California’s Cannabis Industry Still Struggling with Systemic Hurdles and Local Veto Power, Says Industry Consultant

LOS ANGELES– The cannabis industry in California is still facing major obstacles despite being the most populous state in the US. Many businesses are struggling to turn a profit in the market due to a range of systemic issues. One of the key issues is the veto power that local governments have over commercial cannabis companies. This has limited the number of retail outlets that can sell legal cannabis and where they can operate. Since the legal market launched in 2018, roughly two-thirds of local governments across the state have kept bans on marijuana companies in place.

More cities and counties have started to allow some level of licensed cannabis operations, but the pressure on the broader industry remains high. According to Hirsh Jain, founder of Los Angeles-based Ananda Strategy, the “dual licensing” system in California is “fundamentally broken”. The system requires businesses to obtain both city or county permission as well as a state license before launching operations, making it nearly impossible for stores to open.

Jain believes that the most local governments lack the resources, time, manpower, or expertise to write their own ordinances and regulations to govern the cannabis industry effectively. This has led to time-consuming bottlenecks that drive entrepreneurs broke before they get a chance to compete in the cannabis market. Jain cites several examples, including the city of Fresno, which has opened only two out of 21 licensed shops, and the L.A. suburb of Corona, which has opened only one of 12 licensed shops. Another L.A. suburb, Stanton, has opened none of its four licensed shops, while the coastal city of Oxnard, between L.A. and Santa Barbara, has only opened one of 16 licensed shops.

Jain also mentioned that cities that passed retail ordinances in 2019/2020 have still not seen those stores open, 3-4 years later, indicating that something is fundamentally wrong with the licensing process. The convoluted and time-consuming local approval processes in these cities involve so many different steps and departments, some of which are not even staffed. Consequently, many stores never open, leaving many entrepreneurs broke before they even get started.

Jain’s memo highlights a systemic issue that the cannabis industry is still grappling with in California. As the market continues to evolve and grow, there is a pressing need for regulatory clarity and streamlining of the licensing process to enable entrepreneurs to succeed in the cannabis industry.

(This information is primarily sourced from Reportlinker.  Highly Capitalized has neither approved nor disapproved the contents of this news release. Read our Disclaimer here).