Cannabis Knowledge & Insights

Interstate Cannabis Commerce

With many states around the country having legal cannabis or soon-to-be legal cannabis, interstate commerce of cannabis products is a hot topic.

Learn about how this could impact the cannabis industry, especially cannabis cultivation businesses.

If you have any questions or need help with tuning the financial performance of your cannabis business, then please reach out to us via our website (https://greengrowthcpas.com/get-started/) or call 800-674-9050.

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Video Transcript

Interstate Commerce for cannabis businesses. Now this is something that a lot of people have been waiting for and hoping that this has happens. And some news came out yesterday about the Alliance for sensible markets and what this is is pretty much a group. It’s a group of people, a group of groups, essentially coming together and saying, all right, let’s go ahead and try to get interstate commerce together. And now there’s a way to do this. Essentially, what they’re doing is they’re going to push governors or they’re soliciting the governors of legal cannabis States, and soon to be legal cannabis States to enter into an interstate compact or a pact here, which essentially means that when two States can enter into a pack, this is a constitutional recognized agreement. That again is between two States. Now, pretty much these two States sign this pack, and then they can go ahead and put this before Congress.

And that can either be, you know, put forward and accepted, or it can be, you know, refuse, but essentially it can go as its own standalone legislation, or it can be attached as a rider for another big bill, maybe, you know, the stimulus package and boom, we get to have this kind of as a rider in the bottom there. Now what they want to do is they want to establish a framework for cannabis businesses and have them be able to transport and market their pro cannabis products across state lines. Now, interstate drug trafficking is pretty much an illegal thing. You can not do that right now, but if there’s agreements between legal States, this may open up a lot of new opportunities for cannabis businesses. Now, this has not been done for cannabis, obviously, but you’ve seen other States, for example, Oregon, the governor over there, she signed a bill recently.

I believe it was last year. Maybe even earlier this year saying that a if federal law allows it, we like to allow the import and export of cannabis. So this is something that other States are looking for in making this happen. Now, California and Oregon are likely going to be the first two States to kind of come into this pact here. And because they have so much supply of cannabis, you see, you know, when Oregon started out, they had, you know, so much cannabis, it was going to waste, okay, because there’s just some areas in the country that can produce a lot of cannabis because there’s some great conditions. Now, if asking, well, how does this benefit the cannabis industry? I want to talk about both sides. How does this benefit as well as how does this potentially hurt the industry going forward? Now, as I said before, some States are just over producing cannabis or some States are just under producing cannabis and it could be for a variety of reasons, right?

California, the growing conditions are amazing for cannabis, lots of sun, maybe not so much water, but there’s a lot of great conditions out there for cannabis. There’s also a lot of, you know, um, let me say human intelligence, knowledge and knowhow around cultivation that makes you, it gives you that ability to scale and make a lot of cannabis or grow a lot of cannabis in a smaller area compared to younger markets that don’t have that cultivation know how yet. Now, you know, you may be seeing, um, relaxed too as well in Oklahoma, right? When you look at Oklahoma, pretty much anybody that has a heartbeat, 2,500 bucks and has been a resident for two years can get a cultivation license. But yeah, licenses just a checkbox to say, all right, you can do this, but doesn’t make you a good grower, right? Anybody can pretty much get this, but you know, this allows some States to specialize in their vertical, right?

So, so example here is going to be New York, lots of consumers in New York, New Jersey in the Northeast, maybe not the best place to start growing cannabis. So what they could potentially do is focused on the retail operation. And then you have, you know, States like California, Oklahoma, Oregon, Colorado, supplying the cannabis for those retail operations could potentially bring down the cost per pound when you’re growing in the areas that are best suited for growing cannabis. Now talking about this yesterday in our fire’s video, look, there is interstate cannabis movement. Now this is not something anybody wants to really admit to. And there’s not a really a good solid solution on how to stop this other than more cops on the road to potentially pull over people. But there’s not an efficient way to enforce these regulations. So this may legalize and it’s already happening now.

