California cannabis regulator clarity spurs entrepreneurs to move forward in North Coast
This fall, North Bay cannabis business leaders have been hard at work building and networking to develop a slew of creative proposals. Sonoma County, and Santa Rosa in particular, have emerged as a hub for the industry. The county’s central location, proximity to cannabis cultivators in Sonoma and Mendocino counties, and invitation to submit permit applications have attracted industry professionals from around the state.
‘Uncertainty and dynamic change every week’
Terry Garrett, a co-managing member of Sustaining Technologies LLC, a Santa Rosa-based company that developed the Go Local cooperative network, and Robert Eyler, Ph.D., president of Economic Forensic and Analytics, a Petaluma-based forensic economic and accounting firm, are currently writing a cannabis economic-impact report regarding Sonoma County.
Garrett said the report reveals that there are no patterns in the cannabis industry in the past year that have been sustainable enough to become trends. He said the current state of the North Bay’s cannabis industry is “uncertainty and dynamic change every week.”
“The fluctuations (of the market), the regulations, and how they impact (operators) show there’s been a lot of change in this industry. The cannabis industry had to operate underground (before legalization). It created its own culture, which was ostracized for 80 years,” said Garrett.
Garrett said the good news is that the North Bay is home to a “tremendous cannabis knowledge base” that predates state legalization.
“We also have a sophisticated and experienced consumer market, which numbers close to 30 percent of the general adult population,” said Garrett.
Garrett said it is a concern that in the past year, many experienced cannabis operators have left the region.
“(The drain is) due to an adverse regulatory environment that has triggered economic distress and an exodus of that brain trust. (Yet) we have more (of a) knowledge base than other counties…and other states,” said Garrett.
Garrett added that the North Bay’s cannabis industry also has a stable “of ambitious, entrepreneurial folks” who are very resilient.
“You have to be almost much better at business than anyone else to survive that. When you’re a cannabis operator, you get no banking, pay way too much in taxes and fees, and have a shortage of people who can (work in the industry),” said Garrett.
Eyler said it is also helpful that the cannabis marketplace is becoming more professional.
“There is also a hard line developing between those who are complying with local and state regulations and those who are very content to roll the dice and produce cannabis to move it to other states. Local government is trying to balance between two worlds, making consumption temperance a priority and being relatively open-armed to it because they want the revenue,” he said.
Eyler said one advantage that the North Bay has over other parts of the Bay Area is its proximity to local cultivators and cultivators to the north in Humboldt, Mendocino, and Trinity counties.
“The North Bay’s location allows it a lower transactions cost of doing business than in Los Angeles, San Diego, or Fresno. But that won’t last forever,” said Eyler.
Production line gears up in Santa Rosa
In early 2019, Annie Holman, the former owner of a Petaluma gourmet edible company, Derby Bakery, plans to open an 8,300-square-foot cannabis product-manufacturing space on Sebastopol Road in Santa Rosa. Holman co-founded The Galley with two partners.
Holman said the group hopes to break ground in mid-2019 on an additional 20,000-square-foot second building next to the first building.
“At our cannabis contract manufacturing facility, we’ll start by focusing on five (different types of products), baked goods, both sweet and savory, topicals and tinctures, hard candies and gummies, chocolates, and … cans, bottles, and power shots of drinks that contain cannabis,” said Holman.
The Galley will have a large commercial equipment and also run a bottling line.
“Our customers are interested in ‘white labeling,’ (or) contract manufacturing where we make the products for them. We’ll also rent out shared kitchen space to customers who would prefer a more hands-on approach. In addition, we’ll have our own product line of THC/CBD products such as edibles, beauty products, beverages and vapes called Big Fish,” said Holman.
Holman said that in the past three months, she has talked to over 75 cannabis business operators interested in having The Galley make products for them.
“We have heard from operators in the North Bay and throughout California, as well as cannabis companies from Arizona and Oregon who want to enter the California market. Most of our potential customers want us to source ingredients like eggs, sugar, and chocolate, and high-end extracts for their products. Right now I am working on finding suppliers for organic, fair-trade (ingredients),” said Holman.
Holman said The Galley also plans to make its property a community cannabis campus.
