0820_AUG Comstock's Magazine 0820 August | Page 48

CANNABIS
n an economy that’s been on the
downturn since mid-March, not
many Sacramento businesses
can report a spring of sunny sales
numbers. Two cannabis companies
that Jeffrey Dillon co-owns
— Stillworx Cannabis Refinery and
Condorz, a distributor — are among
the few.
The COVID-19 pandemic brought
more clients to Condorz, which Dillon
says he and his business partner started
in November 2018 under another name.
Tight procedures for maintaining
sanitation matter more than ever now,
so they’re getting requests from other
manufacturers for
help with distribution.
“We’ve always prided
ourselves on having
some of the cleanest
distribution trucks
in the business,” he
says. Sales across the
two companies rose
at least 20 percent
from mid-March to
mid-May. In the third
week of May, the company
hired two more
people. “April was a
tremendous month,”
he says.
He’s not alone
among local cannabis
businesses, which
are reporting revenue
that held steady amid
the biggest economic
slide since 1929. Their experience fits a
pattern statewide of sales in April and
May that mostly kept pace with or outperformed
the year-to-date average for
2020 as a whole, according to cannabis
industry data firm BDSA. Other BDSA
data show even stronger performance:
Statewide sales in May were 15 percent
higher than those in April and 15 percent
higher than May 2019, says BDSA
executive chairman and cofounder Roy
Bingham. Opinions in the industry vary
on whether that will continue as the
jobs blowout erodes consumer spending
even more. But even if the pessimists
are right, Sacramento’s marijuana
companies may be better positioned
to hold steady through this crisis than
others around the state and country.
As job losses mount in the Capital
Region, industries that can weather
downturns will be key to recovery.
Their employees will spend money
locally as area retail struggles to revive.
Their employers will pay state and local
taxes as governments dig out of budget
deficits. Their shareholders will take
less of a hit. And investors looking for a
hedge against future economic declines
will take notice.
In 2012, CNBC reported certain
product sectors came through the 2008
“A lot of the (cannabis investors)
who went into (Las Vegas) went to
it specifically because the attraction
was, ‘Oh, my God, look how many
visitors show up every year, so let’s go
big, and let’s build these gigantic retail
stores.’ I think (Sacramento cannabis
businesses) are faring better
because our demand is organic.”
KHURSHID KHOJA
FOUNDER, GREENBRIDGE CORPORATE COUNSEL
Great Recession relatively unscathed
— beer and wine, death services, and
health care among them. Will cannabis
get added to that list?
Essential but embattled
Industry supporters cheered Gov.
Gavin Newsom’s declaration March 20
categorizing licensed cannabis businesses
as essential so they could stay
open during the lockdown. But at that
point it seemed like the only good news
for the industry.
Marijuana companies had to make
costly changes that raised operating
costs. Sacramento dispensary A
Therapeutic Alternative invested in
enhanced sanitization and new social
distancing procedures; added new
positions for curbside pickup, online
ordering and phone orders; and gave
employees a 20-percent hazard pay
boost, all of which added about $5,000
a month to expenses. ATA’s sales peaked
following the governor’s announcement
— March was its best month ever,
says CEO Kimberly Cargile. But in the
first week of April, they dropped. Given
the company’s higher overhead, “We
were really worried,” she says.
It didn’t help that the April 18-19
Cannabis Cup — a music and marijuana
festival in Sacramento
— had to be
canceled. It was a premier
event for local
cannabis businesses
to promote their
wares and advertise
their presence.
And the industry
is whipsawed by
federal rules. The
federal Families
First Coronavirus
Response Act, passed
March 18, treats
cannabis businesses
with fewer than 500
employees like any
other: They must
offer up to 10 days
of paid sick leave to
employees out for a
coronavirus-related
absence, including taking care of
kids out of school or day care because
of the shutdown. But unlike
other businesses, they won’t likely be
reimbursed by the IRS for the costs
of covering that leave because their
product is illegal under federal law.
That also makes them ineligible for
any of the several streams of relief
from the U.S. Small Business
Administration.
Federal rules complicate their ability
to keep customers safe. Since the industry
is still unbanked, cannabis businesses
are forced to handle cash at a time
many firms are moving to plastic.
48 comstocksmag.com | August 2020