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Marijuana market mellows

Six months after the first recreational pot stores opened in Clark County, challenges still lie ahead

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Dan Penticoff, 55, of Hazel Dell, was the third person to purchase marijuana from Main Street Marijuana when it opened on July 9.
Dan Penticoff, 55, of Hazel Dell, was the third person to purchase marijuana from Main Street Marijuana when it opened on July 9. He says he had to go back to buying it on the black market after prices spiked in late summer. Photo Gallery

2014 marijuana timeline

July 9: Main Street Marijuana opens in Vancouver.

July 11: New Vansterdam opens in Vancouver.

Through July: Prices average about $25 per gram.

July 12: Main Street Marijuana runs out of stock and closes.

July 13: New Vansterdam runs out of stock and closes.

July 15: Main Street Marijuana gets new stock and reopens — random openings and closings follow for the next two months.

July 18: New Vansterdam gets new stock and reopens briefly, then closes again — random openings and closings follow for the next two months.

July 26: Mint Tea in Vancouver holds cannabis-friendly new moon event.

Aug. 1: After the Liquor Control Board threatened to take Mint Tea’s liquor license, the restaurant announces it will no longer hold cannabis-friendly events.

Aug. 5: The Liquor Control Board releases first list of approved edibles, but supply won’t be readily available until November.

Aug. 7: Federal tax issues emerge; stores have to raise prices to compensate and more price spikes result.

Mid- to late August: Prices skyrocket to upwards of $40 a gram and stay there for several weeks.

Aug. 14-17: First CannaCon business convention in Tacoma.

Aug. 15-17: First post-legalization Seattle Hempfest.

Sept 2: Vancouver’s CannaMan Farms announces it has created two brand new cannabis strains.

Sept 9: Stickey’s, a pot shop in the county on Highway 99, is approved but can’t open because of the unincorporated Clark County ban.

Sept 18: The Marijuana Business Association holds its first meeting in Vancouver, with a large local crowd attending.

Oct. 6: Stores say pot supply is finally starting to improve, but prices remain over $30 a gram for most strains.

Early Nov.: Cannabis Country Store holds a soft opening in Battle Ground.

Early Nov.: Prices start dropping. Some supply becomes readily available at $20 to $25 a gram.

Late Nov.: Some prices go as low as $15 a gram.

Nov. 26: The day before Thanksgiving — not Green Friday, as merchants were anticipating — breaks statewide sales records, with sales of more than $1 million.

Nov. 28: Green Friday statewide sales of $630,744, a solid day but not nearly as much as the pre-Thanksgiving spike.

Dec. 10 and 11: Cannabis Country Store holds grand opening.

Mid-December: Some stock regularly drops to $10 a gram (a few earlier holiday sales also had limited supply at $10 a gram).

Marijuana industry in Clark County

Growers

Agrijuana

CannaMan Farms

Cedar Creek Cannabis

Crescomax

Fairwinds Manufacturing

Gensys One

Going Green

Black Alpaca

Stores

Cannabis Country Store, Battle Ground

Main Street Marijuana, Vancouver

New Vansterdam, Vancouver

Monthly statewide marijuana sales

July: $3,368,368

August: $7,261,712

September: $8,722,872

October: $13,003,684

November: $16,069,276

December: $14,993,495

(Through Dec. 29)

Ramsey Hamide looked across the packed shelves and piled boxes of product in the cramped backroom of Main Street Marijuana and stretched out his arms.

“Look at this,” the store manager said, smiling victoriously. “Nonstop, growers are coming, bringing us samples, new products.”

It’s a vastly different world from six months ago, when Main Street, Clark County’s first recreational marijuana store, opened its doors on July 9 to widespread shortages.

For the first few months, Hamide spent days on the road, courting growers across the state and trying to build relationships that would secure at least a modest amount of stock for his mostly barren shelves.

But by November and December, the situation had changed significantly, with growers coming to Vancouver to court him, hawking a wide variety of strains, edibles, lozenges and even some oils and concentrates.

Shortly before he spoke to The Columbian on a December afternoon, a new grower dropped by unannounced with a bag of samples for store employees to try, hoping to make a sale. The asking price per gram was too high, so employees sent him away — something unheard of just six months ago.

2014 marijuana timeline

July 9: Main Street Marijuana opens in Vancouver.

July 11: New Vansterdam opens in Vancouver.

Through July: Prices average about $25 per gram.

July 12: Main Street Marijuana runs out of stock and closes.

July 13: New Vansterdam runs out of stock and closes.

July 15: Main Street Marijuana gets new stock and reopens -- random openings and closings follow for the next two months.

July 18: New Vansterdam gets new stock and reopens briefly, then closes again -- random openings and closings follow for the next two months.

July 26: Mint Tea in Vancouver holds cannabis-friendly new moon event.

Aug. 1: After the Liquor Control Board threatened to take Mint Tea's liquor license, the restaurant announces it will no longer hold cannabis-friendly events.

Aug. 5: The Liquor Control Board releases first list of approved edibles, but supply won't be readily available until November.

