Direct-to-Consumer Proposal Advances in California Legislature
by Omar Figueroa
April 26, 2022
On Tuesday, April 26, 2022, craft cultivators from all across California rallied in Sacramento in support of Assembly Bill 2691. This proposed legislation would allow licensed cultivators with less than one acre to sell directly to consumers at farmer’s markets and other cannabis events by creating a “temporary cultivator event retail license.” We previously wrote about AB 2691 here.
As amended, the bill would require the Department of Cannabis Control to issue this new type of license to a licensed cultivator who cultivates no more than one acre of cannabis total, with a maximum of eight (down from twelve) temporary cultivator event retail licenses issued to each licensed cultivator per calendar year.
At the hearing before the Assembly Committee on Business and Professions, there was tremendous support for the bill as well as spirited opposition, and numerous comments were submitted in person as well as by telephone. (Full disclosure: Omar Figueroa, the author of this piece, spoke out via telephone in support.)
For example, members of regional trade associations which comprise the Origins Council delivered moving requests for legislative relief, as did members of San Francisco-based Axis of Love.
Author Dr. Jim Wood introduced the bill and accepted the proposed amendments detailed in the Report by the Assembly Committee on Business and Professions, such as reducing the number of temporary event cultivator retail licenses issued to a small licensed cultivator from 12 to 8.
The Report sets forth the purpose of the bill, according to its author, Assembly Member Wood:
Licensed cannabis operators continue to struggle to compete against products produced and sold at a much lower cost by illicit operators. Without viable pathways to compliance and access to legal markets, good operators who are trying to make ends meet playing by the rules, will continue to suffer. Currently, cannabis farmers are prohibited from selling their products directly to consumers unless they also own and operate a full-fledged licensed retail facility. This disadvantages small cannabis farmers, who lack the resources to vertically integrate, or support large advertising budgets or sales teams. Instead, small farmers must rely on distributors and retailers to market their products and develop new customer relationships. This bill creates an opportunity for small cannabis farmers who otherwise may lack the means, to build relationships with consumers and retailers, and gives them a fighting chance to develop demand for their craft product.
The Report also presents the arguments in support from numerous organizations listed below, many of whom spoke at the hearing.
Operation EVAC, Veterans for Medical Cannabis Access, The Emerald Cup, This Is Jane, Operation Iraqi Freedom Army Veteran Veterans Cannabis Group, Covelo Cannabis Advocacy Group, Veterans Walk and Talk Bay Area Chapter, Global Cannabinoid Research Center, California Certified Organic Farmers, Weed For Warriors, Mendocino Producers Guild,Cannabis Travel Association International, Dear Cannabis, Medical Cannabis Resource Events, Green Centaur, LeafWorks, Sweetleaf Collective, Bay Area Latino Cannabis Alliance, Hessel Farmers Grange, Aunt Zelda’s, Oaksterdam University, Equity Trade Certification Sanctuary Farms, San Jose Cannabis Equity Working Group, Sonoma County Growers Alliance, Trinity County Agricultural Alliance, Mendocino Cannabis Alliance, Nevada County Cannabis Alliance, Big Sur Farmers Association, Humboldt County Growers Alliance, and Origins Council collectively write in support:
Over two decades, California medical cannabis patients, legacy cannabis farmers, medicine-makers and home growers of medical cannabis developed a robust direct-to-consumer network under state medical cannabis access laws. This network was stewarded by compassion clubs, medical patient collectives and cannabis farmer market events which afforded producer direct-to-consumer relationships and transactions.
Under the legal commercial cannabis framework, craft legacy producers have largely lost access to these opportunities to connect directly with consumers. Vertical integration is financially out of reach for nearly all independent small urban and rural producers, and land use regulation restricts the opportunity to sell directly from the farm. As a result, legacy producers have been denied access to their well-established and loyal medical cannabis consumer base, as well as the burgeoning recreational consumer base.
In turn, consumer and patient access to farm-fresh cannabis and small batch products at retail have substantially diminished since legalization. Analytic labs are now reporting a significant and ongoing decline in the genetic biodiversity within the regulated market. As an annual plant, the loss of California’s extraordinary cannabis genetics currently underway will be largely permanent.
Independent small producers typically lack access to marketing resources, such as sales teams and advertising budgets, that are available to larger and better- capitalized businesses. As a result, these legacy producers remain under-utilized in contributing to the public and consumer education efforts necessary to support a thriving legalized industry.
