The American Cannabis Report
(C) 2018 Eastman Smith Communications

California Market Takes a Dump. Governor Newsom: War on Drugs!

On a browse of cannabis stories, we happened on "Tough cannabis policies do not deter young people – study" - in sum, young people smoke pot regularly and are not afraid of getting in trouble for it. This should come as no surprise... it's been this way for decades (and the same is true for older people who have grown up with cannabis available "within 2 phone calls" - that is, it only takes 2 calls to score weed).

 

Which is why the cannabis market in California is estimated at about $3-4 Billion annually

 

So when geezers say "keep that stuff out of my town", we try to educate them gently... it's already here (has been forever)... the only question is, how do you want it sold? By street dealers, or by licensed, vetted, fingerprinted, responsible business people operating legally and by the book? Nevertheless, we also read today that the majority of towns in California have NOT allowed cannabis businesses.

 

"Only 161 of California’s 482 municipalities and 24 of the 58 counties have opted to allow commercial cannabis activity of any sort, according to data from CannaRegs, a website that tracks local marijuana rule developments in the state."

 

LET'S REVIEW - $3 Billion existing demand, but very few outlets for sale. What's that? Cannabis taxes in California are over 35%? 

 

"In San Bernardino for example, dispensaries are taxed 29%: a 15% excise tax, 6% city tax and 8% sales tax."

 and...

"According to BDS Analytics, the effective sales tax on a gram of cannabis bought in San Jose works out to a hefty 38%. Add this to the higher cost of doing business in the state, and the sticker shock for consumers is real."

 

(And don't even get us started on the Disaster That is Los Angeles ("Pot entrepreneurs are running out of patience and money while waiting on L.A. permits") - potentially the biggest cannabis marketplace in the entire world is just sucking air.

 

So here's a market that was anticipated to generate $1 Billion in revenues annually for California. And is it any wonder that actual sales at legal dispensaries were lower than $3 Billion in 2018 (first full year of full legalization), and that tax revenues were dramatically lower than expected?

 

Now at this moment, one would think our spankin' new Governor Newsom would take a look at the dumb failures in the nascent cannabis industry, and make some bold choices to make it successful? After all, he's reined in the super-train and the Double Tunnel already!

  • He could go on an educational tour of the state to promote this $1 Billion revenue stream, safe markets, safe products, new jobs...

  • He could step in an adjust the exorbitant tax rates so that the nascent industry could get on its feet

  • He could do just about anything to increase the productivity of the industry to meet the existing demand....

But instead, he's decided to send in National Guard Troops to Humboldt County to bust up family farms. That's right - the same old War on Drugs tactics that have FAILED FOR 80 YEARS.

 

Governor Newsom: please don't be a knuckle dragger here, a throwback to Nixon and Reagan. The War on Drugs was an epic failure, perhaps bigger than any failure the US has ever had. Virtually every Presidential candidate is going to come out and say this (and every California voter already knows it). And you're going to get dragged under.

 

And so are we.

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