Washington state Initiative 502 appeared on the general ballot in November of 2012 – the same month Colorado passed Amendment 64. Also in line with Colorado, commercial sales began in January of 2014. Yet, somehow Colorado seems to have carved out more of a niche for itself in the nationwide public consciousness as a pioneer of legal cannabis. Washington state was there too, at the very beginning of the unprecedented trend that California is only now catching up to.
When it comes to the legal cannabis experience in Washington State, Sal Packard was there at the beginning, and now plays a crucial role in the industry. His company, Black Tie Couriers, was the first to offer third party transportation services for cannabis businesses in the Seattle area. Recently, he took some time out of his day to give me an insider perspective on some burning questions about the industry - which is especially relevant to us Californians as a new member of the coalition of states who have legalized marijuana.
1. What is your general role in the industry - growing, production, or more on the business side of things? Where do you work?
As of January 1, 2017, my brother and I received the first marijuana transport license in Seattle. This effectively allows us to offer third party deliveries of cannabis in all stages from live plants to finished product, between any state licensed cannabis business. Prior to this license becoming available in July, 2016, all deliveries had to be made by an employee of the cannabis company that produced the product - imagine a world without Fedex or UPS if you will. Everyone running around inefficiently delivering their own products from one location to another. Now we can save companies valuable time and money by offering a distribution solution. There were countless hurdles along the way, but now our company, Black Tie Couriers, is off to a great start and we have been adding new clients every week.
I started working in the cannabis industry in March, 2012, while moonlighting as a pizzeria manager. One of my customers had a laboratory where they were testing cannabis for potency and microbial analysis. One day they came in to pick up a pizza and showed me a new CO2 extracted oil vaporizer, similar to an e-cigarette, only loaded with cannabis oil instead of nicotine juice. They were the first company to produce such a thing in Washington state, and I asked if I could buy one. Everyone I showed it to said the same thing, "where did you get this and how do I get one?" I thought quickly and replied, "you can get them from me." So I took my entire paycheck and bought as many as I could afford. The next day I went back to the lab with the money I had made and asked for more.
After a few weeks the lab told me they had run out, I had sold all of them. At the time they were literally looking for weed or trim on Craigslist, trying to find medical patients or collective gardens that were willing to sell their raw material so they could extract it and turn it into more oil for vaporizer pens. I offered to assist them in finding more material and they said that they would trade me vape pens for trim. The next day I hopped in my car and got on the Leafly phone app looking for marijuana dispensaries nearby. I began driving up and down the I-5 corridor offering to purchase trim from the shops that grew their own weed or trade them finished cartridges in exchange for their input material. Later that day I drove home with 4 pounds of pot and a giant grin on my face. I continued this process for the next several months. Each time I'd head out, I'd return with more pot - 10 pounds, 20 pounds, 50 pounds, up to 100 pounds at a time. The guys at the lab loved me and offered me a job as their head of sales and procurement. I ended up working for them for the next 3 years, selling millions of dollars worth of vaporizers, and building a vast network of marijuana farmers, processors and retailers. About half way into year 3, the state of Washington decided to force medical dispensaries to close or convert to recreational stores. But, doing so wasn’t as easy as it sounds. The state created a lottery for retailer applicants. You had to pay for $256 for an application and essentially put your name in a hat - it appeared to be rigged as some folks got as many as three licenses when others got none. Imagine hitting the jackpot three times in a lottery drawing! Those licenses today are worth upwards of a million dollars on the open market depending on the municipality they were zoned in.
Anyhow, the lab I was working with managed to squander most of the money we had generated, through bad business dealings and inflated rental properties. We call it green gauging, any time you put the word marijuana in front of something, you can expect it to cost 3x what any other business would be charged simply because the average Joe thinks we're just raking it in. That is not necessarily the case, starting a marijuana business is extremely daunting, there are countless regulations and legal hoops to jump through, I have seen so many businesses fail over the last few years seeing as you have a ton of people thinking they’re going to strike it rich and they overspend on everything from tenant improvements, to nets on rental properties, to antiquated equipment just because they grew some plants in their basement they now think they’re a master grower.
