Cannabis business tough for little guys
High permit fees among obstacles entrepreneurs face in Bay Area
As a teen in the ’70s, Alexis Bronson sold joints to his Berkeley High School classmates in front of the school cafeteria.
Bronson lived in hotels with his father and two brothers and made enough money selling weed to eat and to buy clothes. He figured he could probably make enough to keep a roof over his head, too.
In 1980, two years after he graduated from high school, Bronson began cultivating cannabis, planting the seeds for his future business. After California voters passed Proposition 215 to legalize marijuana for medicinal use in 1996, Bronson began selling his cannabis flowers to a dispensary in San Francisco. He also sold to street dealers. “I wasn’t out on the streets selling,” Bronson said. “I knew the streets, but I wasn’t hard like that. I was poor, but I wasn’t street-hardened. It just wasn’t my thing.”
For almost four decades, Bronson, 57, ran very successful businesses, eventually settling on selling clones and seeds through his company, Medicinal Organic.
At the height of his business, he was selling about 4,500 clones per month out of an East Oakland warehouse, earning more than $30,000 a month.
But now that the state has imposed strict marijuana regulations on everything from growing to packaging to selling, Bronson finds himself in the cold. And his business has shriveled.
He is waiting to move his business into proper, city-approved spaces for cannabis cultivation. He already has received four local permits — for delivery, indoor cultivation, outdoor cultivation and distribution — and a state license for cultivation. He also has a state license for a microbusiness, a category that allows small businesses
apply for more than one license with a single application.
He’s hoping, also, to get a dispensary permit from Oakland so he can open a retail store to sell his products.
Without his own retail store, he’s unsure his business can survive — even with the extra help he got from Oakland’s equity program, which waived $12,500 worth of application fees.
Oakland’s attempt at equity has been commendable, but it’s not enough. The little guy is still getting squeezed out of business.
Because even if they get their local permits, they have to pay $1,000 for each application they submit to the state. And then they’ll have to pay to receive the annual state license.
That’s a $5,000 licensing fee for each license. Yearly. Bronson, for example, needs five state licenses to build the business he wants to run: a full seed-to-shelf operation that grows the products he sells to customers who walk in or order a delivery.
Sure, the cannabis industry is expanding, but if small businesses can’t get off the ground, they’ll be swallowed by large companies with the money to pay state fees.
“There’s no other industry that charges the kind of money that they do,” Bronson said. “There’s just outrageous fees. The bootstrapping days are over. You have to pay.”
Right now, Bronson is only generating income from his seed sales, he told me.
That’s because his top clone buyer, Harborside, a cannabis dispensary, discontinued its relationship with him in December. Because of new state regulations, dispensaries can sell only six clones per person per day. Before Jan. 1, the limit was 99.
According to Andrew DeAngelo, Harborside’s director of operations, the dispensary has a contract “to take a certain amount of clones from Dark Heart,” a cannabis nursery. That contract expires at the end of next month, he said.
“With the new regulations, my volume of clone sales has been reduced by about 80 percent,” DeAngelo told me. “My average clone sale before (Jan. 1) was well over 50 clones per sale. Regulations change business models. Regulations change my ability to buy from a wide variety of people if the regulations constrain my sales.
“I should still be selling all these clones. I should be able to buy from a multitude of vendors, but I can’t. Because I can’t sell them.”
DeAngelo expects to eventually have more clone vento dors on Harborside’s shelves in the spring, but Bronson, who has primarily sold his clones at the dispensary since it opened in 2006, might not be ready to reclaim his spot.
He can no longer run his clone business out of his garage in East Oakland where he’s been cultivating for the past two years after a new warehouse owner evicted him.
Because of the equity program, he’s secured two spaces to operate legally — one for seeds and one for clones. Now he’s waiting for the spaces to open so he can move in and get to work. At one, he’s awaiting the city building department’s approval of a greenhouse. At the other, the construction of the space probably won’t be completed for another three months.
“I’ve got to get a place soon,” Bronson said. “To grow the business, I’ve got to start producing product. My seeds are helping out tremendously. Basically, if it wasn’t for my seeds, I wouldn’t be in business.”
The hard truth of the new cannabis environment is that there’s only so much room for small, boutique businesses.
“All the dispensaries are trying to do their own farms and grow their own medicine, because that’s the only way they’re going to be able to wring out profit,” Bronson said.