by Dominic Corva, Executive Director

The first day of legal retail cannabis sales in Washington State started at 330 in the morning for me, though I was asleep.  A last minute interview request from CNN had me getting up early, but apparently first thing in their morning they tried calling me to come to the studio 20 minutes earlier.  By the time I woke, they had changed their mind, so after a desperate search for my own car keys I borrowed Dee’s and headed downtown uncaffeinated.

I struggled to make out where exactly the studio was in Fisher Plaza until Alison Holcomb arrived for her earlier, lengthier live interview (much deserved, of course). James Lathrop and his attorney arrived about the same time the coffee did. While I met James a few months ago, I had no idea he was even in the retail lottery, but once his big grin hit the news I called him up to get some inside scoop. Over the next few days I hooked him up with Sean Green’s active production company, which had a pound available. That increased Cannabis City’s initial supply 10%.

After the CNN “interview” (it was two softball questions and over before I knew it), CASP GIS consultant and videographer Steve Hyde picked me up to check out Cannabis City’s opening act. The space in front of the building was thick with media crews and equipment, VIPs and staff while the line stretched around the block. The entrance to Cannabis City was covered in bright yellow police tape advertising the impossible, today: DO NOT CROSS.

 

 

 

Viv McPeak and Kanti Selig were there, beaming. Hempfest’s Sharon Whitson reminded the crowd that people were still going to prison for marijuana and that we need to not forget about them; Alison H was there, and gave a nice ribbon-cutting speech that reminded everyone that the best reason for doing this was de-incarceration; and Pete Holmes was there, boldly announcing his intention to exercise his freedom and imagining a drug war-free future. Patient advocates held up signs and educated folks about current medical cannabis trials.

 

Finally James addressed the crowd with enthusiasm and grabbed some big-ass scissors. The Police Line: Do Not Cross tape met its fate, with some help from Alison Holcomb.

 

Once the doors were open the real wait began, as one by one people entered to by legal cannabis. A grandmother named Deb walked out first, with each two-gram package in its own paper bag. Deb first consumed cannabis in 1977, and was an occasional enthusiast until her company adopted drug testing policies. Once she retired, one of the first things she did off her “bucket list” was enjoy a joint with friends.  She never went medical, though, and the last time she bought cannabis was six months ago.  Recently, her dealer saw her on the news and rang her to say “So that’s why you haven’t called me!”  She was a little concerned that her conservative daughter might not respond so well to her historic role, so I wished her the best as we ended our chat. The first legal cannabis customer couldn’t have been designed better to change perceptions about cannabis consumers.

 

At that point it became a sort of block party — Magical Butter personnel in Seahawks-flourescent-green seemed to be singing, dancing, handing out water and doing line control, music leaking from a soundbox stashed somehere in one of their little MB wagons. Pete Holmes came out with 2 grams and announced to cameras that he was preserving one for posterity, and enjoying the other one in private, himself. Pete, please be more social with your cannabis consumption. I have people who would love to help with that.

 

 

After mingling for a bit, Steve and I went to Lake City to check out the scene at the Amsterdam Exchange Farmer’s Market to catch a snapshot of gray market prices on the day of retail legalization. So here it is:

 

I think those prices will be approached in November 2015, when the first full round of Tier 3 outdoor and greenhouse production comes in.

by Dominic Corva, Executive Director

On July 1, 2014, the Liquor Control Board updated their master applicant for producers and processors.  This post is our first analysis of legal landscape production in Washington State.

62 Producers licenses are listed as “Active,” out of 2654 total.  Of that total, another 13 license applications have been withdrawn. This translates into about 2% of the applicant pool that is currently producing cannabis for retail shops that open early next week.

This seems like a pretty low number after more than six months, and some of that can be attributed to WSLCB’s chronic under staffing issues.  Several other things should be in the readers’ minds for context.  First, a significant number of producer applicants came from folks who were in weak position to capitalize on a license should they get it, whether from inexperience, incompetence, regulatory curveballs, under capitalization, and plain old bad luck.  This was evident from my interview with I-5 Realty owner Tom Gordon, who estimated that between 5-15% of total applicants would be active when the one year anniversary of the process occurs in November, due to their own issues.  It also jibes with WSLCB staffer Becky Smith told me  two months ago, that much of the hold-up was due to applicant issues rather than the agency’s human capital restraints.