This is a commodity now, same as another commercial agriculture product. If you can't produce it as cheap as your competition, you're going to lose your ass. In Washington there are over 1000 licensed producers and processors, and only 350 retail stores, this creates a glut in the market place and drives down prices. Unfortunately the consumer doesn't see that since there's a 37% sin tax in addition to the average 10% sales tax in most Washington counties. This is a slight improvement over the original tax structure which was 25% to the grower, 25% to the processor, 25% to the retailer, and finally 25% to the consumer in addition to their 10% sales tax. It took over a year for structure to change. Then the state told us they were putting the hundreds of millions of tax revenue into "the general fund" and wouldn't explain what that meant or how it was being allocated.
2. How has the industry changed in the last few years in your view? Is there anything our Californian readers should learn from legalization in Oregon and Washington? Is there anything you would like to see happen differently in the states that recently legalized?
In the last few years. things have changed drastically. As of June 2016, Washington legislators effectively put an end to medical marijuana in Washington state. All medical dispensaries were forced to either get a recreational marijuana license through the liquor and cannabis board or they would be forced to close their doors to patients by June 31, 2016. After the initial round of applicants were selected through a lottery, the second round of applications were subject to a 3 tier priority system. Priority 1 applicants had to have applied for the lottery during the first round, but didn't "win" yet had continuously paid state taxes and operated their dispensary with a business license prior to Jan. 2013. Priority 2 applicants were required to have been a member, owner or employee of a collective garden with pay stubs to prove it prior to Jan. 2013, (many of these businesses were cash only with no records of any kind to avoid federal prosecution.) Priority 3 applicants were everyone else that didn't fall into the first two categories.
There were thousands of applicants all hoping to get rich based off of what they had witnessed years prior during the green rush. Applicants inundated the under budgeted, under staffed liquor and cannabis board who were rushing to sort through all of the applications. It was obvious that there weren't enough retail licenses to go around (only an additional 220 license were issued.) Since then, there are still only 350 or so retail stores open across the state due to moratoriums and lack of compliant properties. The L.C.B. had issued all of the available licenses before they ever got through the priority 1 applicants. This led to law suits against the state from large groups of angry applicants who felt they had been robbed of their opportunity to open their stores as they knew they would be forced to close their dispensary doors in a matter of months.
California readers should be prepared for applications by securing compliant properties and setting aside money for taxes even if they're not paying them currently. Many Washington medical dispensaries operated as non-profit organizations to avoid incriminating themselves by paying taxes on a federally illegal business. Even if the Feds don't want your tax money, the state will. I had retailers that were hit with tax bills ranging in the $100's of thousands, even as much as a million dollars. This disqualified them from being able to apply for a recreational license.
I would like to see standardized testing by state run labs rather than privatized labs. We see unrealistic test results all over the board, genetics that have been routinely testing in the teens are suddenly testing in the 30% THC range, this is just a bunch of bologna. The numbers literally changed overnight with new testing standards that were varying from one lab to another. You can send the same batch of cannabis oil from one lab to another and you'll get different results from each lab. Potency analysis is just a marketing tool in most cases, uneducated consumers just look for the highest testing THC available, unaware of the effects of terpenes or other cannabinoids and their entourage effects. What's most concerning is the lack of testing requirements in medical states for microbial issues and harmful pesticides. In my opinion, potency takes a back seat until you begin to consider proper dosing for products like edibles. You can always eat more, but you can't eat less sort of thing. It's all too common for a novice consumer to over consume and have an unpleasant experience.
Lastly, I would like to see less scrupulous requirements for medical patients. Ever since Washington shut down medical cannabis dispensaries, the state also shut down private doctor’s offices that specialized in providing medical marijuana authorizations. Now patients must see a regular doctor and only certain ailments qualify to obtain an authorization. On top of that, they're putting their names into a federal database that lists them as a cannabis consumer, which can cost some patients their jobs. To add more insult to injury, Washington patient’s HIPPA rights are being violated as their illness is printed right on their authorization which they have to present to a budtender in a recreational store, not a medical professional. And all of this is simply to avoid being charged local sales tax, typically around 10% in Washington. There's no avoiding the state 37% sin tax on marijuana.
I suppose the taxes are a slight improvement over what they were originally when initiative 502 first passed, requiring a 25% tax to the grower, a 25% tax to the processor, 25% tax to the retailer, then 25% tax to the consumer. They changed the tax structure a year later since no one seemed to be able to make any money. Now it's just 37% to the end user. Also weed prices have come way down, with so few licensed retail stores and so many producers, there is a huge glut in the market driving down prices. A pound of bulk marijuana before it's packaged can be purchased by a processor for less than $400 - when the first pot stores opened, there wasn't enough weed to go around and bulk pounds were as much as $8,000.
