‘It’s been a rocky road’: Local cannabis industry struggles to take off
The massive buildings on Giffen Avenue in southwest Santa Rosa had been vacant for more than seven years, abandoned one by one and left to skateboarders and drifters who occupied the space where workers once made specialized coatings for spaceship windows and televisions.
Blighted no more, the industrial campus has been transformed into a guarded, indoor farm run by NorCal Cannabis with high-tech irrigation systems delivering cocktails of water and nutrients to marijuana plants in various stages of growth in 10 different rooms.
The company is just getting started. By the end of the year, it will have the capacity to produce 16,000 pounds of marijuana annually worth between $40 million and $50 million, said president Jigar Patel, 41, an Occidental resident and former winemaker. It also will open a processing hub, where it can trim, dry and package marijuana, and a manufacturing line, where it can turn marijuana into food, oils and other products. It plans to expand its retail presence, too, opening a Santa Rosa dispensary to complement its existing delivery service with 100 drivers serving San Francisco.
“For years, we have been waiting to do this,” Patel said of the opportunity to build a marijuana business in the open.
Patel’s trajectory from a West County winemaker, who also grew medical marijuana, to the head of a fledgling cannabis conglomerate is just one part of the story of cannabis legalization in Sonoma County, the gateway to Northern California’s renowned Emerald Triangle marijuana-growing region.
It also is a tale marred by controversy and a sluggish start to legalizing an entrenched and generations-old industry built on activism, black market cash and pioneering chutzpah.
Sonoma County leaders had hoped to bring existing marijuana growers out of the shadows and into a regulated program as a way to root out illegal activity and the violence that follows. But one year after recreational sales of cannabis began in California, the prospect that marijuana’s legalization would fill tax coffers and tamp down the illegal drug market has not yet materialized.
Just Tuesday, deputies responding to what seemed like a run-of-the-mill car crash found themselves investigating the aftermath of a shooting and searching for out-of-state men suspected of double-crossing a local black market pot dealer. At play was about 14 pounds of marijuana law enforcement officials said could be worth between $7,000 and $11,200 in Sonoma County and far more outside the state.
While many business leaders have praised Santa Rosa’s favorable tax rates and fair policies, Sonoma County’s rollout of its cannabis rules has been roundly criticized by pot companies and people worried about marijuana businesses opening nearby.
“It’s been a rocky road,” Sonoma County Supervisor Lynda Hopkins said. “Honestly, any time you do something for the first time you’re going to make mistakes, and we’ve certainly made plenty.”
Pot prices up, sales down
Dispensary customers have seen prices jump - as much as 40 percent in some jurisdictions - depending on local taxes. As a result, they are spending less.
Statewide, cannabis customers spent about $2.5 billion at dispensaries in 2018, far less than expected and about a half-billion fewer dollars than they spent in 2017, according to a January report from leading industry research firm BDS Analytics. To compare, people in Colorado spent $1.2 billion on cannabis last year although the state’s population is one-seventh that of California.
In its review of nationwide legal marijuana markets, the company’s researchers estimated California’s “expensive regulatory regime” has handicapped legal cannabis businesses. On average, marijuana costs 77 percent more at retailers than on the “robust illicit market,” the report said.
That will drive consolidation, which will ultimately decrease the price of legal pot, BDS head analyst Greg Shoenfeld said. And he expects spending will rise as the legal market continues to gain visibility over the familiar yet illicit places where people have acquired marijuana and its products. The key will be for the state to make it harder for the black market to thrive.
“The industry is very, very quickly maturing and with the types of revenue opportunities involved, big business is increasingly pouring into this industry,” Shoenfeld said. “The unfortunate byproduct is the people who have been fighting to decriminalize cannabis for 20 to 30 years, most of them are getting sidelined.”
At one point, about 80 percent of the flowers and other products sold at Mercy Wellness dispensary in Cotati were grown and produced in Sonoma County. Founder Brandon Levine said he’s watched as nearly all of his suppliers - many of them friends - have gone out of business or left the area.