California’s Cannabis Industry Market Update - Targeted Growth Opportunities
At $5.1 billion dollars in total cannabis sales in 2023, California is still considered the world’s largest and most lucrative cannabis market with the same revenue streams as a small nation’s GDP. However, that has belied some of the challenges that cannabis businesses in the State have been facing, including a high local and State excise tax structure that impacts profitability and a powerful illegal market. In fact, when viewed not based on total market size but on a per capita rate, California is actually outperformed by several other markets, such as Michigan’s, which saw per capita sales at approximately 3x California’s in that same year.
Yet California is still a central player in the cannabis industry, with some of the nation’s largest cannabis company’s calling it home and with some of the most successful brands in the State still seeing huge revenues and profits. So the question becomes, is the opportunity in California already exhausted or is there still a chance for entrepreneurs to grab ahold of some of that $5Billon+ market share. The answer is yes – but only if you find the right niche on the wholesale side, or the right location on the retail side. And it’s on the retail side that the State still has plenty of organic opportunities to provide.
New Cities Allowing Cannabis Retailers
As many know, more than half of the California’s municipality’s passed moratoriums when the State legalized adult-use cannabis in 2018. Since then, municipalities have been slowly opening up in many of the underserved areas of the State, creating an immediate lucrative retail opportunity and, eventually, bringing wholesale demand back to initial per capita levels. The current CA Cities to watch are:
Baldwin Park – A city of over 75,000 people in Los Angeles County, is currently accepting license applications. The City permits indoor commercial cultivation, manufacturing, distribution, and laboratory testing of cannabis and cannabis products and limited retail. However, only cannabis business with a license from the City prior to July 1, 2021, and are in good standing can apply for a retail cannabis license. There is no deadline but there is a limit on the number of licenses that will be approved. The City will issue a maximum of 25 cannabis permits including the exclusive distribution permit that has already been issued. As of January 1, 2024, there were licenses available. Please contact Global Go to confirm the number of available licenses and if you qualify.
Clairmont – A city of over 36,000 people in Los Angeles County, currently prohibits commercial cannabis businesses but allows the delivery of cannabis from businesses outside of City limits. However, on November 8, 2022, Claremont voters approved Measure CT, establishing tax rate ranges for commercial cannabis businesses, and on January 24, 2023, the City Council approved tax rates for commercial cannabis businesses based on the tax rate ranges approved by voters. The Council approved a 6% tax rate for retail, 6% tax rate on deliveries, 4% rate for manufacturing, 3% for distribution, 3% tax on cultivation, and 2% for testing and laboratory.
To allow cannabis businesses in Claremont, the City Council would need to approve an amendment to the Claremont Zoning Code. This would require the City Council and City Planning Commission to conduct noticed public hearings to determine which types of cannabis businesses, if any, would be allowed in Claremont and where they would be permitted to operate. On Tuesday, February 6, 2024, the City Planning Commission discussed possible cannabis regulations, with City Staff presenting an overview of potential City cannabis regulations and zoning. This is the first City Commission meeting in a series of public meetings and hearings on this topic that will take place this year.
Pacific Grove – A small beach town in Santa Barbra County (population just over 15,000 but a median income above $50K), the City is looking to hold a round of retail applications later this year, having unanimously passed an ordinance allowing one retail location, as well as delivery services, on Nov. 1st, 2023. The council must still approve local cannabis regulations and must decide on an application process to determine who will receive the single retail license. Due to the city’s small size and the State’s 1,000-foot School zone distance requirement, cannabis retail dispensary locations are likely limited to either the upper Forest Hill business district or the industrial area near Asilomar.
Redondo Beach – A decent sized city of over 70,000 people in Los Angeles County, Redondo Beach citizens have a median income of $63,700 (2020). The City has been attempting to begin their application process for almost a year but has seen several setbacks due to issues with a former contractor. However, those issues appear to have been largely resolved and so the City is expected to begin licensing sometime in Q2 2024. While much of the process has yet to be released, what is known is that an applicant will be required to have a leased or owned property within the City’s zoning requirements in order to apply. Please contact Global Go for further information about zoning and other requirements.
Santa Monica – The City of Santa Monica is perhaps one of the most famous areas of Los Angles County, sporting a famous beach and Board walk, as well as a dense population that includes some of the wealthiest in Los Angles. Currently, the City only allows for 2 medical cannabis dispensaries, but at a City meeting in June 2023 the City Council indicated their interest in expanding the number of licensees and in allowing for adult-use cannabis retail dispensaries. This is important not only to allow for expanded cannabis access, but also to allow the City to capture tax dollars from the large number of tourists visiting their pier. Then, in October 2023, the Council approved changes allowing for adult-use cannabis sales and delivery for the two currently licensed medicinal cannabis retailers and approved an Interim Zoning Ordinance that would remove certain requirements and permit retailers within the city to deliver, cultivate, and sell adult-use cannabis or adult-use cannabis products to persons 21 years of age and over. The Council also directed the creation of an ordinance permitting adult-use cannabis in more areas of the City. Implementation of council direction is forthcoming, with discussion on the topic scheduled for March 19th, 2024. Please contact Global Go for further information
Santee – Just west of San Diego, the City of Santee has a population of just under 60,000 people. On March 13th, 2024, the City passed a new Ordinance allowing for the manufacture of cannabis in their light industrial zones. The City also currently allows for up to 4 adult-use retail dispensaries; however, it appears that only 2 are currently active in the City. Please reach out to Global Go for information on licensing availability.
West Sacramento – As the name implies, West Sacramento is a small City that borders the State’s capital just to its West. While the City itself only has a population of about 54,000, it is within easy driving distance of the 519,000 people who live in the Capital, including a large number of college students. While currently the City only allows wholesale distribution, testing labs, manufacturing, and indoor cultivation, an ordinance allowing both storefront and non-storefront retail cannabis licensing has already been passed. City Staff are in the process of developing the retail licensing program for further consideration by the City Council. Please reach out to Global Go for updates on this process.
Winters – The City of Winters, CA, sits just between Sacramento and San Franciso, just east of the Napa Valley. While having a small population of around 8,000 people, it’s a picturesque area that sees tourism from local wineries and National Parks. In April of 2023 the City approved grant funding to explore commercial cannabis and discussed efforts to update the city’s General Plan. Then, in February of 2024, the City Council and Planning Commission held a Public Workshop on the cannabis industry and to discuss what license types would be allowed, with a specific emphasis on retail cannabis dispensaries. Please reach out to Global Go for updates on this process.
While the above Cities are those that are most recently looking to open themselves for new local cannabis licensing, several other cities and counties, such as Riverside County, allow for open licensing or have not yet reached their licensing caps. Further, the other closed municipalities are continuing to slowly open their doors to new opportunities for cannabis entrepreneurs. So California, the largest cannabis market in the world, continues to be a dynamic market with multiple opportunities, though anyone looking to get into the space should analyze each jurisdiction carefully to avoid the pitfall of so many in the space – entering an already saturated market with a sound plan to capture market share.
Global Go specializes in cannabis licensing and applications (99% win-rate over 300 applications), compliance automation, advanced analytics, SOPs, training, mergers and acquisitions, new product launches, technology, and best practices. Seize this opportunity and position yourself as a leader in the dynamic California market by reaching out to a Global Go Application Director today!