Here Are 3 Things Happening In Cannabis This Week
By Kaitlin Domangue
I’ll just get right on into it with my hot take, y’all. 🔥
I don’t believe we have time to focus on anything besides making more cannabis businesses profitable.
And I don’t think there’s any way to dress that up and make it sound any better.
How can we even be an industry, if we can’t be an industry? Who wants to join a failing space where the average business doesn’t make it?
Why cannabis businesses aren’t making money
The new U.S. Cannabis Conditions Survey Report by Whitney Economics surveyed nearly 400 cannabis operators and found just 42% of respondents are turning a profit. 37% of respondents reported making no money.
16.8% of these respondents hope to still be in business over the next 12 months, with the majority being commercial cultivators.
Almost half (48.6%) are 50/50 on their overall outlook for their business over the next year. Half of the retailers fall under the 50/50 category.
And it’s not hard to see why, when there are limited banking options, next to no access to capital, exorbitant tax rates for businesses and the consumer, and heavy competition from the illicit market – where none of these things exist.
And this is just the U.S. market. In Canada, cannabis businesses are also not profitable, on average, for some of the same reasons.
Licensed cannabis producers (LPs) pay the Canadian federal government $1 for every gram of cannabis sold. $1 for every gram!
This $1 charge doesn’t include provincial taxes and additional fees. Canadian producers also have less freedom than U.S. companies when it comes to branding and marketing, which offers a huge ROI for any business, in any industry.
Canadian producers struggle less with the illicit market overtaking the legal market, more than half of all cannabis purchases in Canada were through legal channels in 2021. Conversely, 75% of the U.S demand for cannabis was supported by the illicit market in 2021, leaving just a quarter of sales to the legal market.
Jumping back to the report by Whitney Economics, the survey found California businesses to be an outlier. This isn’t something anyone near the cannabis space should be shocked about.
Legal California cannabis businesses have been crying out for help for a long time. Their businesses are significantly less profitable than other states.
56.5% of California respondents weren’t turning a profit at the time of this survey.
Where do we start? 🏁
There are clearly a plethora of issues, but we have to start where we can make the most impact. In our opinion, that’s removing tax burdens.
Even before we fight for more accessible bank accounts and lending options. Even before fighting the illicit market.
Thankfully, there’s an active effort underway, once again, to try and pass the SAFE Banking Act. Earlier this week it was announced that Democratic Senator Patty Murray of Washington is leading the charge to include SAFE Banking in another bill.
Removing tax burdens by repealing or amending 280E will immediately free up capital for all American cannabis businesses. American cannabis businesses are hurting for capital when the capital can be provided to them in one step: giving them the capital they’ve generated through their own business operations.
Funny how that works.
Similarly, an amendment to Canada’s cannabis tax policy will alleviate much of the burdens on LPs.
Keep the pressure on lawmakers up, cannabis. 👊 American cannabis businesses, in particular, are living in a modern-day American Revolution. We are being taxed without federal representation – right before our eyes.
Labor unions – the balance we need?
A group of workers at a commercial cannabis cultivation facility in Gresham, Oregon walked off the job on Monday.
The United Food and Commercial Workers (UCFW) Local 555 said the company, CBN Holdings, has been interfering with unionization efforts. UCFW has been organizing medical and recreational cannabis workers in the U.S. since 2011.
The number of cannabis jobs in the United States is quickly surpassing traditional industries. There are currently more legal cannabis industry employees in the United States than there are bank tellers, insurance sales agents, machinists, cosmetologists, and even firefighters.
The industry saw a 161% growth from 2017 to 2021. 📈
But as the industry grows, people join cannabis in hopes of a great career doing something they love. Many times, that’s not how the story goes.
A lot of people are left disappointed after joining cannabis, and going as far as calling the industry and its promises a “wolf in sheep’s clothing.”
Cannabis employees are seeing low wages, poor working conditions, and a lack of benefits. That’s why unions and talks of unionizing are on the rise in cannabis.
New York was one of the first states to pass cannabis union legislation in 2014, which requires entrepreneurs applying for a medical cannabis license to sign a labor peace agreement giving workers the chance to join the Retail, Wholesale, Department Store Union (RWDSU).
The adult cannabis program in New York will also require applicants to enter a “labor peace agreement with a bona fide labor organization actively engaged in representing employees of the cannabis industry.”
Other states followed suit, like California in 2018, and eventually more followed after that.
What I’m thinking 🧠
To be honest, I never really had a formal opinion on labor unions before joining the cannabis industry three years ago, but a part of me didn’t “trust” them – probably just from things I had heard in the past from others who’d been burned.
Now, I am certain there is almost no industry that needs a labor union more than cannabis businesses. There are too many stories of employers not being held accountable for how they’re treating employees.
We surely don’t have the federal government protecting U.S. cannabis companies, and considering thousands of Canadian cannabis industry professionals have left or lost their jobs since 2020 – working conditions up north aren’t much better.
Many cannabis companies are pushing back on employees joining or supporting unions, but some states require cannabis businesses to allow it. Federal law gives employees the right to discuss unionization under certain circumstances, like outside of working hours.
I support all cannabis employees and believe labor unions could provide the checks and balances our industry is currently missing, but acknowledge and encourage industry professionals to remember that not all workers have seen success joining a union.
Medical cannabis shot down in South Carolina – thanks to a technicality
Certain South Carolina lawmakers have been fighting for seven years to legalize medical cannabis in the state. 76% of GOP voters in the state approve of allowing South Carolinians access to regulated, medical cannabis.
S. 150, South Carolina’s Compassionate Care Act, was just shot down in court yesterday.
But it failed due to a tax technicality, after a seven-year battle by Sen. Tom Davis, who championed the legislation through the state legislature.
The bill was ruled unconstitutional, due to the 6% tax attached to medical cannabis purchases. One of the main opponents of the bill argued this creates a new tax, which can only be done under a bill that originates in the House – not the Senate like this bill.
Speaker Pro Tommy Pope considered this point for three hours before declaring it unconstitutional.
“This bill levies taxes in the strictest sense of the word. It is a core ingredient. It established a separate tax to create the whole infrastructure,” Pope said.
House members backed this, with a 59-55 vote. This officially killed the bill for this year’s legislative session. No debates were allowed on its merits.
This bill would have made South Carolina one of the strictest medical cannabis markets in the United States, something Sen. Davis did intentionally.
What can you say, he knows his audience.
But, it still wasn’t enough and lawmakers found a way to turn it down. The bill would not have allowed for smoking and a limited number of qualifying conditions are included. Also, patients would only be able to access cannabis through specific pharmacies, which is entirely different from what the majority of the country does.
What I’m thinking 🧠
It’s asinine to see a bill with seven years of effort behind it fail in the 11th hour because of something so technical.
We could spend all day speculating whether or not this was a deliberate effort by lawmakers to prohibit medical cannabis in South Carolina, but that won’t actually change anything. The writing is on the wall, as far as I’m concerned.
All we can do is encourage South Carolina activists to continue fighting. South Carolina is one of 24 states that do not have initiative and referendum processes for citizens.
Where other states can start a petition, collect signatures, and get their question placed on the ballot – South Carolina residents can’t.
This is a primary reason why the seven-year bill failing to materialize over something so small is such a huge blow – there aren’t many other options for South Carolina to see a medical cannabis program.
The Tax Foundation found South Carolina is leaving a potential $96,680,914 in revenue on the table without legal cannabis.