Alcohol distributors as marijuana middlemen

Beer, wine and liquor distributors — long-time big-money backers of cannabis prohibition — stand to gain from new regulations governing California’s $1.3 billion medical cannabis industry.

One of the landmark laws Gov. Jerry Brown signed Oct. 9 calls for the creation of a new kind of business to regulate the flow of all cannabis products in California, essentially middlemen like beer, wine and liquor distributors but with authority over quality assurance and product testing.

Licensed distributors would receive cannabis products — flowers, concentrates and edibles, unpackaged for further processing or packaged for retail sales — and submit random samples for lab testing and certification before performing final inspections and delivering products to manufacturers and retailers.

Distributors can hold lab-testing licenses and perform in-house analysis. Distributors may charge fees that cover the testing plus any applicable taxes.

While the creation of a licensed distribution scheme is the first of its kind in any state that allows medical or recreational cannabis, it is not unexpected as the alcohol industry has begun to infiltrate and embrace the cannabis industry after realizing pot is not booze’s bogeyman.

Alcohol industry groups had feared cannabis legalization would cut their profits. Turns out, alcohol sales are riding high. In the 18 months since recreational pot was legalized in Colorado, alcohol excise tax receipts rose 2.1 percent. “We’ve just seen phenomenal growth,” a Denver liquor store owner told The Guardian recently.

“There’s definitely some crossover in the two communities of beer drinkers and herb enjoyers,” said Bryan Simpson, spokesman for New Belgium craft brewery. “But I don’t think people are doubling down in one category or the other.”

Alcohol distributors are by far the most involved in state politics among their booze-business brethren. In 2015, state alcohol wholesaler alliances had at least 315 registered lobbyists spread across every state and the District of Columbia, except Wyoming, according to a Center for Public Integrity analysis. Wholesalers pour most of their money into statehouses. They gave roughly $14.6 million to state candidates, parties and ballot issue groups in the 2014 elections. Alcohol manufacturers, meanwhile, gave about $5.3 million and retailers gave about $2 million, according to data from the National Institute on Money in State Politics.

In 2010, the California Beer & Beverage Distributors made a $10,000 contribution to Public Safety First, a political action committee fighting Proposition 19, a measure to legalize recreational cannabis in the Golden State. Whether it played any role in crafting the call for cannabis distributorships in AB 266 this year, the CBBD took no public position on the law that creates lucrative opportunities for companies experienced receiving, processing, shipping and tracking regulated products.

This year in Nevada, wholesalers contributed $87,500 to a 2016 ballot initiative that would give alcohol distributors exclusive control for the first 18 months of the state’s recreational cannabis market.

“Experience matters,” said Joe Brezny, spokesman for the Nevada legalization initiative group, whose leaders avoided a fight by consulting with alcohol distributors when they wrote their measure.

Alcohol distributors, however, have no experience handling raw agriculture products.

AB 266 seeks to prevent large-scale operations from monopolizing the market. Cannabis industry lobbyists say the system gives distributors too much power.

“We’re very concerned about basically mandating the distribution model for the entire state, because what that will do is allow a few organizations to control the price structure for the entire state, kind of like the exact same way the spirit distributors do it now,” said Nate Bradley, executive director of the California Cannabis Industry Association, told the Sacramento Bee.

Steve DeAngelo, executive director of the Oakland-based Harborside Health Center, said, “It would give a huge amount of branding and marketing power over to the distributors. Supply and demand is going to dictate that the distributors will have much more economic power than the farmers would.”

Hezekiah Allen, executive director of the Emerald Growers Association, disagrees.

“Getting cannabis from the far north in Siskiyou County to the far south in San Diego County is virtually impossible,” Allen said.”An alcoholic beverage can get from a producer to a distributor to a retailer anywhere in the state in two days.”

The Colorado Marijuana Enforcement Division used the Metrc system to track plants but has no distribution licensing scheme. In Washington and Oregon, two other recreational cannabis jurisdictions, state Liquor Control Boards regulate cannabis; growers and manufacturers self-test and deliver their own products to retailers. Oregon lawmakers are just starting to draft license regulations for producers, processors, wholesalers, retailers, laboratories and researchers.


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