Aug. 7: Federal tax issues emerge; stores have to raise prices to compensate and more price spikes result.

Mid- to late August: Prices skyrocket to upwards of $40 a gram and stay there for several weeks.

Aug. 14-17: First CannaCon business convention in Tacoma.

Aug. 15-17: First post-legalization Seattle Hempfest.

Sept 2: Vancouver's CannaMan Farms announces it has created two brand new cannabis strains.

Sept 9: Stickey's, a pot shop in the county on Highway 99, is approved but can't open because of the unincorporated Clark County ban.

Sept 18: The Marijuana Business Association holds its first meeting in Vancouver, with a large local crowd attending.

Oct. 6: Stores say pot supply is finally starting to improve, but prices remain over $30 a gram for most strains.

Early Nov.: Cannabis Country Store holds a soft opening in Battle Ground.

Early Nov.: Prices start dropping. Some supply becomes readily available at $20 to $25 a gram.

Late Nov.: Some prices go as low as $15 a gram.

Nov. 26: The day before Thanksgiving -- not Green Friday, as merchants were anticipating -- breaks statewide sales records, with sales of more than $1 million.

Nov. 28: Green Friday statewide sales of $630,744, a solid day but not nearly as much as the pre-Thanksgiving spike.

Dec. 10 and 11: Cannabis Country Store holds grand opening.

Mid-December: Some stock regularly drops to $10 a gram (a few earlier holiday sales also had limited supply at $10 a gram).

“They come pretty much every day now, they pitch, they give samples, sometimes they come twice a day,” said Janie Rayburn, a “budmaster” who runs the back stock room.

With more than 50 strains of marijuana on the shelves at the three operational stores in Clark County, the Washington market is finally starting to normalize.

But recreational marijuana in Washington still faces challenges. The drug is still illegal federally, which has led to some odd tax complications that could make it hard for Washington businesses to compete with Oregon’s impending legal market. Felony prosecutions for the drug are relatively low, but the black market has continued to thrive through price spikes and shortages of the early months of legalization. Out-of-state challenges and federal law changes could further complicate the situation.

Still, the market is improving and prices are dropping — and the worst uncertainties seem to have passed.

Bumpy start

The era of legalization in Washington began with what almost everyone would call a bumpy ride.

Marijuana industry in Clark County

• Growers

Agrijuana

CannaMan Farms

Cedar Creek Cannabis

Crescomax

Fairwinds Manufacturing

Gensys One

Going Green

Black Alpaca

• Stores

Cannabis Country Store, Battle Ground

Main Street Marijuana, Vancouver

New Vansterdam, Vancouver

Initiative 502, the measure that legalized marijuana in the state, passed in November 2012, with 55.7 percent of the vote. The state Liquor Control Board started taking license applications in December 2013, and began the approval process in early 2014. It allowed unlimited applications for growers and processors in the state, but limited the number of retail stores; 15 were allotted for Clark County.

The state picked store applicants by lottery, with results released in early May. But stores still had to pass through a gauntlet of requirements before they could be licensed. At the same time, approvals for growers and processors moved slowly, with only a handful ready with product when the first stores in the state opened on July 8.

When the store lottery winners were announced in May, there were only 18 approved growers in the state, most of whom were only barely starting to set up their operations.

Clark County also started out with just one grower, Vancouver-based CannaMan Farms, which had limited product available at New Vansterdam when that store opened on July 11.

When the first stores opened, they did so to a significant supply shortage. Main Street and New Vansterdam both found themselves setting limits on how much marijuana their customers could buy. Those limits were generally a few grams per customer, well below the ounce that people are legally allowed to possess according to the new law.

Monthly statewide marijuana sales

July: $3,368,368

August: $7,261,712

September: $8,722,872

October: $13,003,684

November: $16,069,276

December: $14,993,495

(Through Dec. 29)

The shortage also led to higher prices from growers, who were flooded with offers. Compared with street prices of $5 a gram, retail prices began much higher, at about $25 a gram.

Then things got worse. In early August, stores got the unwelcome news that many business expenses they could usually deduct — along with the excise tax they pay to the state — were not federally tax-deductible because of marijuana’s status as an illegal drug.

As stores tried to compensate, grower prices continued to rise. Some stores found themselves in the unenviable position of trying to sell stock for, at peak, about $40 a gram.

“It was just outrageous,” said Dan Penticoff, one of Main Street Marijuana’s first customers. “When that happened, I had to go back to the black market. I got it from friends or other medical patients that were growing.”

Penticoff doesn’t have a medical marijuana card, but uses marijuana for a medical condition to treat pain, he said.

The spikes lasted until October and November, when a cluster of outdoor growers began harvesting and selling their stock.

Signs of stabilization

Through late fall and early winter, the Liquor Control Board plowed through ever more grower licenses, getting to a point where the supply shortage is pretty much over and prices have dropped.

“I think (the lower) prices (of $10 to $20 a gram) will probably be the norm now,” said Adam Hamide, who manages Main Street with his brother.

It’s been a trying year watching the market take shape and dealing with a host of controversy, but things are finally starting to look brighter, he added.