AB 2691 would provide a pathway for small producers to re-establish these consumer relationships, and in turn would help build a niche market for craft cannabis produced by California’s world-renowned cannabis producers. Establishing a market for craft cannabis will help educate the public at large and drive consumers to these products at licensed retail facilities, building the foundation for the long-term market differentiation of California cannabis.
Additionally, AB- 2691 would enable rural areas to utilize producer event sales as one component of larger efforts to promote tourism and destination marketing. Providing a pathway for consumers to interact directly with producers, in the region of origin itself, would enable legacy cannabis producing regions to establish and build a regional reputation, similar to other California producing regions renowned for their craft products, such as the Napa Valley American Viticultural Area.
As independently owned and operated small businesses and allies of legacy farmers, BIPOC and social equity operators, craft producers, consumer and patient rights advocates, we are collectively working to ensure that the pioneers who fought for decades to establish the legendary medical cannabis movement of California have an equal opportunity to participate within a viable regulated industry, and to ensure that patients and consumers have safe, affordable access to fresh, high quality craft cannabis products and medicines.
Equitable access to marketing and educational opportunities are an essential lifeline for small producers and vital to consumer education efforts. AB-2691 would provide significant new opportunities for craft operators, and serve as a powerful tool to preserve and enhance California’s world-renowned reputation for craft cannabis production within emerging global consumer markets.
Of course, the Report also summarizes the arguments in opposition from numerous organizations which also spoke out at the hearing.
In opposition, the United Cannabis Business Association, Social Equity LA, Orange County Advocacy Alliance, Long Beach Collective Association, California Minority Alliance, Silicon Valley Cannabis Alliance, Coachella Valley Cannabis Alliance, Social Equity Operators and Workers Association, Angeles Emeralds, and the San Francisco Cannabis Retailers Alliance collectively write in opposition:
We oppose AB 2691 for the following reasons:
1. The Department of Cannabis Control has proposed new regulation to allow cultivators to display their products to consumers – Cannabis growers’ reasoning for introducing this bill was a result of the California Department of Cannabis Control not allowing them to display their products directly to consumers at Emerald Cup in 2021.
On March 4, 2022, the Department of Cannabis Control proposed new regulations addressing this issue, and making this bill unnecessary. Proposed Regulations Section §15603.1 – Participation in Temporary Cannabis Events by Non-Retail Licensees- states the following:
(a) Licensees who are not retailers may participate in licensed temporary cannabis events and may display cannabis or cannabis products in accordance with the following:
(2) Cannabis or cannabis products may be provided to attendees of the event for inspection and educational purposes only…
(3) Cannabis and cannabis products for display purposes by non-retail licensees only may be brought to the licensed event by the licensee or their employees.
2. The Legislation Violates Proposition 64 – In 2016, the voters approved Proposition 64 – The California Marijuana Legalization Initiative, which established the type of cannabis licenses. Proposition 64 specifically established cultivation, manufacturing, testing, distribution and retail licenses. This legislation will be contrary to the voters’ intentions to establish separate licenses and not allow cultivators to have a hybrid cultivation retail license. If a cultivator wishes to become a retailer, the state has already set up licensing requirements for such an opportunity.
3. Does not Expand Market Access; Only Undermines Established Retailers – Currently there are less than 10 local jurisdictions statewide that allow for temporary events in which this proposed legislation could operate under. Those markets have robust and established retail operatorers, both equity and non-equity that have invested heavily into becoming state compliant. Allowing cultivators to flood their market and unfairly compete with them by pricing their products more competitively than a retailer would only serve to undermine retailers. This bill does nothing to promote the expansion of the legal market throughout the State of California.
4. Illicit Cannabis Market – Cannabis retailers continue to face challenges that threaten their licenses and families’ livelihoods. Currently retailers cannot compete with the illicit market which makes up 80% of California’s market. Most consumers decide to purchase unregulated cannabis products because those products are at times half the price of regulated cannabis products. Cannabis retailers would now have to compete with thousands of cultivators to sell their products which will be detrimental for small businesses owners.
In the end, AB 2691 passed through committee.
Stay tuned for more in the future about Assembly Bill 2691. It’s a critical lifeline to craft cultivators which would allow direct to consumer sales at up to eight locally approved temporary cannabis events per year. The bill would also revolutionize the events landscape by driving a transformation of cannabis events into true farmer’s markets where consumers can interact directly with and buy from the farmers themselves.
This information is provided as a public educational service and is not intended as legal advice. For specific questions regarding cannabis laws and licensing in California, including for events or the proposed “temporary cultivator event retail license,” please contact the Law Offices of Omar Figueroa at 707-829-0215 or info@omarfigueroa.com to schedule a confidential legal consultation.