Can ‘Cottage Cannabis’ Open Doors to Small Operators?

Back Commentary Jul 25, 2018 By Allison Joy

Comstock’s first in-depth cannabis story ran in December 2011 (“Up in Smoke,” by Carol Crenshaw), explaining how two-thirds of Sacramento County’s medical dispensaries had shuttered after a crackdown by the county, which lacked any sort of regulatory framework for businesses operating in unincorporated areas.

Things aren’t getting less complex with the passage of Proposition 64 in 2016, which approved the use of recreational cannabis for adults. Jurisdictions began moving forward with their own ordinances to accommodate or prohibit recreational cannabis well before the state’s cannabis agency began issuing temporary licenses in January 2018 (the agency just released a first draft of permanent rules last month).

This patchwork of regulations has created concentrations of the cannabis industry in some areas of the state, including Sacramento (“420 Estates” by Laurie Lauletta-Boshart, available in our August issue). Competition, market uncertainty, and the consequent level of risk and upfront investment necessary to break into the industry makes it difficult for small operators to gain a foothold. Daniel Conway, of cannabis investment firm Truth Enterprises, estimates the cost for starting a viable operation to be at least $2 million.

For “big cannabis” to become the new “big tobacco” would be unfortunate — first and foremost due to injustices already suffered by communities of lower socioeconomic status. Residents in these areas, typically the poor and people of color, have been more likely to be fined or jailed for growing, selling or even merely possessing cannabis. Now that California voters have legalized recreational marijuana, ensuring these communities have access to the economic benefits is vital. But beyond the moral argument, there is a strong economic one for supporting small cannabis operations.

Related: The Great Green Unknown

Artisanal offerings enrich a destination’s culture. One only needs to look to the growing wine industry in Amador County or the evolution of Sacramento’s craft beer scene to see how savvy and passionate small-business owners can redefine a region and invigorate the local economy. Cottage industries allow patrons to form a relationship that extends beyond the basic consumerism of the product itself, creating an experience and an identity more likely to live on in memory and encourage repeat visitors.

Microbusiness permits could help prevent small operators from being excluded from a fledgling industry. Smaller operations would be allowed to apply for a single microbusiness license to undertake at least three commercial cannabis activities in the supply chain under one roof. So as opposed to getting permitted for cultivation, manufacturing, distribution or retail separately — and paying a permit fee for each — these small guys would be allowed a one-stop shop. South Lake Tahoe has given a trial run by issuing two permits, and Sacramento Chief of Cannabis Policy and Enforcement Joe Devlin says his city is working toward it as well.

But a microbusiness permit is only as useful as the existing regulations within a jurisdiction allow it to be. In South Lake Tahoe, microbusinesses will still need to ship their product down the hill to Sacramento for manufacturing, because South Lake Tahoe doesn’t allow for non-volatile extraction. Microbusinesses might fare better in the City of Sacramento, which has approved all segments of the commercial cannabis supply chain. For an example on how the patchwork of regulations might thwart microbusiness permits, consider a city like Davis, where they would be almost irrelevant: Commercial cultivation isn’t allowed within city limits, and retail businesses are restricted from manufacturing.  

And then there is the issue of onsite consumption — there are only a handful of municipalities throughout the state that explicitly allow the practice. Jurisdictions are understandably hesitant to approve onsite consumption without the ability of law enforcement to deduce when someone is driving under the influence of marijuana.

But imagine your favorite craft brewery or tasting room without onsite consumption. It is, quite frankly, the central draw of the experience. Patrons enjoy speaking to the grower or business owner as they consume the product, where they can ask about things like flavor palates and cultivation strategy. There’s a social aspect as well, and onsite consumption would likely increase tourism dollars.

While any movement toward tamping down barriers to small operators is worth lauding, we cut these businesses off at the knees when we don’t allow them to offer customers the opportunity to sample onsite. We all know that small businesses are a fundamental piece of local economies. If they lose out on cannabis, we all lose.

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