speaking, comments indicate that a streamlined solution is better; specific concerns identified were:

-       Software that works of the grid

-       Batch and lot not plant count

Many indicate that they will have more opinion on this after they have experienced track and trace. This is consistent with the outcomes of our advocacy in 2016. We expect this to be a major focus of our work in 2020.

Vertical Integration

Vertical integration is the lowest priority to our membership. Of those who responded 19 percent think vertical integration should be allowed; 69 percent think that only Type 1 and 2 licensees should be allowed to vertically integrate; 8 percent think that no vertical integration should be allowed, while 5 percent feel that current restrictions are appropriate. 


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