LOS ANGELES (AP) – It should be an extraordinary year for weed business person Brian Blatz.
At the point when California comprehensively authorized pot on Jan. 1, the legal counselor with a foundation in managing an account and medicinal services had been laboring for a year to set up a trucking organization that would whisk fragrant weed buds, injected juices and different items from fields and creation plants to store racks.
On its website, Long Beach-based Verdant Distribution said the company’s goal was to be the United States’ pre-eminent business for transporting cannabis.
But it’s all gone. The trucks were sold to cover debt, a warehouse vacated, its license expired.
The choppy rollout of California’s legal market saddled the company with costly delays, but it was undone by an abrupt state rule change that allowed just about any marijuana business to become its own distributor, undercutting the need for stand-alone companies like Verdant.
In California’s emerging market, “the challenges are tremendous,” said Blatz, who is now advising clients in the fledgling industry. “Suddenly, the whole game changes on you.”
In a nation increasingly embracing legal cannabis, California stands out as the country’s biggest pot shop . Top-shelf marijuana, concentrates, balms and munchies are being produced and sold. Some companies are doing well, especially those with deep pockets that can handle the market’s twists and turns.
But many are not. And some, like Blatz’s company, already are casualties.
At year’s end, California’s effort to transform its longstanding illegal and medicinal marijuana markets into a unified, multibillion-dollar industry remains a work in progress. It’s a mix of success stories, struggles and crashes.
The illegal market continues to flourish – by some estimates, up to 80 percent of the sales in the state still are under the table, snatching profits from legal storefronts.
With many communities banning marijuana sales, limiting the number of licenses or simply not creating rules for the legal market to operate, the supply chain is fragile, leaving some shops with sparsely stocked shelves. A battle over home deliveries of pot in communities that have banned marijuana businesses could end up in court.
A promised state tax windfall has yet to arrive, while businesses complain about hefty tax rates that can approach 50 percent in some communities. The number of testing labs remains tight. Meanwhile, shifting rules and start-up costs are taking a toll.
In Los Angeles, where the pace of licensing has lagged, Adam Spiker, who heads an industry group, summed up the condition of most companies with one word, “Pain.”
He says tax rates need to be cut to entice buyers into the legal market, and the city needs to rapidly expand the number of licenses for shops to sell cannabis.
“The encouraging sign, the state is open for business,” said Spiker, executive director of the Southern California Coalition. But “if you have limited access to retail, that’s going to force a lot of companies to fail.”
A year into broad legal sales, “no one has it figured out in California,” he said. “It’s so new, so big, so turbulent.”
As a rule, California treats cannabis like liquor, permitting individuals 21 and more seasoned to legitimately have up to an ounce and grow six pot plants at home.
What’s risen is an interwoven. Pot ranches multiply in Santa Barbara County and lawful pot shops are never far away in San Francisco. Be that as it may, different spots boycott all business pot action, or permit development yet not deals.
The state’s best pot controller, Lori Ajax, said her objective in 2019 will be to get progressively authorized organizations in the commercial center, while expanding implementation against illicit administrators.
One of the lucky ones has been Arizona-based Harvest Health and Recreation, which has activities in twelve states and more than 400 representatives, incorporating into California, and as of late begun exchanging on the Canadian stock trade. Before one year from now’s over, the organization hopes to have no less than 20 retail shops in California, an assembling plant and a statewide dissemination framework.
Organization president Steve Gutterman commended the state’s endeavors to open the lawful market – the buyer is getting quality, safe items. Be that as it may, he said he’d welcome an increasingly forceful push against illicit administrators, and pot organizations require access to saving money – most budgetary foundations won’t work with cannabis organizations since it stays unlawful at the government level.
“There has been good and bad,” he said, but “California is a great place for us.”
That’s not the case for many retail businesses in Los Angeles.
Drive through California’s largest city and there are plenty of shops and billboards advertising pot sales, and some businesses provide Apple store-like settings to pick from buds with names like Blue Dream and Chocolate Gelato.
But the number of shops is part of the problem – hundreds are illegal. Here, and elsewhere, the illicit market that thrived for decades continues to do robust business, often in plain sight.
Police do periodic crackdowns on individual businesses, but it barely makes a dent in the illicit marketplace.
In a letter to Los Angeles officials in November, the United Cannabis Business Association said legal shops are struggling to keep their doors open while illegal storefronts flourish, selling products for as much as 50 percent below legal rivals.
Those illegal shops “do not pay taxes, do not pay the cost of … city and state regulations, and do not follow required worker protections,” wrote the group, which represents legal retailers.
Larger companies can weather the transition to the legal market – some say government rules favor them – but smaller operators are taking out second and third mortgages, industry experts say.
In L.A., “we are seeing a regulated industry that is bleeding out,” said Ruben Honig, the business group’s executive director.