HIGH OR DRY?
California legal pot to test supply pipeline
LOS ANGELES—Most Californians with an urge to smoke a joint will enter the state’s legal marijuana marketplace through a single doorway— a retail shop.
But out of view of those dayto-day sales, the state is ushering in a sprawling, untested system to move pot from place to place that will also serve as a collection point for taxes, a gateway for testing and a packaging center for the plant’s fragrant buds.
The so-called marijuana distributor is a kind of skeleton connecting the state’s emerging industry of growers, sellers and manufacturers. It’s envisioned as a vast back office where the grunt work of keeping track of cannabis and getting it from farms to store shelves will take place. But just days after legal sales began, there are concerns that not enough companies are licensed and ready to transport pot.
Some predict that within weeks, cannabis could be marooned at fields and warehouses while dispensary shelves go barren.
“There’s going to be huge bottleneck in the distribution network in California at some point,” said Terry Blevins, CEO of a security firm and a part-owner of a marijuana distribution company in Southern California.
Billions of dollars of pot will need to move through the market in 2018, and “I don’t believe there are enough businesses to handle it,” he said.
California’s new market was rattled Thursday when the Trump administration signaled a more aggressive approach to marijuana prosecutions, lifting an Obama-era policy that kept federal authorities from cracking down on the pot trade in states where the drug is legal.
The impact of Attorney General Jeff Sessions’ decision is uncertain.
But some predict it could discourage businesses from entering the distribution system, while making those in it extremely cautious about what growers and sellers they work with, narrowing the pipeline.
Flow Kana CEO Michael Steinmetz, whose company distributes cannabis products from small, outdoor farmers, said a slow rollout of licenses has resulted in a limited pool of distributors.
A patchwork of rules has emerged so far, with some cities allowing legal sales and others banning all commercial pot activity. Los Angeles—the state’s biggest market—has yet to authorize any licenses, though the first could be issued next week.
Flow Kana, which is developing a new distribution center on the site of a former Mendocino County winery, transports cannabis for about 100 local producers.
While many retailers stocked up in advance of legal sales, “I do think we are going to see a big reduction in supply,” Steinmetz predicted.
A crimp in the supply chain, if it happens, would reprise what occurred in Nevada last year, when the start of legal sales saw a surge in demand with too few licenses to distribute it.