So again, first off how it benefits is it could help the supply chain and smooth out and allow people to specialize in certain areas. Now, the second way this could help out is it could increase business valuations, especially for cultivators, especially the ones that have great product, the ones that have high yields and the ones that are in spots that can grow large amounts of cannabis. Now last week, two weeks ago, I spent about four days in Oklahoma. If you’ve never been to Oklahoma, you should go and check it out, beautiful state to visit. But specifically went there too, visit some of our clients. And, you know, I spent there, I looked at the spaces and the grow operations. I’m going back in October for crop Tober when they harvest a lot of this cannabis, but it’s like, wow, this is a kind of set up perfectly for cultivation and processing or manufacturing.

They’ve got cheap real estate, the cheaper to do business overall there. And all the costs are pretty much lower relative to other places in the country. Now they’ve also got, as I said before, incredibly incredibly relaxed licensing regulations. It’s not very difficult to get a licensing app licensing for cultivation out there, which kind of opens up the door for the free market to say, who is going to be the best. And they’re going to hopefully rise to the top. Now it’s also in the center of the entire country. So it can take advantage of easy distance attribution right up the [inaudible]. It can go West out to California and other States, it can go North. It can go out to the East of Chicago, uh, hit up New York, the new England area, and also go down towards Florida. So, you know, those are the kinds of things you look at as a multi-state operator or as a brand new cannabis business saying, Hey, where do we really want to position ourselves?

Because the industry today is not what it’s going to be in six or seven years, right? Maybe in eight, your competitors are going to be Rite aid, Walmarts, CVS, cause they may start moving into the licensed cannabis if it becomes nationally legalized and be rescheduled. So thinking about where do you want to place yourself in the next, you know, four to six years, right? Don’t rush into cannabis just because you think it’s a cool, hot thing to do. There’s no such thing as the green rush, that’s a big fallacy. It’s a cool marketing gimmick for the news stations, but it’s not real. There will always be opportunities. So think about where are the booming cultivation opportunities going to be located at? So that’s one thing to think about, alright, now, one thing to consider everybody wants us interstate legal cannabis, or most people do want that, but we don’t know how this is going to really affect the small scale growers.

Now you may have heard of what they call craft grows. This is something that’s happening in Illinois and other States have different levels and schedules of where you can grow and how much you can grow, how much canopy space. Now, when you get a smaller scale grow operation, this means that you don’t always get to hit that inflection point to get an economy of scale, to really draw down that cost per pound significantly, you know, bring it down 50 or 80%, right? If you’re a large MSO or multi-state operator for a cannabis cultivator, you know, you’re allowed to, you’re given the space, shall I say to really scale up your operation, you know, reduce the cost per pound and achieve this really streamlined operation. Now, if you go interstate cannabis commerce, it’s probably going to benefit those multi-state operators. People that have the infrastructure, the money and the knowhow on how to grow great cannabis, but also how to distribute it and get it out to the masses in all corners of our country, right?

In certain States that are legal, they have what they call cannabis deserts. For example, in California, it’s like 66% of the state in the municipalities. They’re prohibit the sale of cannabis in their area. So this could be a lot of different things that happen with this. But interstate commerce for cannabis is something to keep your eye on. Now this is not moving very fast. They want to governors to look at this and they’re going to get a bill, hopefully sign, or how do you say a bill drafted up by December and then hopefully signed by two governors by March, 2021, which then maybe moves us into getting this ratified in some type of on the bus legislation in the second half of 2021. So nothing right away. But this is something to think about because the lead time for cannabis licensing is such a long one.

