Business
Cannabis company implements business model based on boutique wineries
Post-Prohibition, the alcoholic beverage industry had a head start of nearly 80 years before voters legalized the United States’ first regulated, adult-use marijuana markets in 2012.
In the years since, cannabis companies have leaned into the similarities between alcohol and marijuana, with some manufacturers creating THC-infused beers, seltzers and wines.
Jim Roberts, owner of The Bohemian Chemist in Philo, California, adopted a different angle when applying lessons from the alcohol industry to his small, vertically integrated cannabis business, which sits in Mendocino County at the junction of wine country and the Emerald Triangle.
“When I talked to small wineries, there were always different silos that would make their businesses work,” he said. “One would be direct sales to consumers in a location like a tasting room. The second would be having their wines either served at a restaurant through their distributor or on shelves in a bottle shop. And then the third was their club. If they got the right combination with those three things, they had a pretty successful brand going.”
After spending the past several years building out the first two “silos,” Roberts checked the third item off his list this spring, when he debuted 300 inaugural membership boxes for The Bohemian Chemist’s cannabis club.
Building the brand
Roberts, a microbusiness license holder, learned about cannabis cultivation from his mother, who grew medical marijuana in the famed region. Her flower was sold at dispensaries mostly in Southern California; she also created balms and salves to treat her rheumatoid arthritis.
Less than a half-mile away, Roberts developed a Mediterranean-style compound called The Madrones. After closing the design business he ran on the property, Roberts started renting tasting room space to local wineries.
When California voters passed adult-use marijuana legalization in 2016, Roberts realized that a cannabis brand would complement the businesses already occupying The Madrones, which over the years had grown to include several tasting rooms, guest accommodations, a restaurant and a gift shop.
“I followed so closely, having so many wineries on the property – at one time we had four wineries – and I said, this is the perfect thing for cannabis. Let’s do it like a small family boutique winery, where we actually cultivate our own cannabis and then we’ll have a place where we sell it.”
What’s for sale
In addition to its own branded products, The Bohemian Chemist sells “mainstay” brands such as Papa & Barkley and Mary’s Medicinals at its storefront in The Madrones.
“We don’t carry a lot of flower, just because we’re in a very small town, and (foot traffic is) very seasonal. So, we concentrate mostly on our own flower, and then we’re also trying to support other craft brands,” Roberts said.
While he was cognizant of how his winery tenants would respond to the store, Roberts knew a lot of winemakers use cannabis, which he describes as part of Mendocino County’s culture.
The reaction of tasting-room patrons and guests at the inn, however, have been surprising – sometimes even to the guests themselves.
“A lot of people will come in and they’ll say, ‘Oh, my gosh, I’m not interested in that.’ And then the next day, they’ll peek their head in and they’ll say, ‘My shoulder’s hurting,’ or, ‘I used to do this in high school.’ It’s in the way that we have it set up, it’s very approachable,” Roberts said, adding that he recently opened a consumption lounge at The Madrones.
“They’ll come in maybe thinking they don’t want to have anything to do with this, and by the end of their trip, maybe they’ve purchased a gummy or some pre-rolls or an ointment. And they’ll load up before they go. It’s been a really interesting journey for us.”
Benefits of membership
In addition to welcoming guests to their tasting rooms, boutique wineries often cater to out-of-town customers through wine clubs, which give members access to exclusive offerings and events for a recurring fee.
Roberts had long planned to create a similar program through The Bohemian Chemist, and the club’s debut box – The Alchemist – launched in April at select retailers and through California-based delivery services.
Going forward, Roberts plans to ship three boxes to members per year: The Alchemist, which focuses on rare cannabinoids, landrace varietals and genetics; The Summer Solstice, which will arrive in June and contain his favorite products; and The Harvest, which arrives in November, after harvest, filled with the company’s latest offerings.
For cannabis enthusiasts, Roberts said there are multiple benefits to membership: “One is that they are going to get a preferential release of something.” With just 5,000 square feet of cultivation space, yields of some cultivars can be 5 pounds or less, he said, adding, “They’ll probably get things before anybody else does.”
Additionally, The Bohemian Chemist plans to include extra items in the boxes, driving their value above the $190 sticker price. Members will also be eligible to receive perks when they visit the Philo-based store in person.
Roberts said he looks at the box as a sampling of products intended to drive customers back to The Bohemian Chemist and its retail partners.
The company’s branded products currently are available in fewer than 20 stores in California, and Roberts says he tries to reward good retail partners with geographic exclusivity.
“If we get into a really good retail partner in a certain area, we’re not going to sell to a store that’s really close to them,” he said, adding that avoiding two retailers trying to undercut each other on the price of his brand helps cement its value.
“Right now, we’re going to be doing straight wholesale (on The Alchemist boxes),” Roberts said, “and then we’ll do a drop through some of our retail partners. So, basically, the retailer will be able to get their full markup on it, with the thought that maybe, eventually, this will be something that customers could get from us directly.”
Source: https://mjbizdaily.com/cannabis-company-implements-business-model-based-boutique-wineries/
New Mexico regulators fined a cannabis operator nearly $300,000 and revoked its license after the company allegedly created fake reports in the state’s traceability software.
The New Mexico Cannabis Control Division (CCD) accused marijuana manufacturer and retailer Golden Roots of 11 violations, according to Albuquerque Business First.
Golden Roots operates the The Cannabis Revolution Dispensary.
