So far in 2016, LivWell Enlightened Health has opened up four new storefronts, bringing our total number of dispensary locations in Colorado to 14, with more expected later this year. The majority of that growth has come through acquisitions, and I could not be more proud of the hard work our staff has put into these endeavors.
As we continue to grow, I am often asked about the future of our industry, and if smaller companies will crumble under the competitive pressure exerted by the few large cannabis companies in Colorado.
Although there may be some truth to this assertion, in my opinion there is another, far more significant pressure forcing some of the smaller operators out of our industry: The often crushing weight of complicated and frequently changing regulations and associated compliance.
I hear this all the time as I talk with smaller dispensary owners. They’re worn out to the point that they’d rather sell the business into which they’ve poured their hearts and souls than continue to exhaust themselves in an ongoing effort to satisfy the burdensome regulations.
I spoke to one owner who hadn’t had a vacation in five years. Similar tales abound. From each of these conversations I gathered that the main factor in their decisions to exit the industry was not the increasing competition from larger operators, but, the forward march of stricter and more complex regulations.
The burden on cannabis businesses
Many of these operators are sinking under the burden of this rising regulatory tide, and they look to larger companies to throw them a life raft.
Even a simple acquisition in the Colorado Cannabis Industry typically takes between six and nine months. Aside from the initial negotiations, due diligence, and consulting with lawyers that is required of an acquisition in any industry, cannabis businesses must also endure excessive wait times just to get an appointment with, and then approval from, the Marijuana Enforcement Division, the industry’s regulator.
Under current regulations, the seller must continue to retain and manage the company throughout this entire process, even though his or her heart may no longer be in it. Similarly, the expectant buyer can only stand by and watch as their new acquisition potentially diminishes in value due to the dwindling enthusiasm felt by the current owners.
At LivWell Enlightened Health, we have over 40 people employed in our compliance department alone. That’s roughly 8 percent of our total staff. How can a smaller company be expected to maintain such a team when their total staff may be fewer than 10 people? I have immense respect for those individuals who find a way to get it done.
How can we be expected to stay up to speed?
Legal cannabis is often compared to the alcohol industry, and the text of Colorado’s Amendment 64 explicitly states that the industry was to be regulated “in a manner similar to alcohol.” In Colorado, we have large liquor retailers and smaller companies, like the corner wine store, sometimes just a mile apart. The owner of your local wine store survives because she’s more than happy to discuss each bottle in the store, and that degree of specialization brings patrons back.
The cost of complying with her industry’s regulations is not nearly as prohibitive as the Cannabis Industry’s due to the maturity of the liquor license regime. She is not expected to deal with a new regulation bi-monthly the way cannabis operators must.
Again, I ask: Where does the time come for a Mom and Pop-sized cannabis company to stay up to speed with ever-changing regulations?
Due to our size, we have (and will continue) to expend considerable resources towards the greater good of our industry. I believe strongly in the independent operator and am confident that our industry has room for all shapes and sizes. My company will never be that boutique corner wine store, yet I feel it is important that the larger players do what they can to ensure that industry regulations work for everyone.
For example, we are pushing for the harmonization of medical and recreational regulation. Operating under two different regimes simultaneously is difficult for any business, no matter its size. We are opposed to new equivalency standards, which would further limit the amount of product a customer could legally purchase. The math required to complete a legal transaction that complies with these new regulations is difficult for anyone.
Regulations shouldn’t stifle the smaller players
Now imagine a 20-something budtender whose job – and potentially my license – depends on them completing a compliant transaction according to these additional standards. That is an unfair burden to place on their shoulders, and something I look forward to debating with our regulators.
Cannabis has been legal in Colorado for a number of years. In that time, the sky hasn’t fallen as some opponents predicted. I had three kids go through the Jefferson County School system years ago when cannabis was illegal, and they were exposed to marijuana back then — not to mention prescription drugs and probably many other things they won’t tell me about! The cannabis prohibition did not prevent my children from discovering it. And cannabis was not invented the day it became legal.
As a fledgling industry, we must be responsible and vigilant, but we also must ensure that the regulations in place do not stifle the smaller operators to the point that they simply give up.
I believe in regulation, and the industry needs regulation. But, keep those regulations achievable and applicable to all, including the 100-light “caregiver” grows that pose a significant black market diversion risk, but which go virtually unregulated in Colorado.
We must also continue to educate the consumer on the products, and the science, and on responsible use.
There’s a spotlight on this industry. There could be hundreds of alcohol-related incidents this evening, but if one cannabis-related incident occurs, guess which one will be on the news?
This industry must stick together. LivWell Enlightened Health will continue to fight for better regulations that benefit not just large operators, but the boutique stores that more than deserve their place in this market, and, of course, the consumers and public at large.