Help us Nominate East of Eden Cannabis Co. for MC Weekly’s Best Dispensary of 2019

We’d love your help nominating our first retail store East of Eden Cannabis Co. as the “Best Dispensary” for Monterey County Weekly’s 2019 Awards!

Click here to nominate East of Eden Cannabis Co.!

Grupo Flor Launches New Innovative Product and other Industry News

Is your Vape Cartridge Safe?
Branded cartridges from major industry leaders are particularly coveted for the assumed assurance that they contain a premium concentrate free of contaminants like pesticides, cutting agents, and heavy metals. But what if the cartridges are fakes?
That is a real possibility, as there is a booming wholesale market for empty counterfeit cartridges produced in Shenzhen, China – the very same place where many legitimate cannabis companies source their hardware.
“ Many vape brands are currently testing for Phase 3 and failing. Results are showing heavy metals, with lead being the most common problem,” said Paul Henderson, CEO of Grupo Flor. “The industry is looking for solutions to make sure that this problem isn’t a major disruption in available product.”
Our tempered glass with no glue or resin in our Smoke Stacks Vape allows for pure vapor output without breathing in any hazardous by-products, and the metal we use is Tier 1 medical grade, gold plated alloy.

The LITLZ Flower that Could
Many, if not most cannabis flower consumers are connoisseurs who focus on the smell, size, and shape of larger buds in evaluating quality. In the cannabis world, generally speaking, bigger is better. Grupo Flor’s flower brand LITLZ, however, turns that mantra on its head – creating value in the smaller cannabis buds.
The bigger buds favored by consumers are comprised of little buds clustered together. These little buds are commonly referred to in the industry as “littles” or “smalls.” Smalls are frequently the by-product of the trimming process and typically are used to create pre-rolls or are processed into oil. Simply put, smaller buds are considered a production “by-product.”
In creating LITLZ, Grupo Flor’s Chief Branding Officer and Co-Founder, Gavin Kogan, re-conceptualized how to create an entire product line from these smaller buds. Since “littles” are the same quality as the larger buds and are exactly what consumers pluck off of a larger bud for use in joints or smoking devices – Kogan figured, “This is an opportunity to market these little guys directly.”
What’s exciting about the brand is it re-contextualizes cannabis value and offers high-quality buds at a fraction of the price of their larger counterparts. However, there are challenges, as Kogan points out. “This makes instant sense to industry people,” says Kogan, “they get it right away, but it’s the end consumers that are more challenging. I guess for us, that’s the fun of it – figuring out a compelling way to tell the LITLZ story.”
Consumers can find LITLZ in dispensaries throughout the state and locally at our retail location, East of Eden Cannabis Co.

Lawmakers Reach Farm Bill Deal, Hemp Legalization Incoming
Lawmakers in federal Farm Bill negotiations just announced they have reached an “agreement in principle” that would break a months-long standoff over commodity policy and food stamps disagreements.
The bill’s hemp language, which was inserted by Senate Majority Leader Mitch McConnell (R-Kentucky), is reportedly intact after Sen. McConnell personally followed up with the Farm Bill conference committee to ensure it was included. The hemp provisions will reclassify the plant as an agricultural commodity, removing it from the list of federally controlled substances and allowing farmers to pursue crop insurance for their industrial hemp .
The Farm Bill negotiations were not at all related to the hemp provisions it contained but rather to a request by President Trump that lawmakers include provisions expanding work requirements for people who receive federal food stamps. Supporters have nonetheless waited impatiently for news that the $867 billion spending bill would pass without having its hemp legalization language stripped away.
The bill requires a few more minor details to be hashed out. It will be made publicly available sometime next week before full floor votes in the House and Senate, after which the bill will go to the president’s desk for his signature.

Big Win For the California Cannabis Industry – White labeling is permitted
Another significant win for the marijuana industry is that contract manufacturing, also known as white labeling, may be allowed.
Contract manufacturing allows a licensed maker of edibles or concentrates to produce and package products on behalf of an unlicensed business, such as a celebrity brand or out-of-state company. However, the process can be tricky to navigate.
The BCC removed previous examples from the regulations on what was prohibited to avoid confusion. Now it appears that such licensing agreements will be allowed, provided that the unlicensed brands aren’t calling the shots for license-holding California manufacturers.
What would be allowed is for unlicensed brands to contract out their intellectual property to licensed firms, as long as they’re not directly involved in production or other day-to-day logistics.
“Grupo Flor is cautiously optimistic that White Labeling will be permitted as the industry is ripe for strategic partnerships. The BCC still has the authority to closely review licensing agreements with unlicensed parties, ” said Paul Henderson of Grupo Flor.