3. How do you think recent cannabis science, such as new ideas about terpenes and CBD, have changed things for growers, producers, patients and consumers?
Not much at this point. Only a handful of growers test for terpenes as it's not required by the state, and most labs can only identify a limited number of them. There's only a select group of consumers, retailers and producers that even understand this. Our market is undereducated in this department and I hope we can come up with some better marketing campaigns to inform the public about the benefits and effects of terpenes and other cannabinoids.
4. Can you name some rising trends in the industry, in terms of how cannabis is produced and consumed, that seem likely to change the landscape in the next few years?
Indoor pot is too expensive to produce, we are seeing retailers pushing lower end flower from outdoor, "sungrown" farms since consumers don't really seem to care about quality or growing conditions. It's all about price per gram and THC content which means farmers need to lower their overhead.
5. What attracted you to working in the industry? Do you feel like cannabis has the potential to make the world a better place? How?
I was attracted to doing something new. Working in an industry that until this point was untapped and allowed me to pave my own roads. I wanted to do something exciting that I felt was making people happy, and showing other industries that they're doing it wrong. I'm tired of fossil fuel dependencies and global warming from what our existing infrastructure has caused over the last century. I want to leave this world a better place than how I found it. I also saw first hand how it was helping sick people, it made me realize that the big pharmaceuticals and other industries just didn't want to compete with it so it was made illegal. Now weed is back, and it's here to stay.
I think cannabis is going to change how people see things, how products are made, how energy is produced; it will provide huge tax revenues that will boost the economy, provide renewable building supplies, bio fuels, clean the air and reduce our carbon footprint. I'm definitely a hippy at heart, I love this planet and I don't want to see it trampled on by money hungry companies any longer. We can make money and care in my opinion.
6. Were you surprised to see this kind of change in cannabis laws in your lifetime, or did you see this coming on some level?
I welcome change. If something isn't working, change it. I saw this coming when Washingtonians started pushing the petitions really hard. Even though legalization failed the year before I-502 came out, I knew it was just a matter of time before it gained traction and passed. It's a plant that occurs naturally in nature, It has therapeutic effects, and it's got a million different uses so why isn't it legal? I guess I would still consider myself as a young man at 32. I know tons of baby boomers and seniors who say that they cannot believe it - I tell them, you should try it some time, you might like it.
7. Are you hopeful about the near future for the cannabis industry? Do you think the forward momentum of the legalization movement will outweigh the effects of Trump’s incoming, apparently conservative administration? Do you think legalization is here to stay?
Yes, I am hopeful. If the recent election was any indication, with more states being added to the list of legal marijuana markets, I believe that the country is on the path to federal legalization. I'm not concerned about Jeff Sessions or Donald Trump in that respect, they cannot refuse the tax dollars. I could be wrong, but I'd be extremely surprised if the Feds tried to put the kibosh on legal pot now.
8. What hopes and fears do you have for the cannabis industry in the future, that may not have been covered by the other questions, if any?
Big companies like Phillip Morris and RJ Reynolds coming in and messing up the industry. Then there's big pharmaceuticals. In my opinion they put money as a priority over people’s lives. Ever since my childhood friend died of an opiate addiction, I have been strongly against prescription pain killers and the companies that produce them. I welcome professionals and science to get involved and find out more about this amazing plants capabilities, but I don't want to see a monopoly on this. The DEA's recent crackdown on CBD is a perfect example of the government trying to keep control of our industry and put it in the hands of pharmaceutical manufacturers. Ugh, the fight is nowhere close to being over.
Having the chance to interview Sal gave me a sense of where things stand for California.
The story of legalization in Washington state holds many lessons for California and the rest of the country. As much as AUMA represents progress, many of the details were considered controversial in parts of the cannabis community. Now that we have passed AUMA, and fulfilled our first mandate of getting cannabis out of the shadows, it is time to pay attention to the details and do our best to make sure access for medical patients, cost, and the situation for small producers are not sacrificed for the sake of big cannabis business. Cannabis could hold answers for a number of the problems facing the country – the continued economic slump, the wave of opiate addiction in parts of the country, and many others - but it will only work if we handle things the right way. AUMA was a big victory – perhaps the most important victory possible for Californians – but as Sal said, the fight is nowhere close to being over. Not for the rest of the country, and not for the legal states either.