Marijuana Business Magazine - March 2018

to a local food bank for every one of its products sold.The company – which sells its products throughout California – recently donated its millionth meal, a milestone in corporate giving for a regulated cannabis business. “There’s not a lot we can do to combat the black market beyond offer- ing amazing products and amazing customer service,” Ray said. “We see Bloom Farms as equally a customer service company as a social good com- pany and as a cannabis company.That’s something the black market can’t do.” Offer Novel Products It’s important to curate a menu of products that the black market doesn’t or simply can’t offer. Among those products, CBD-rich strains or extrac- tions are particularly popular with consumers. “When it comes to our brands and products we have made it our mission to allow customers to customize their treatment,” said Dennis Hunter, co- founder and co-CEO of CannaCraft, a vertically integrated medical cannabis producer and distributor in Northern California. CannaCraft’s AbsoluteXtracts brand, for example, offers 19 strain- specific vape cartridges that allow A cross the board, industry executives in Hawaii, Cali- fornia and Colorado agreed that one of the most effective ways to combat the black market is for busi- ness owners to advocate for reasonable tax structures for the regulated market. Steep taxes can spur consumers to seek out cheaper black-market products. Organizations like Colorado’s Cannabis Business Alli- ance and the California Cannabis Industry Association represent businesses and include registered and full- time lobbyists to directly appeal to state legislatures to pass reasonable tax structures for the cannabis industry. In Colorado’s previous legislative session, the Cannabis Business Alliance lobbied successfully for Senate Bill 192, which lowered the tax rate for unprocessed cannabis used for extraction – which in turn lowered the cost for businesses producing extracted products, passing that savings on to consumers. Colorado’s SB 192 also increased the frequency with which the state department of revenue calculates the average market rate for unprocessed cannabis from twice a year to quarterly, which means there’s a more accurate, seasonal reflection of the wholesale price of unprocessed cannabis – again, translating to lower-cost products for consumers. That’s the kind of legislation that business owners need to rally behind, executives agreed. “The more overregulated or overtaxed we are by the state, the more that cost is passed down to the end con- sumer,” said Cannabis Business Alliance Executive Director Kevin Gallagher, who is also the director of compliance and government affairs for Craft Concentrates, a Colorado- based concentrates producer with facilities in Denver and Pueblo. “The industry cannot be a budget crutch. (Legisla- tors) need to be careful about how they’re taxing us.” Taxes levied throughout the supply chain – for cul- tivation, extraction, distribution and other processes – quickly add up, said Joshua Drayton, the director of communications for the California Cannabis Industry Association. EXECUTIVE SUMMARY While you can’t control how the black market operates, there are ways you can encourage consumers to instead buy from a licensed, regulated retailer. Executives in states with regulated markets advise businesses to: • Reward your customers with loyalty programs and discounts, or develop a corporate-giving campaign to appeal to the “conscientious consumer.” • Curate a menu of products that the black market doesn’t or simply can’t offer, including CBD-rich strains, extractions or novelty items. • Educate consumers about the quality and safety testing in the regulated market – and how that compares to untested product on the black market. • There’s only so much you can do on your own, so lobby state and local lawmakers for reasonable taxes to deter consumers from seeking out cheaper black-market products. LOBBYING FOR REASONABLE TAXES Helen Cho is director of integrated strategy for Hawaii’s Aloha Green Apothecary. Photo courtesy of Helen Cho 52 • Marijuana Business Magazine • March 2018