East of Eden Cannabis Co.’s Grand Opening and other Grupo Flor News!

Please Join us for our Grand Opening of East of Eden Cannabis Co.
Our doors are open, but our official Grand Opening is scheduled forSaturday, November 3, 2018, at 10:00 a.m. at 514 Work Street, Salinas, California.
This is the first of several East of Eden Cannabis Co. retail stores planned across the State of California.
“After a long road, we are thrilled that our doors are finally open, and we are now able to serve the residents of Salinas, the Central Coast and beyond. East of Eden Cannabis Co. plans to be an integral part of the community and economic development of this region, providing over 110 jobs between our supply chain operations,” said Paul Henderson, Grupo Flor CEO.
East of Eden Cannabis Co.’s 4,500 sq. ft. facility is conveniently located off Highway 101 at the John Street exit. Offering unparalleled service and a customized experience, clients discover a unique setting unlike many cannabis retail stores, with a well-lit, airy and spacious environment designed with comfort in mind. Clients are greeted by sales associates, eager to educate while encouraging the freedom of exploration.
“We strive to create a unique model, unlike other cannabis retail stores. Critical elements of great retail design converge with the unique display needs of cannabis products to create an atmosphere that allows for exceptional service to the customers. Clients can efficiently shop and move to checkout within minutes,” said Mike Bitar, President of East of Eden Cannabis Co. and Co-Founder of Grupo Flor.

Grupo Flor’s Paul Henderso & Gavin Kogan to Moderate Workshops at the 2018 Monterey Cannabis Summit
Building California Brands – Moderator: Gavin Kogan, Chief Branding Office & Co-Founder of Grupo Flor
Marketing and branding is what is going to lead the evolution of the California cannabis industry. This panel will discuss the importance of marketing and branding California cannabis companies and products in an industry rife with hurdles. You’ll hear from marketing pioneers who have creatively forged ahead building and launching brands and products throughout the state. The panel will also explore innovative approaches on how to differentiate your brand based upon positioning the benefits of the region.
The Commerce of Cannabis: Investing and Raising Capital – Moderator: Paul Henderson, CEO, Grupo Flor
This panel will focus on the wide range of funding opportunities for both large and small-scale cannabis businesses and the realities that ensue in these types of partnerships. The panelists will discuss the legal responsibilities and ramifications for both the investors and the invested party; what potential investors are looking for and expect from these investments, and; the types of investments to pursue, whether it’s for start-up, expansion and/or upgrading purposes.

Federal Legislative Look
According to Pew Research Center, about six-in-ten Americans (62%) say the use of marijuana should be legalized, reflecting a steady increase over the past decade. The share of U.S. adults who support marijuana legalization is little changed from about a year ago – when 61% favored it – but it is double what it was in 2000 (31%). Read more… 

State Legislative Look
California’s proposed marijuana business regulations continue to evolve, this time in an updated draft of permanent industry rules released on October 19 by state officials.
The proposed rules – from the state’s Bureau of Cannabis Control, Department of Food and Agriculture and Department of Public Health – touch on areas including marijuana delivery, packaging and events.  Read more… 

Guest Feature: Mat Yourkee

Colombia Turns A New Leaf
Mat Yourkee, Guest Journalist
While CA continues to receive the most amount of attention in the developing cannabis economy, the recent $4B investment by Constellation in Canopy Growth was largely fueled by interests in the developing international markets. Not only is the U.S. behind in terms of national cannabis economic development, it is quickly falling behind other nations that are more progressive, like Portugal, Germany, Israel, Argentina, Colombia and of course, Canada.
Mat Youkee is a consultant and journalist covering Latin America from his base in Bogotá, Colombia. Since May 2018 he has published The Colombia Cannabis Investor , a free monthly business intelligence publication focused on the Colombian medical marijuana industry. He tweets at @matyouke.
Birds of Passage , Colombia’s nomination for this year’s Oscars, tells the story of tribal conflict for control of marijuana drug routes in the country’s northern regions in the 1970s. The story is a timely and tragic reminder that, before Colombia became synonymous with cocaine, it was a hub for high-quality grass for American counterculture.
Today Colombia is in a different place. Over a decade of strong economic growth was capped, in 2016, with a peace treaty with the FARC, the largest guerrilla army. But the fertile soils and ample sunlight still make a great place for growers. Today, a rapidly developing regulatory framework is allowing local and foreign firms to build a legal medical marijuana industry. Read More!

