A Decade Ago, Recreational Cannabis Was Only Available on the Black Market. During the Pandemic, It Became an ‘Essential Industry.’
On one night last summer, Ted Hicks, owner of Apex Extractions, had somewhere from 50 to 75 cars suddenly pull up in front of his cannabis extraction facility located in an industrial part of Oakland, California.
“Over a hundred people get out and they break into the facility and just raid it and swarm it and keep going and going until it’s wiped out,” he tells Reason.
Had you described this scene to someone a decade ago, they’d probably assume the people ransacking Hicks’ business were cops. Instead, he spent the whole night trying to get the police to show up to his licensed, state-legal cannabis manufacturing facility.
“Police were called. No one could get the police. 9-1-1 was busy, there wasn’t a police presence for hours,” he tells Reason, explaining that law enforcement was busy responding to protests and riots in other parts of the city over the police killing of George Floyd.
Hicks’ experience, unfortunate as it is, highlights the growing normalization of the once-prohibited industry, even as it has had to cope with the ups and downs of last year. All things considered, though, the pandemic hasn’t been a bad time to be a pot merchant.
California Gov. Gavin Newsom, a Democrat, issued his first stay-at-home order in March 2020, which required people to stay in their homes unless performing a few essential tasks, like buying food or going to work at places deemed essential by the state.
That order shut down huge swaths of the economy. But not the budding cannabis industry, whose collection of growers, processors, distributors, and retailers were all granted coveted “essential” status by Newsom.
“Being deemed an essential business by the state was huge in an industry like cannabis where federally we’re illegal,” says Kristi Palmer, the co-founder of edible manufacturer Kiva Confections. “You’re always pushed to the side, or treated like a not-legitimate business, so to be deemed essential was a pivotal, historical moment for our industry.”
That essential designation allowed the industry to stay open and keep operating, even at the height of lockdowns. That was fortunate given the sudden surge in demand for cannabis that came as a result of everyone being holed up in their homes with little to do but get high and watch Netflix.
“There weren’t many other things you could go and do,” says D’Ann Lapenias, who runs Elevated, a dispensary in San Francisco. While restaurants and bars were cratering, Lapenias says her business actually had to start extending its hours to cope with higher demand.
That surge in cannabis buying was felt all the way up the supply chain. “I have not ever seen such a craze around cannabis. The product was selling before the batches were released from testing,” says Michelle Hackett, president of Riverview Farms, which grows and distributes cannabis products from its home base in Salinas, California. (She hastens to adds that obviously her company wasn’t selling product before it went through state-mandated testing.)
In order to keep up with increased demand and sales, Hackett says her company’s grow operation added an additional two 40,000-square-foot indoor grow rooms and packed more plants into their existing greenhouses. Production went up about 20 percent, she says.
This isn’t to say it was all upside for the cannabis industry. Cannabusinesses weren’t immune from the increased costs and challenges imposed by the need to socially distance and sanitize.
Palmer says her company had to stop production of their popular churro bar product because the manufacturing process required workers to stand close to each other. Hackett had to change things up by staggering workers’ breaks and lunch hours to accommodate social distancing.
Lapenias says she had to cut her number of registers from six down to four to be in compliance with capacity restrictions. She also had to write a full COVID-19 prevention program.
“It was a lot of learning,” she says, saying that the plan she wrote had to be vetted “line by line” by Elevate’s other owners, the company’s lawyers, and San Francisco’s health department.
Customers and employees had to answer health questions and get temperature checks before entering the store. The company’s HR policies had to be changed to make it easier for employees to stay home even if they felt so much “as a tickle in their throat,” Lapenias said.
There were also no small amount of difficulties that came from being a federally illegal business.
Hackett notes that while a pizza business run by her family was able to make use of federal small business relief loans during the pandemic, her cannabis business wasn’t so lucky. That only made it harder to retain employees given their own coronavirus concerns and the generous relief the federal government was providing to the unemployed.
As an added indignity, Hackett notes that Monterrey County, where her business is located, used cannabis tax dollars to fund a host of relief programs that cannabis businesses weren’t eligible for.
“All the problems that existed for cannabis businesses before continued, such as lack of access to banking and cashless transactions and other financial services. Their inability to deduct business expenses on their taxes, their ineligibility for [the Paycheck Protection Program] or [Small Business Administration] loans,” says Morgan Fox of the National Cannabis Industry Association (NCIA).
There were a lot of little things during the pandemic that made life harder for cannabis businesses too. The end of in-person industry shows made it harder for Hackett’s company to connect with retail clients, she says. Palmer said getting packaging material from China was a real difficulty for a while.
Those, of course, were problems faced by a lot of other businesses and industries too. In that way, the pandemic showed how far cannabis had come in making itself a normal industry with normal problems. If only the federal government would see them that way, too.
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