The majority of the violations are related to the Albuquerque company’s improper use of BioTrack, which has been New Mexico’s track-and-trace vendor since 2015.
The CCD alleges Golden Roots reported marijuana production only two months after it had received its vertically integrated license, according to Albuquerque Business First.
Because cannabis takes longer than two months to be cultivated, the CCD was suspicious of the report.
After inspecting the company’s premises, the CCD alleged Golden Roots reported cultivation, transportation and sales in BioTrack but wasn’t able to provide officers who inspected the site evidence that the operator was cultivating cannabis.
In April, the CCD revoked Golden Roots’ license and issued a $10,000 fine, according to the news outlet.
The company requested a hearing, which the regulator scheduled for Sept. 1.
At the hearing, the CCD testified that the company’s dried-cannabis weights in BioTrack were suspicious because they didn’t seem to accurately reflect how much weight marijuana loses as it dries.
Company employees also poorly accounted for why they were making adjustments in the system of up to 24 pounds of cannabis, making comments such as “bad” or “mistake” in the software, Albuquerque Business First reported.
Golden Roots was fined $298,972.05 – the amount regulators allege the company made selling products that weren’t properly accounted for in BioTrack.
The CCD has been cracking down on cannabis operators accused of selling products procured from out-of-state or not grown legally:
- Regulators alleged in August that Albuquerque dispensary Sawmill Sweet Leaf sold out-of-state products and didn’t have a license for extraction.
- Paradise Exotics Distro lost its license in July after regulators alleged the company sold products made in California.
Golden Roots was the first alleged rulebreaker in New Mexico to be asked to pay a large fine.
Source: https://mjbizdaily.com/new-mexico-cannabis-operator-fined-loses-license-for-alleged-biotrack-fraud/
Four marijuana companies, including a multistate operator, have filed a lawsuit against U.S. Attorney General Merrick Garland in which they allege the federal MJ prohibition under the Controlled Substances Act is no longer constitutional.
According to the complaint, filed Thursday in U.S. District Court in Massachusetts, retailer Canna Provisions, Treevit delivery service CEO Gyasi Sellers, cultivator Wiseacre Farm and MSO Verano Holdings Corp. are all harmed by “the federal government’s unconstitutional ban on cultivating, manufacturing, distributing, or possessing intrastate marijuana.”
Verano is headquartered in Chicago but has operations in Massachusetts; the other three operators are based in Massachusetts.
The lawsuit seeks a ruling that the “Controlled Substances Act is unconstitutional as applied to the intrastate cultivation, manufacture, possession, and distribution of marijuana pursuant to state law.”
The companies want the case to go before the U.S. Supreme Court.
They hired prominent law firm Boies Schiller Flexner to represent them.
The New York-based firm’s principal is David Boies, whose former clients include Microsoft, former presidential candidate Al Gore and Elizabeth Holmes’ disgraced startup Theranos.
Similar challenges to the federal Controlled Substances Act (CSA) have failed.
One such challenge led to a landmark Supreme Court decision in 2005.
In Gonzalez vs. Raich, the highest court in the United States ruled in a 6-3 decision that the commerce clause of the U.S. Constitution gave Congress the power to outlaw marijuana federally, even though state laws allow the cultivation and sale of cannabis.
In the 18 years since that ruling, 23 states and the District of Columbia have legalized adult-use marijuana and the federal government has allowed a multibillion-dollar cannabis industry to thrive.
Since both Congress and the U.S. Department of Justice, currently headed by Garland, have declined to intervene in state-licensed marijuana markets, the key facts that led to the Supreme Court’s 2005 ruling “no longer apply,” Boies said in a statement Thursday.
“The Supreme Court has since made clear that the federal government lacks the authority to regulate purely intrastate commerce,” Boies said.
“Moreover, the facts on which those precedents are based are no longer true.”
Verano President Darren Weiss said in a statement the company is “prepared to bring this case all the way to the Supreme Court in order to align federal law with how Congress has acted for years.”
While the Biden administration’s push to reschedule marijuana would help solve marijuana operators’ federal tax woes, neither rescheduling nor modest Congressional reforms such as the SAFER Banking Act “solve the fundamental issue,” Weiss added.
“The application of the CSA to lawful state-run cannabis business is an unconstitutional overreach on state sovereignty that has led to decades of harm, failed businesses, lost jobs, and unsafe working conditions.”
Alabama regulators are targeting Dec. 1 to award the first batch of medical cannabis business licenses after the agency’s first two attempts were scrapped because of scoring errors and litigation.
The first licenses will be awarded to individual cultivators, delivery providers, processors, dispensaries and state testing labs, according to the Alabama Medical Cannabis Commission (AMCC).
Then, on Dec. 12, the AMCC will award licenses for vertically integrated operations, a designation set primarily for multistate operators.
Licenses are expected to be handed out 28 days after they have been awarded, so MMJ production could begin in early January, according to the Alabama Daily News.
That means MMJ products could be available for patients around early March, an AMCC spokesperson told the media outlet.
Regulators initially awarded 21 business licenses in June, only to void them after applicants alleged inconsistencies with how the applications were scored.
Then, in August, the state awarded 24 different licenses – 19 went to June recipients – only to reverse themselves again and scratch those licenses after spurned applicants filed lawsuits.
A state judge dismissed a lawsuit filed by Chicago-based MSO Verano Holdings Corp., but another lawsuit is pending.
Source: https://mjbizdaily.com/alabama-plans-to-award-medical-cannabis-licenses-dec-1/
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