East of Eden Cannabis Co.
East of Eden’s first retail store will open its doors in October, a grand opening day will be announced soon. Unlike most cannabis retail competitors, East of Eden’s customers will be met with iPad-carrying sales associates, eager to educate while encouraging freedom of exploration.

New Faces Join the Grupo Team
Chief Operating Officer – Chuck Drake
Charles (Chuck) Drake joins Grupo Flor as its newest Chief Operating Officer. Chuck, who previously served as a consultant for Grupo Flor’s Harkins Indoor Grow Project, is a consultant, project manager, private equity investor, and founder of several services and support companies in the resource and industrial sectors.  Prior to taking on his current roles, Chuck led a team to develop a series of deep-water robotic drilling tools, founded an offshore mineral exploration company, was active in commercial real estate brokerage, and worked at Merrill Lynch Equity Capital Markets in London, UK. Previously, he served for 8 years as a U.S. Naval Aviator. Chuck received a Bachelor of Science in Mechanical Engineering from the University of Virginia in 1986, and an MBA in 1996 from London Business School.
Sales Development Representative – Anna Quinlan
Anna joins Grupo Flor as the newest sales development representative for the Northern California – East Bay region. Anna has over a decade of sales and marketing experience ranging from pharmaceuticals to advertising to the outdoor and fitness industries. She’s new to the cannabis industry and excited to be part of a growing field that’s poised to shape the economic, agriculture, and legal landscape of California. Anna received a Bachelor of Science in Kinesiology from Westmont College.
Human Resources Generalist – Diana Biddle
With hopes of expanding recruiting and building a strong company culture, Diana Biddle joins Grupo Flor as its first Human Resources Associate. Diana has extensive experience in managing complex human resources and safety programs in the automobile and agriculture industries and hopes to bring her human resources knowledge and experience to Grupo Flor’s rapid growth and development.

Federal Legislative Look
The U.S. House Judiciary Committee approved legislation to force the Department of Justice to issue more licenses to grow marijuana to be used in research. The move comes despite opposition from some drug policy reform groups and Democrats who objected to provisions preventing people with certain criminal records from participating in cultivation operations. Republican leaders agreed to revisit the language as the bill moves to the floor.

State Legislative Look
On August 31, the Legislature adjourned for the 2017-18 legislative session. In addition to the hot end-of-session bills, like wildfire liability and net neutrality, some cannabis bills were still being debated on the Floor. Of the many cannabis-related bills, three have already been signed and one vetoed by the Governor. Twenty-three never made it fully through the legislative process, and these are the 13 bills pending Governor action before the September 30th deadline: Read More!

Local Look
The 2018 Monterey Cannabis Summit is the first conference of its kind on the Central Coast to bring together the knowledge and expertise of cannabis professionals and business and community partners in California’s fastest growing region in the cannabis industry – which blends old school growing and Big Ag .
On December 13 and 14 2018, the Monterey County Cannabis Industry Association (MCCIA) hosted Summit takes place in the heart of Monterey at the Portola Hotel and Spa. MCCIA’s dedicated Board and staff aim to attract leaders and stakeholders in all aspects of the industry – from cultivators, state and local regulators, manufacturers, suppliers, agriculture, organics, investors and so on.
The Summit is a two-day event featuring tours of facilities of some of our industry leaders for early registrants, a cocktail reception, a luncheon with a keynote speaker, breakfast and four workshops delving into the most pressing cannabis issues facing the state and the region. The intent of the summit is to foster collaboration and growth by bringing together a vast array of professionals and enthusiasts from all aspects of the cannabis community.
The 2018 Monterey Cannabis Summit will partner with, and directly follow, the Organic Grower Summit taking place in Monterey on December 12 and 13. Launched by the Organic Produce Network (OPN) and California Certified Organic Farmers (CCOF), the Organic Grower Summit will bring organic growers, producers, and processors to Monterey for two days of education, information and networking opportunities with their production supply chain and support service providers.