You may not want to be in certain States when this does actually open up, or maybe you do. It’s all just for your consideration. Now, um, this legislation is kind of running under the guise and it’s going to help thousands of smaller other businesses, small scale operators. Now it probably could help the retailers that are smaller scale or those later in the supply chain with cheaper, raw product, you’re going to get the ability to get access to cheaper raw products. Now, from there, you know, do these small scale growers get priced out cause they just can’t compete. You know, they can’t bring their price down as much as these large scale operators, but as a small scale operator, something to think about is, well, what really makes you different? Right. We had a group, um, you know, they worked from California. I don’t want to say the name is not the place for that, but I really liked about them is that they had, you know, old time growers who’ve been growing for 20, 25 years with very specific inhouse, genetics, you know, real peer ask in cannabis that you can’t find this stuff anywhere else.

You’re looking at a lot of hybrids nowadays. So having amazing genetics, that’s one way to stay at, to stand out as a small grower or special techniques for very potent cannabis or consistent crop. That could be one way to stand out or maybe just having the convenience factor of being in the area of the other cannabis businesses, the retailers, and being able to get that product to them faster than potentially a multi-state operator. Who’s going to have distribution centers all over and they have a 72 hour lead time or a larger lead time than that compared to where you may be able to turn it over in 24 hours, you can charge a premium for that. So just think about where you want to put yourself with that. And the last thing I want to bring up about this interstate commerce for cannabis is that this could alleviate a lot of the medical patient supply issues.

So when new States turn on for recreational cannabis, you see that lots of operators are going to switch over. If they are medical. Now they’re going to probably divert a lot of their gross space, if not all of it to recreational cannabis. Cause there’s no supply for that, which means no supply higher prices per pound for the same square footage of grow area. Now we’ll see, hopefully this can actually smooth things out for the patients and their supply, but we really don’t know until this actually gets, uh, opted into, by two governors and ratified by the Congress. Now CLL comes together. If you have any questions or comments on that, drop it into the comment section below, we can reply and kind of have a discussion about this. Maybe hop on for another video, but also if you have any other questions about your cannabis business, interstate commerce for cannabis, anything else financially related to your cannabis business, and please reach out to us via our website at GreenGrowthCPAs.com.

Click that get started button in the top right corner. You can see the link in our bio bio for different ones here and let us know, Hey, do you need help or give us a call (800) 674-9050. Let’s see if we have any questions here from YouTube or on Instagram. Cool. Michael is out here talking about all right, he’s got a touch screen, kiosk, ordering solution for dispensary’s. Uh, we can provide you, yeah, he’s asking. Can we provide guidance on compliance and operations even though I’m not directly in the cannabis industry? Yes, Michael, please reach out to us again, go to our website, click on the, get started page and fill out the form relevant to your cannabis business and a person from our team will reach out to you and walk you through your compliance, thoughts and considerations. I just want to touch on this here real quick for this distribution model we’ve seen in California because of COVID you’re having curbside deliveries being offered.

Now, one of the things that’s kind of cool is that these kiosks, you could potentially put them in local convenience stores and then people actually order their cannabis and it gets delivered to their house or it gets delivered and you can go meet up with the delivery person at the relevant location. It’s a lot of cool ideas of technology that are streaming right now and coming up. So if you don’t want to be directly in as a distributor or as a cultivator, look at technology plays, there’s a lot of money being poured into streamline the technology aspect of cannabis. You know, when you, when we talk to our clients, there’s a lot of people say, Hey, there’s no great all in one solution. I know everybody’s trying to crack that code cause there’s not, you know, out of the box, all in one, a lot of software solutions focused on just their one topic, whether that’s cultivation management, manufacturing, management, they’ll add another components that help them make it become a vertically integrated all in one software.

They’ll look at these plays, fix a pain point for the cannabis industry. Maybe you get to sell that technology company. And then 24 months later, now you can get into your cultivation business with your exit cash. So, Michael, thank you for that question. And again, if you have any other questions about the cannabis industry, send us a DM on Instagram or reach out to us via email or again, go to our website, GreenGrowthCPAs.com click that get started button in the top right corner. And we can help you out and walk you through and consider all the different angles or as many as we can see for helping you through your cannabis business. Again, thank you for your time today. Have a great day and we’ll talk to you soon.

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