In California’s Monterey County, where until recently I lived and reported, the cannabis industry has been ramping up. The cultivation and sale of medical marijuana is legal in the county and within municipalities including Salinas. Medical marijuana was legalized in California with Prop 215 (the California Compassionate Use Act) in 1996 for patients that qualify, but this was superseded by the 2015 Medical Cannabis Regulation and Safety Act (MCRSA). The 2015 act said that state regulations for medical marijuana apply unless a local government creates its own regulations. This set many cities and counties scrambling to put together their own set of rules. Full statewide legalization—medical and recreational—is set for Jan. 1, 2018.
Growers have been scrambling for permits and entrepreneurs have been brainstorming ways to get in the game. There is much at stake, particularly for cities and counties hoping pot will be a cash cow and reel in millions in tax revenue.
Over the past year, I found myself reporting on numerous city and county meetings where the discussions covered policy about indoor and outdoor cultivation, how many acres would be permitted and how much a municipality could collect in taxes.
And then the emails starting coming in. I received correspondence from readers, public relations consultants—even an alarm company—asking if I was the cannabis beat reporter and if they could add me to their mailing list. I began interviewing growers, cannabis CEOs and mom-and-pop enterprises. As a business reporter who has covered everything from Main Street to Wall Street, I realized there was a large pool of untapped stories in the pot industry.
The spectrum of stories ranges from breaking news and profiles to in-depth watchdog investigative pieces. These investigative pieces can draw from data sets that reveal plenty of local activity: acres of agriculture land allotted to marijuana, number of warehouses and greenhouses (and their locations), how many permit applications have been received and issued, and the breakdown of those permits into categories (e.g. cultivation, manufacturing, distribution).
Last year Ricardo Baca, The Denver Post’s inaugural marijuana editor and founder/editor of The Cannabist, shared a top 10 list of story ideas for the business of cannabis. I’m updating the list with top 5 story angles for an industry that’s likely to take off nationally.
Taxation
Many growers in Monterey County are miffed at the tax structure that comes with legalization, asserting the tax is too high and will hurt competition with other municipalities, and eventually with other states that adopt medical and recreational marijuana. In Monterey County, for example, the tax rate for cultivation starts at $15 per square foot of canopy with a $5 annual hike starting in 2020, topping out at a maximum of $25 per square foot. These are local taxes that are piled onto state tax. A deep-dive could examine the taxes imposed by municipalities around the state. It could also include interviews with locally elected officials and county/city staff on whether higher taxes could threaten industry competition. The story can pair well with an infographic or map (Google has a simple-to-use mapping tool that is free).
Who can afford to be a pot grower?
I distinctly remember a conversation I had with a pot grower who looked at me with wide eyes when I asked, “So how much does it cost to get into this business?” He rattled off a litany of costs including a minimum of $1 million for a greenhouse, and that’s if you’re lucky enough to have scored an available greenhouse (in Monterey County, most have already been snapped up). And don’t forget about the cost of stocking up on premium cannabis strands, the small army of workers who will water and tend to the plants, and the sticker shock that comes with a multitude of permits. While this is a fairly straightforward story that can include a checklist/breakdown of the costs (this makes a good visual or infographic), it’s important to talk with at least two or three growers so the numbers are accurate.
Another aspect of the topic is financing. Since traditional banks don’t readily loan money to cannabis businesses, how are these growers funding their projects?
David and Goliath
In many counties in California, cannabis has mostly been a mom-and-pop business. Many growers set up shop in their bedrooms, garages and open fields. Think of the days of moonshine and bathtub gin. Some of them view cultivation as an art and have a passion for the industry’s fringe culture. Others count on it for their livelihood. I’ve heard of single mothers who have been able to make a living for their families, cultivating and distributing. That said, with legalization most mom-and-pop enterprises will have to close shop, or join the big guys who have been awarded the permits. How will this affect the small business owners who have operated underground for years? Will legalization spawn a monopoly? You’ll have to work hard to find sources since most mom-and-pop outfits are media shy.
Women and minority entrepreneurs
It is no secret that agriculture is dominated by men, especially on the executive level. Many of the big ag companies are family owned and passed down from generation to generation. At farm-centric conferences and gatherings, I am often the only minority and the only woman. “The industry is still pretty denim, plaid shirt, and Coor’s Light,” a councilman once told me, and in large part he’s right.
But cannabis seems to be open to a lot more female entrepreneurs and innovators and has attracted a younger, more tech-savvy group of professionals along with many more minorities. The industry has spawned an entourage of powerful women who have launched companies or are leading them. At the local level, there’s a plethora of potential business to profile, each with its own colorful story.
Marijuana vs. big AG
To say that Monterey County is ag-centric is an understatement. Agriculture is a $9 billion industry anchored by lettuce, broccoli and spinach. The landscape is defined by well-orchestrated rows of specialty crops. While the fledgling marijuana industry asserts that it is a part of agriculture, many local farmers and members of the long-standing agriculture community will argue otherwise. Pot and ag are contending over water and land, both premiums in California. Once the cannabis industry is up and running, how will big agriculture work with this smaller but potentially powerful business? How will the two sides co-exist? Will it be a symbiotic relationship or a contentious one ? If outdoor grow is permitted, will the lettuce growers start parceling out pieces of land to grow cannabis or rent their land to pot growers?
