In part two of covering the legal marijuana industry, host Megan Calcote highlights tips from Ricardo Baca and Kevin Dale that were presented during Reynolds Week 2016. Their discussion provides insights on seasonal sales trends, including the impact of tourism and the black market on the cannabis business in Colorado, and the complexities of an industry that is local at the state level but illegal federally.
Baca is the editor of The Denver Post’s website The Cannabist and Dale is the executive editor of Arizona PBS’s Cronkite News, who also directed pot coverage as a top editor at the Post.
More information regarding the lawsuits discussed during the podcast can be found at the links below:
- Fourth Corner intensifies its fight to be first marijuana credit union
- Judge tosses Denver marijuana credit union’s suit for federal approval
This is part 2 of a three-part series. Be sure to check out part 1 and part 3 if you missed them after this.
Transcript
[Intro music]
Megan Calcote: How to Cover Money: The business of the marijuana industry,
Kevin Dale: And so all this cash flying around is brings up the story about banking, which is probably one of the most serious issues in the industry.
Calcote: Hello and welcome to the Reynolds Center podcast. We are coming to you from the Donald W. Reynolds National Center for Business Journalism based at the Walter Cronkite School of Journalism and Mass Communication at Arizona State University. I’m Megan Calcote, host of the How to Cover Money podcast. Today, we continue our discussion on the business of the marijuana industry with insights from Ricardo Baca, editor of The Denver Post website, The Cannabist and Kevin Dale, executive editor of Arizona PBS’s Cronkite News. Dale also directed pot coverage as top editor at the post. Baca and Dale shared their experiences covering the legal pot industry at Reynolds Week 2016. Colorado legalized cannabis for recreational use in January of 2014. In the two years since its legalization, Dale and Baca have been able to track and identify seasonal sales trends.
Ricardo Baca: We’re always the first to write about these sales every month that they’re released by the Department of Revenue, because we know that they tell a very important story overall. And as Kevin mentioned, the sales and taxes in 2014 were significantly less than in 2015 and that’s makes sense when the shops first opened January 1, 2014, we have 35 shops statewide, and now we have more than 300. Then also you have this giant peak in August of 2015 which is a result of four months of regular growth. And then you see it falling off. And what we’re starting to see, honestly, this is tied to tourism. So when you do have high tourism, and people coming to Colorado to go mountain biking and to see the leaves change in the national parks, or conversely, in the winter, hit the pow up in Summit County, in Eagle County, you see these sales spike. Tourists are coming. They’re paying money for recreational weed. They don’t have access to the cheaper medical stuff. And it is fascinating to see that.
Calcote: Identifying these trends has given Baca and Dale the opportunity to identify industries that play a big part in marijuana sales. Another unique aspect of the Colorado market is personal marijuana harvesting. As you’re about to hear, the fact that it’s legal for citizens to grow their own pot has an annual effect on the market.
Baca: You also have harvests of legal and illegal cannabis in Colorado. You can grow, as I mentioned earlier, so when you’re cultivating that marijuana. And a lot of people cultivate and ultimately harvest in the fall, October, you’re not buying at the shops, because you have your own personal supply. The argument has also been made that because there’s still such massive amounts of black market marijuana coming out of Northern California and Oregon, that as that moves east from those states, then you’re starting to see more people say, “Oh, well, I can get this for half the price of in the retail store.” So they do that, and the sales numbers plummet. And there’s kind of in between seasons.
Calcote: Beyond the complexities of tracking and reporting sales. Legalizing marijuana has caused some complicated banking issues.
Dale: And so all this cash flying around is brings up the story about banking, which is probably one of the most serious issues in the industry. So Dave Mcgoya, he was our investigative reporter in business, and he was our banking writer and he was an expert on banks. And he started to learn about marijuana. What this helped him do is to break stories, because people in the marijuana industry would call Dave about issues in banking because they knew he was an expert. You know, no offense to Ricardo, but he’s not an expert in banking. So understanding the issues around the battle with the Federal Reserve and banking and all this cash literally being driven around Denver in trunks. You know, was just a interesting and ongoing part of the story.
Baca: There’s a Colorado credit union that’s attempting to operate to serve the marijuana industry. They got their charter, but they couldn’t get their license from the Federal Reserve. They sued the Federal Reserve, as well as the National Credit Union Association, the NCUA. And there was just the first hearing on that last week, I think a week ago today. And ultimately, the U.S. District Court judge in Colorado kind of came out and said, heard the opening arguments, and said he will make a ruling this month. And everybody kind of got the impression that he is going to have a very hard time to force the Federal Reserve to issue this license to a federally illegal company, and so we’re not expecting much movement on that issue.
Calcote: A few days after this presentation, the district judge hearing the court case dismissed the lawsuit. In his opinion, he stated that permitting the bank to serve businesses selling marijuana would facilitate criminal activity, the credit union in question has since appealed a lower court ruling. We’ll provide links to the stories covering these cases in the post for this episode, so make sure to visit businessjournalism.org if you want to dig deeper into these ongoing lawsuits. These court cases highlight the difficulty states face when dealing with a substance that is considered illegal on a federal level.
Dale: Sometimes you’re looking at a barrier that’s a state versus city battle, but more often than not, you’re looking at a state versus federal battle, which is exists on every platform of this super complex issue. And it just screws everything up. When we’re talking about the FDIC and the FDA and the USDA and the IRS, is a very, very big one, because currently legal, marijuana businesses are taxed in a way like no other businesses, primarily because of some old anti-mob laws.
Calcote: The inability to conduct business with banks has led to another issue for marijuana businesses.
Dale: Basically, the government of Colorado is freaking out because you ultimately have people transporting hundreds of thousands of dollars, hundreds of thousands of dollars worth of product daily in their Subarus, and they’re taking it to undisclosed locations where they’re like, burying under in the backyard or something. And it’s really the kind of situation where the Governor’s Office specifically thinks that what happens when there’s a major act of violence around this just to get that money. It’s a heist movie waiting to happen. Only this is real life and it’s a it’s a significant problem.
Calcote: This cash only business model is a big factor in the boom in security companies we discussed in our last episode. That does it for this week’s discussion on the legal marijuana industry. Thank you, Kevin and Ricardo for discussing your experiences with our attendees at Reynolds Week 2016 and thank you listeners for tuning in to another episode of the How to Cover Money podcast. If you plan to attend SABEW 2016 you can hear more on this topic from Ricardo and Kevin at our workshop covering the business of pot on Friday during the conference. And if you want to learn about social media marketing, I’ll be presenting a webinar on how to automate social media. Visit businessjournalism.org to find more information on these sessions.
If you are in need of business journalism training, the Reynolds Center can help. Visit businessjournalism.org to find articles and self-guided training, download our free eBook: Guide to Business Beat Basics, or sign up for our monthly newsletter. The newsletter will keep you up to date on training opportunities from the Reynolds Center year round. If you enjoy the How to Cover Money podcast, make sure to subscribe on iTunes, Stitcher, or SoundCloud, and while you’re there, leave us a rating or review to help make the podcast more visible to other business journalists. So support for the How to Cover Money podcast comes from the Donald W. Reynolds National Center for Business Journalism. Join us next week for the final installment of our discussion on covering the legal marijuana industry, when we’ll discuss the cannabis coverage of potency and regulation.
[Outro music]