“We own shipping containers that are being retrofitted as meeting spaces and painted by local artists. We plan to fill them with comfy furniture, rugs, and lamps, install sliding glass doors, and cover the space between them for outdoor gatherings as well. We will host educational events at our facility, and support organizations such as the Sonoma County Growers Alliance and Women’s Cannabis Business Development Group. We’d like to see a cannabis and seniors program, as well as support our veterans,” said Holman.
Helping North Bay cannabis businesses stay legal
Tawnie Scarborough, co-founder of Canna Code Compliance, a Santa Rosa-based cannabis business consulting company, said in the coming year, she is looking forward to supporting the business’s 50+ clients. Canna Code Compliance advises cannabis businesses from Trinity County to Long Beach, with most of its clients are in the North Bay. Canna Code Compliance assists cannabis businesses with creating business plans, obtaining local permits, and submitting applications for state licenses.
“My co-founder Brian Elliott is a retired fire chief from Cloverdale, so he has a great deal of fire and building code knowledge,” said Scarborough. “We help clients understand the permitting and licensing process and how to bring their business into compliance. Sonoma county remains the center of a lot of activity. Napa and Marin Counties are slowly opening up, with San Rafael showing the most constructive leadership in the two counties. The city of Napa has been more receptive to retail cannabis stores in particular.”
Scarborough said much of Canna Code Compliance’s focus has been working with clients to make sure their cannabis business model’s goals are compliant with local and state laws. Recently, several new “synergy partners” joined the Canna Code Compliance team to provide expanded services.
“We have four people on staff. We are bringing in a California Environmental Quality Act expert, a land use expert, Standard Operating Procedure writers, OSHA and waste management specialists, (and someone familiar with) water rights. All of these subcontractors will make up a broader technical knowledge base,” said Scarborough.
Scarborough, who co-founded the trade group Sonoma County Growers Alliance, said local cannabis business owners are most successful in starting ventures in Santa Rosa and San Rafael.
“These two cities are the North Bay’s leaders in creating successful cannabis programs. They keep cannabis programs in balance with the rest of the community. They both have made a very concerted effort to attract quality cannabis businesses. (They) are truly committed to the success of the businesses in their permitting programs,” said Scarborough.
From urban cultivation to ’70s disco
Brandon Levine, founder of Mercy Wellness Center in Cotati, said in the coming year, he will open two cannabis dispensaries in Santa Rosa.
“We plan to open Mercy Wellness Santa Rosa at 900 Santa Rosa Avenue. This dispensary will keep with the style of Mercy Wellness in Cotati. We also plan to open Doobie Nights, a 1970s, disco theme retail dispensary, at 3011 Santa Rosa Avenue. In addition, we are expanding our flagship store in Cotati from a 720 square foot retail space to a 2,300 square foot retail space. We are putting in a 20-foot wide window in front to showcase a high-end indoor cultivation facility and a 20-foot window in back to reveal an extraction facility. We’ll offer a concierge service to help patients understand where their medicine comes from,” said Levine.
Levine said Mercy Wellness has also been approved to open two indoor cannabis cultivation facilities, Lierre in Cotati and Flureon in Santa Rosa. Each facility is 10,000 square feet and cost about $2 million.
“Lierre and Flureon should be completed in three to four months (by the end of February 2019). The steel beams for Mercy Wellness Santa Rosa just went up. We’re still filing the application to get approval for Doobie Nights. That may take five to six months (by the end of May 2019). By 2020, we expect to have hired at least 75 additional people for the various facilities,” said Levine.
Levine said the idea for Doobie Nights came out of a lot of brainstorming.
“Due to the volume of applications that Santa Rosa is seeing, we wanted to do something a little different. We expect tourism to come to Sonoma County. We want to stand out and offer an experience you won’t get at other dispensaries,” said Levine.
Levine said another project he hopes to see come to fruition in the coming year is Eyler’s report.
“I am the one who organized the creation of this report. I helped raise $25,000 for the report, with a substantial amount of the funding coming from Mercy Wellness Center,” said Levine.
Levine said although he has been planning the construction of the new businesses for at least three years, this fall is a pivotal time for the North Bay’s cannabis industry. Before the final regulations are issued in December 2018, Levine wants to “maintain a moment of moving forward.”
“You really have to get approval locally. You have to maintain communication with the city and the county in which you want to do something new. That’s why I have succeeded in Santa Rosa and Cotati. Property owners are open to us using the spaces for cannabis. Both cities have been great to work with,” said Levine.