One day, California was a medical marijuana market; the next, it was adult use, reaching millions of additional Californians and tourists. The switch is simple when laid out that way, right? The reality, however, is much more complex.
For California cannabis businesses, including Caliva, the evolution from a medical marijuana dispensary to adult-use sales was the result of months of careful planning. The efforts included updating product packaging, lab testing regulations and stocking up on product to ease into the new year. For retailers and other cannabis businesses located in states on the verge of legalization, these action steps could save you time along the way.
How to Begin Preparing for Recreational Marijuana Sales
Caliva was among the scores of businesses in California to open its doors for adult-use sales on January 1. But even on our first opening day in 2015, the prospect of an adult-use market was always on our minds. Here are some tips we learned on how to successfully convert from medical to recreational cannabis sales.
1. Identify regulations associated with your license type(s)
We began by identifying which license types we’d need and the regulations associated with each type. As a vertically integrated company, Caliva holds licenses for every step of the supply chain (11 total), so we reviewed all 278 pages of California’s temporary regulations. We found it helpful to have one or two people distill the information into smaller, easier-to-understand chunks. Breaking down all the information also helped us identify key stakeholders and departments, and the degree to which they’d be affected by the new rules.
2. Form committees with stakeholders and meet often
After Prop 64 passed, we formed internal committees to address areas like regulation, purchasing planning, and marketing strategy. Each committee comprised department heads and other stakeholders for each department and license type. Once the Bureau of Cannabis Control released its temporary guidelines in November 2017, planning ramped up.
Caliva General Manager Erika Henika and the rest of the company began a thorough analysis of what was ahead. “We came together as a company to read and talk through all regulations and list out pain points and plan how to overcome potential obstacles,” Henika recalled. “We had consistent meetings to assign projects and to problem solve any issues.”
Some issues required the help of partners. “We partnered with our POS system to ensure the proper setup was ready and we were able to receive the new recreational customer in the most compliant manner,” Henika said.
3. Communicate with city and state regulators
A working partnership with the city and state is just as beneficial. Henika said departments for both levels of government are excellent resources for answering compliance questions, a sentiment shared by Compliance Manager Jessica Box. “Make friends with your regulators! We’ve been able to establish great relationships with the City of San Jose and that has been invaluable,” she said.
4. Proactively address potential pain points with customers
Some facets of converting to recreational sales are out of a dispensary’s control. One of the more significant customer pain points hinges on taxes. “Trying to explain all of the taxes is still proving to be difficult,” Henika noted, particularly when speaking with a long-time medicinal marijuana patient why a product doubled in price.
Packaging costs and vendor packaging have also been lingering sticking points, Henika said. These pain points are being felt across the state and should serve as lessons for states like Massachusetts, Maine and Vermont, where adult-use markets will soon exist.
5. Stay up-to-date on regulations
The work doesn’t end once your business opens. Compliance remains a top priority for the Caliva team, who make it a point to continue training and informing one another of the latest developments in the industry.
According to Box, maintaining compliance is a daily effort. “We constantly monitor the CA Cannabis Portal and the Department’s websites and we are subscribed to the Department’s email lists. We keep the three sets of regulations readily available for our reference when asked questions specific to 2018 rules. We read though the regulations on almost a daily basis – not in their entirety!”
It’s Never Too Early to Prepare
Henika and Box agree: start preparing now for adult-use sales, no matter where your state is in the conversation. Putting processes in motion now, like staying up-to-date on compliance issues, will make it easier for your business down the line.
Have more questions about compliance? Check out our cannabis compliance webinars for answers to frequently asked questions.