“It’s been good,” Adam Hamide said. “I wish there were more growers sooner, but it’s gotten better quick. Six months isn’t a hugely long time for a new industry to evolve.”

Brian Budz, one of the owners of New Vansterdam, said he’s impressed at how quickly the market corrected. Prices are still a little higher than he’d like, but they’re getting better, he said.

“With the challenges we faced starting out, improvement was inevitable,” Budz said. “With a new market, maturity seems to come at a much faster rate than in an established market.”

Black market

Since legalization was approved in 2012, the number of felony marijuana drug cases has remained relatively small. In 2012, there were 33 marijuana cases, making up just 4.9 percent of the total drug cases filed by the Clark County Prosecutor’s Office. In 2013, there were 20 marijuana cases, or 2.8 percent. And in 2014, there were 28 cases, or 3.8 percent.

“Our principal problems are methamphetamine and heroin, which together make up about 79 percent of our felony drug cases,” said Chief Deputy Prosecutor John Fairgrieve. “My sense (of the marijuana cases) is that we see this little drop in 2013, probably due to confusion about the state of the law. This past year, 2014, there’s probably a better understanding it.”

Most of the county’s felony marijuana cases are related to the black market, typically possession with intent to sell, Fairgrieve said.

But as retail prices continue to drop, the black market will become less viable, which could mean fewer cases to prosecute, he said.

“To the degree that continues, that will decrease the profit margin in illegal sales,” Fairgrieve said. “It probably won’t get rid of the black market, but it could (reduce it).”

Penticoff, who is on Social Security, said he hasn’t been back to stores since late summer, but with prices getting close to $10 a gram, he’s ready to go back to legal marijuana.

“I’m glad to hear they’ve come down,” he said. “That will really be a blessing for me.”

Still, as things start to look up for the young industry, a few looming issues remain — especially as Oregon moves toward legalization.

Oregon’s challenge

Measure 91 in Oregon tasked that state’s Liquor Control Commission with creating a regulatory system for recreational pot by Jan. 1, 2016.

Oregon’s law charges a one-time excise tax to producers only on marijuana sold at wholesale: $35 per ounce for flowers, $10 per ounce for leaves and $5 each for immature plants.

Washington, on the other hand, charges a 25 percent excise tax at three stages between grower, processor, seller and consumer, which will likely keep our prices higher.

Still, some of the tax and cost issues could be resolved with small changes to I-502 in the next legislative session, Budz said.

“I think there will be some changes to the Washington law, and it can be constructed in a way that could lower prices immediately without them changing much at all,” Budz said.

If no changes are made, the larger question in Southwest Washington is whether Clark County businesses will be able to compete with the new market when it launches in Portland.

“I think we’ll have it covered at prices that will be friendly to everyone,” Ramsey Hamide said. “That said, we’ll probably lose some of our Portland customers to cheaper prices there.”

Most retailers here are also expecting a slight boom before the Portland shops come online, starting when possession becomes legal in Oregon on July 1, 2015. The six months to a year between legal possession and the first Oregon stores opening will likely draw even more Portlanders over the border to Clark County, where marijuana is already available at retail stores.

“I think we’ll see the first stores opening there in July 2016, but that would be my highly amateur estimate,” Budz said.

National issues

Larger issues are also looming nationally. In the last election Oregon, Alaska and Washington, D.C., joined Washington and Colorado in approving legal recreational marijuana, and several other states, including California, Michigan, New Mexico, Maine, New York and Massachusetts, are considering their own measures.

But while the tide of legalization rises, the states of Nebraska and Oklahoma are fighting back. In December, those states filed a lawsuit seeking a court order to stop Colorado’s legalization process, saying it runs afoul of federal law and therefore violates the Constitution’s supremacy clause, which says federal laws trump state laws.

The states filed the suit because they say marijuana from Colorado’s legal market is crossing their borders, making it hard for the two states to enforce their own anti-marijuana laws.

Washington State Attorney General Bob Ferguson said he plans to follow that lawsuit in case it spreads to Washington’s neighbors.

“I will vigorously oppose any effort by other states to interfere with the will of Washington voters,” Ferguson said in a news release.

Tribal sales

The federal government complicated the picture further when it announced in December that it would allow American Indian tribes to grow and sell marijuana. That opens the possibility locally that tribes in Southwest Washington could start their own businesses aimed at directly competing with I-502 retail stores and other businesses.

That may threaten some local businesses, but it also could open the door for medical marijuana growers to enter the rec market, said Tom Lauerman, a medical grower in Vancouver.

Lauerman, who couldn’t afford to an I-502 license, said he’s hoping to work with one of the tribes to sell his “Farmer Tom” brand of medical marijuana as a recreational product.

“It’s a real game-changer,” Lauerman said. “I’m already talking to some of the tribes. It could be perfect for us.”

Budz said the notion of tribes selling recreational marijuana is one he hasn’t had much time to consider. But he doesn’t think it will necessarily be bad for business.

“That is an interesting dynamic,” Budz said. “I don’t know how that will affect things, but it will sure be interesting to find out.”

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