North Coast marijuana growers fear a takeover by ‘Big Alcohol’

 

Source: LA Times

Joe Mozingo

May 27, 2016

 

For the Humboldt farmers, Sonoma County’s subterranean tasting rooms and Tuscan affectations offered a glimpse into a rarefied realm of legal intoxicants.

 

The marijuana growers had driven south from redwood country to the oak and grass hills to take part in an event called “The Women of Wine & Cannabis,” a chance to visit boutique wineries and learn about appellations and branding in the $200-billion retail alcohol market.

 

But as they sipped wine on a vine-covered terrace of the Mayacama Golf Club that evening, some of them began to see an insidious subtext to the affair.

 

The moneyed establishment was shouldering into the marijuana game, legislating the system to its favor, and the small growers who had built the industry had better accept the new model or get bulldozed by it.

 

Ted Simpkins – a retired executive from the nation’s biggest alcohol distributor, Southern Wine & Spirits – stood up to welcome the growers and proceeded to give what they characterized as a gruff lecture about who were going to be the “winners and losers” when new medical marijuana regulations take effect in the next two years.

 

Accompanied by Assemblyman Jim Wood (D-Healdsburg), one of the authors of the new cannabis legislation, Simpkins explained that they would not be able to sell their weed directly to retailers; they would sell to distributors.

 

And Simpkins happened to own a distribution company that was lobbying heavily in Sacramento to craft the law the way he wanted. 

 

Some of the women liked his pitch, heartened that such a big shot was interested in their businesses. But others suddenly saw that someone with this much money posed a new threat to their scruffy livelihoods.

 

To them, the elderly man – gravel-voiced, sporting a prep-school blue blazer and horse bit loafers – was sending a clear message: Sign up now and hand over a cut of your sales or get pushed out of the market by the new Southern Wine & Spirits of weed.

 

“We had the sudden feeling we were in the belly of the beast,” Sunshine Johnston, a grower in Redcrest, said of that warm evening in August.

 

Two of the women grew so upset they left the party, trudging two miles down a rural road.

 

Since voters first legalized medical marijuana with Proposition 215 in 1996, competing interests have tried to take control of the chaotic market.

 

Bills or citizen initiatives that would have clarified the rules of the business or make recreational use legal have been stymied, partially because the divided industry never came together to endorse any one of them.

 

Growers have long complained that dispensary owners held all the power because they could get licenses and operate openly, while the cultivators who grew the product and drove it to market were widely seen as outlaws.

 

As late as July 2014, the seven-member board of the main growers association in the state consisted of four retail operators and only one full-time grower. No one wanted to publicly state he or she grew pot for a living.

 

“The growers association was run by dispensaries,” said Hezekiah Allen, executive director of the group, now called the California Growers Assn. and under grower control. “We were sharecroppers. So yes, there is a lot of bad blood.”

 

While Colorado built its regulated industry largely from scratch, California – the cradle of the marijuana movement – is struggling to redesign a makeshift system that people have been cobbling together, mostly underground, for half a century.

 

For some veteran growers in the North Coast, the requirement to sell to distributors looked like the corporate seed to their destruction. They would operate like the alcohol industry, where Budweiser and Miller have ruled since Prohibition, where beer, bourbon or wine makers can sell their products only through state-licensed brokers, who then sell to stores.

 

While prices for marijuana have sunk to all-time lows, new players would be taking a bite out of increasingly thin margins.

 

To many farmers in Humboldt and Mendocino counties, this was not just an attack on profits, but on the backwoods hamlets that have long operated like autonomous states – where marijuana growers and their money build local schools, volunteer fire stations, community centers, even a regional radio station.

 

Some, like Johnston, 43, who grew up in the Mattole Valley in Southern Humboldt and went to a pot-funded school, have decided to fight to survive in the industry by working to brand their fabled terroir.

 

She is trying to trademark her brand name, “Sunboldt” – because it’s grown in the sun, not under lights – and working on logos and packaging.

 

Her property, among fields and blackberry thickets on a silty terrace of the Eel River, is the vintage “small family farm” she says. On this spring morning, up the canyon walls that embrace her home, crows wheel in a mist that clings to the redwoods, alders and firs.

 

Her plot sits inland of the summer fog belt, a perfect spot to grow. She and her husband, Eric, are spending the day building light-deprivation tents, which signal the plants to flower early, and feeding the bigger plants with worm compost tea.

 

She knows the wine business; she is a part-time broker for family wineries in Oregon. And she knows how hard it is to get product on the shelves in an industry dominated by Southern Wine and other big distributors.

 

“I want to get my brand in early and get the shelf space,” she said. “The next few years are going to be rough and tumble.”

 

Other cultivators see hope in the new model, and some have signed up with Simpkins’ company, River Wellness, hoping it will give them more power to set prices with dispensaries, which are known for retail mark-ups well above 100%.

 

“I’m not sure of another industry that allowed retail to make the rules,” said Patrick Murphy, a Willow Creek grower who signed on with River.

 

He said it is common for North Coast growers to agree on a price point with a Los Angeles dispensary, then drive 10-plus hours only to be told the number had dropped. “It’s a typical bait-and-switch. What am I going to do? Stay in a hotel and look for other dispensaries?”

 

He said he’s happy to leave distribution to the professionals.

 

“Look, there’s a fair amount of paranoia out here, and that paranoia is well-earned. It’s a leap of faith for farmers to enter into a system that has treated them unfairly in the past. … You’re talking about 50 years of sacrifice, of loss of life, families being separated by incarceration, financial ruin.”

 

But he says he does not fear that a small number of distributors will come to monopolize the entire market. “I get about 10 emails a day from new distribution companies opening up.”

 

Under the new law, California will start issuing licenses for distributors, growers, retailers, testing facilities and others in 2018. The distributor would be required to have the marijuana or infused product analyzed at a laboratory for potency and contaminants, such as mold and pesticides.

 

River had been working since early 2015, lobbying key legislators and regulators in Sacramento, to push this model through to the governor’s desk.

 

It hired the high power firm of Mercury Public Affairs, led by former Assembly speaker Fabian Nunez, paying $82,500 over nine months, according to state records.

 

It also hired lobbyist Jason Bryant, a friend of Assemblyman Wood’s from when they both worked for the California Dental Association, paying him $52,000 by the end of March, the records show. (That was nearly $10,000 more than Bryant earned from his next-largest client – the California Growers Assn.)