02.09.2017
policy

What's At Stake In The Fight Over Who Distributes Cannabis In California

And why the Teamsters look like they'll win no matter what happens.

“I was born into this. I’ve been a grower all of my life,” Hezekiah Allen, executive director of the California Growers Association tells KINDLAND over the phone on a rainy Friday afternoon. The marijuana farmer, whose family has been growing cannabis for more than 40 years, founded the CGA, he says, to protect his way of life, and to give California’s cultivators a voice in how marijuana legislation is shaped in the Golden State. 

Until 2015’s Medical Marijuana Regulation and Safety Act (MMRSA) came into play, the California weed market was basically the wild west, and saw little regulatory oversight in the two decades since voters said yes to the Compassionate Use Act, or Proposition 215, California’s medical marijuana law. After MMHRSA was added to the books in 2015, lawmakers were given until January 1, 2018, to come up with a solid regulatory framework. And when California voters passed Proposition 64 in November of last year, essentially legalizing recreational adult-use, the California weed world grew only more complicated.

Anyone can apply for as many licenses—to grow, to produce, to retail—as they choose to under Proposition 64.

Prop 64, or the Adult Use of Marijuana Act, presents retail weed sales governed by regulations similar to alcohol. Prop 64 wording allows cannabis growers and manufacturers to distribute their own products to retailers, and for some producers, directly to the consumer. Anyone can apply for as many licenses—to grow, to produce, to retail—as they choose to under Proposition 64.

However, as it developed since its initial 1996 passing, Prop 215 required the use of third-party distributors. Now lawmakers are challenged with merging the two sets of weed rules into a singular regulatory structure.

“This is a complex issue,” Christian Sederberg, founding partner of Denver, Colorado-based national cannabis law firm Vicente Sederberg, said to KINDLAND. “There are a number of differences between Prop 64, and Prop 215.”

Current media reports suggest the Teamsters labor union is pushing for a distributor monopoly on recreational weed, similar to the third-party alcohol-distribution model that has worked out so well in the Teamsters' favor. The United Food and Commercial Workers Union (UCFW) has come out in opposition of the Teamsters.

“The conversation we’re having now is: Should licensees be allowed to hold their own distribution license? A lot of people in the industry say yes,” Hezekiah Allen of the California Growers Association tells KINDLAND. “Our membership is pretty split on that. Prop 64 doesn’t just make it so any licensee can distribute their product. You’d still have to get a distribution license, which could [cost] a lot for a small-business owner.” A portion of the GCA’s membership is worried the mandatory license would, “essentially create a competitive advantage for well-capitalized businesses,” and potentially lead to a corporate takeover of the California weed world.

“Right now the Teamsters have a different vision for this industry than UFCW, in terms of how it’s structured,” Jim Araby, executive director of UFCW Western States Council told the Sacramento Bee. “We feel the voters have spoken under 64, which did not mandate a neutral third-party distributor.”

Image via VSCO

Allen, though, describes the union as helpful “experts brought to the table,” familiar with the alcohol-distribution model. The GCA is part of a coalition with the Teamsters, that also includes law enforcement and lawmakers from various state municipalities.

“I wouldn’t be surprised to see the [distributor] license costing in the tens of thousands of dollars,” Allen speculates to KINDLAND, noting that farmers also will be burdened by a cultivation tax once Prop 64 takes full effect, which will have producers paying a 15 percent tax on any cannabis goods produced.

Allen says the cultivation tax will be disastrous for some farmers. 

As reported by the Sacramento Bee, Sen. Mike McGuire, D-Healdsburg, who represents constituents in the Emerald Triangle of Mendocino, Trinity, Humboldt, and Lake counties, “envisions a regulated market in which local farmers in his district become the craft brewers of the marijuana industry,” potentially vulnerable to being, “pushed out of the market if corporations can move in and control the supply chain from seed to store.”

Allen notes, however, that, “There’s no way to become Anheuser-Busch or Coors, because there is a limit on the scale of production.” MMRSA limits growing capacity to one acre. And Prop 64 also establishes a micro-business license for cultivators growing in less than 10,000 square feet, which appeases some of the state’s “mom-and-pop,” artisanal growers, by allowing such businesses to self-distribute their products.

“The only people that matter, in this entire equation, are the growers, the consumers, and the state’s medical marijuana patients. Everyone else is just in the way, or trying to get a piece.”  

Benny [last name withheld], founder of Benny’s Farm, a collective and delivery service based in Los Angeles that he says uses environmentally friendly cultivation methods, and focuses on providing its members with only high-end, artisanal cannabis products, tells KINDLAND: “The only people that matter, in this entire equation, are the growers, the consumers, and the state’s medical marijuana patients. Everyone else is just in the way, or trying to get a piece.”  

A self-admitted capitalist, Benny joined the marijuana industry after working for years as a photojournalist. He believes cannabis education for consumers, and everyone else, is especially important at this crux in weed history. He launched Benny's Farm in 2016 after working with a San Diego-based collective attempting to adopt a franchise model and expand to Los Angeles. 

“A big distribution company that already has networks and logistics figured out, can add value [for producers and manufacturers],” Benny tells KINDLAND. “But [a distribution model that enables monopolies] is a big problem.”

Benny sees the monopoly scenario resulting in a higher cost at the consumer end of the supply chain, and is weary of solely mercenary parties that previously had nothing to do with legalization efforts, potentially degrading Golden State cannabis.

Image via Flickr

“Nobody voted for [mandatory third-party] distributors,” he said. “Overall, I don’t see that model being conducive for artisanal producers.”

For clarity, Allen insists to KINDLAND that the GCA doesn’t have a formal position on independent third-party distribution as a standalone policy, and is looking into more ways to secure a self-distributing future for the state’s small-scale farmers. 

"I love the fact that local law enforcement is ready to stand shoulder-to-shoulder with us in defense of that regulatory framework," Allen tells KINDLAND. "This gives us confidence that California is willing to defend our marketplace."

But Sederberg says what is more important than supporting or opposing a third-party distribution tier––which as a singular license, would give holders immense leverage in negotiating high rates to producers and retailers alike––is distilling the potential value from both sides of the argument.

“For purposes of tax collection, having a third-party distributor makes for more clarity and efficiency,” Sederberg says. “In Colorado, producers can transport product with a third-party, but it is not mandated. If there are ways to address this value, instead of focusing on why each side of the argument holds its position,” is where compromise will be found.

Teamsters legislative director Barry Broad had not responded to a request for comment at post time. KINDLAND will update if Broad replies. 

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