Nonetheless, it is significant enough for the Center for the Study of Cannabis and Social Policy to begin mapping the landscape.  This begins with a basic step, the mapping of all 62 locations.  While we used publicly available WSLCB data on applicant addresses, we have chosen not to list those out of concern for processor safety.  The overall picture reveals that 548,800 square feet of canopy are “active” across the state.  Remember, this time last year the WSLCB expected to license 2 million square feet of canopy for I-502, total.  We are now a quarter of the way to that destination, and while that guideline has been bent and now broken, it’s something to keep in mind when people speculate about legal cannabis “shortages” and for how long.

The next thing to discern from the data are how big each processor is, by Tier, because this makes a huge difference between nominal market share and actual market share.  Tier 1 producers constitute 27% of approved licenses, Tier 2 48%, and Tier 3 24%.  By share of maximum nominal canopy licensed, however, the maximum square footage for Tier 1 producers is 5%; Tier 2 38%; and Tier 3 a whopping 57%.  These are nominal canopy numbers because effective canopy licensed depends strongly on whether folks are growing indoor or not indoor: indoor producers can max out at 5 canopy cycles per year while full sun outdoor producers can get 3 — and two of those are light dep cycles.

Once we have the Tier breakdown, we can estimate (a) total approved effective canopy production and (b) market share per Tier Operation.  This gives us a sense of projected Tier market shares, since we have a 62 sample data set.  As a rule of thumb, all Tier 1 licenses can be assumed to be indoor production while all currently approved Tier 3 licenses can be assumed to be not indoor, because no Tier 3s have been licensed in King County, where large warehouse production is most likely.  At the same time, outdoor Tier 3 production does not have the capacity to rush growth on order to get to market like indoor canopy does.  Most Tier 3s are probably doing light deps for early harvests, but the lion’s share of their production will be harvested in October.  So, 57% percent of currently active canopy is highly unlikely to produce their maximum canopy till October, which skews the actual, existing production in favor of indoor, smaller producers and outdoor Tier 3s with hybrid greenhouses.

All signs point towards major windfalls for this cohort of active legal producers.  I’ve received reports of bids for wholesale pounds that range from $3000/lb to $7000/lb, which is about where black market prices were in the late 1980s till mid -2000s.  The $7000 bid is probably anomalous and would represent the highest price I’ve ever heard someone willing to pay for a pound of wholesale flower.  Most of the wholesale pound range will probably by between $4000-5000/lb, although folks with producer processor licenses will be able to capture more of that windfall than those with just producer licences given the extra tax step — but those producer/processors now have to contend with selling those pounds in packaged increments: one gram, two grams, and eighth (about 3.5 grams) and a quarter ounce.  That’s a lot of extra work and they are probably paying people to do it.

How does that work out per gram, if retailers sell pre-tax at between $15-$25/gram?   The $4000-$5000/lb wholesale works out to $9 and $11/gram that the producer gets — add $2.50 for the retail excise tax margin and current estimates then work out to a margin of between $2.50-$12.5/gram for retailers*.  The low end is not much, and perhaps there are more wholesale pounds going at under $4000/lb than I am aware.  It will be interesting to see whether the legal market follows the illegal and medical tendency for each step in the chain to add about 20%, but that’s about what it shapes up to be with these calculations.

This has been our first analysis of active legal cannabis production landscapes  in Washington State.  We will be updating these each time the WSLCB releases new data.

*This calculation has been revised and clarified.  Special thanks to CASP ally and accounting consultant, Todd Arkley CPA.

 

Dr. Sexton’s complementary piece to Dr. Corva’s post in the Ganjier.  Enjoy!

 

by Dominic Corva, Executive Director

Yesterday at a CNN Town Hall meeting, likely 2016 Democratic nominee for Prez Hillary Clinton reiterated a ubiquitous political standpoint on “legal” aka “recreational” cannabis:  Washington and Colorado are political geography experiments:

“”On recreational, you know, states are the laboratories of democracy,” Clinton said. “We have at least two states that are experimenting with that right now. I want to wait and see what the evidence is.””

I’ll take that as an endorsement of CASP’s raison d’etre, learning lessons for legal landscapes.  We are lab techs of democracy.  Do I have any graphic designers out there that want to make that T shirt?

*The discourse of states as laboratories of democracy is a metaphor for Federalism and comes from Supreme Court Justice Louis Brandeis in New State Ice Co. v Liebmann (1932).