Grupo Flor opens its first retail space

With the recent incredible $4B investment by Constellation Brands (Corona) in Canada’s Canopy Growth, the global markets are standing at attention with lots of media focus. This is just the kind of market action that could dislodge the U.S. government from its cannabis position, which prevents the U.S. from participating in a major evolving global market.
While global markets have gathered attention, California remains the industry bellwether. Grupo Flor’s rapid development of its wholesale operations, opening of its first retail space in September and new key hires, pushes the Company to the forefront of this market’s evolution.
What follows are some of the key highlights of this growth.

Coming Soon East of Eden Retail Space
Located in the heart of the Salinas Valley and right off a major Highway 101 exit (John Street), our new retail space, East of Eden Cannabis Co. is opening its doors in September 2018. The name is a nod to the Steinbeck roots that run deep in the local community.
The space is designed with comfort in mind, mixing the feel of a classic art gallery with rustic industrial design. Unlike most cannabis retail competitors, East of Eden’s customers will be met with iPad-carrying sales associates, eager to educate while encouraging freedom of exploration.
“The store design and atmosphere converge to create a space that incorporates critical elements of great retail design, and addresses the unique display needs of our products. This allows us to deliver exceptional service to our customers,” said Mike Bitar, President of Retail Operations and Co-Founder of Grupo Flor.

New Faces Join the Grupo Team
Grupo Flor welcomes Danny Perez, our new Packaging and Inventory Manager who joins our team after spending over ten years with Keurig Green Mountain. Danny is an expert in inventory management and organizing teams, and will play a critical role in implementing new processes and procedures for FlorX distribution.

Federal Legislative Look
Welcome to the Cannabis Industry, Wall Street!
Financial heavyweights Goldman Sachs, Bank of America and Merrill Lynch are officially dabbling in the in the Cannabis Industry. Bank of America and Merrill Lynch are financing New York-based Constellation Brands’ investment of 4 billion Canadian Dollars (3.8 billion USD) in Canopy Growth of Smiths Falls, Ontario, while Goldman Sachs advised on the deal. You can read more about the transaction here.
The transaction appears to be the first mega cannabis investment to involve major US-based financial institutions.
“Wall Street can no longer ignore the pace, the amount of money being raised and the growth underway in this industry,” said Scott Greiper, vice president at Viridian Capital Advisors in New York.
“We’re going to see more and more of this, because this is how Wall Street banks make their money – doing deals of this size.” Morgan Paxhia, co-founder of San Francisco-based Poseidon Asset Management, agreed. “The size of the deal, the premium to the closing price and the institutions involved are all strong signs of confidence about the industry’s direction,” he said.

State Legislative Look
California Cities Push Back Against Home Deliveries, but the State Bureau of Cannabis Controls Sees it Differently
When California released its first draft of permanent industry regulations last month, perhaps the most significant shift was a clarification to allow licensed cannabis delivery businesses to sell to residents in any city or county in the state, regardless of whether that jurisdiction had banned cannabis commerce.
That policy led to a letter to regulators from the League of California Cities this week in which the municipalities contended the state was undercutting their power to regulate local cannabis activity.
However, the state Bureau of Cannabis Control sees the situation differently, saying the change would clarify what has always been the case: A licensed marijuana delivery can be made to any jurisdiction within the state.

Local Look
MCCIA To Hold First-Ever Monterey Cannabis Summit
The 2018 Monterey Cannabis Summit is the first conference of its kind on the Central Coast to bring together the knowledge and expertise of cannabis professionals, businesses and community partners in California’s fastest-growing region in the cannabis industry blending together old school growing and Big Ag .
On December 13 and 14, 2018, the Monterey County Cannabis Industry Association (MCCIA) hosted Summit will take place in the heart of Monterey at the Portola Hotel and Spa. MCCIA’s dedicated Board and staff aim to attract leaders and stakeholders in all aspects of the industry – from cultivators, state and local regulators, manufacturers, suppliers, agriculture, organics, investors and so on.
If you register between now and September 20 you’ll receive Early Bird pricing and save $100. Click here to register today!

Good Standing
By Jennifer Rosenthal Iverson, Esq.
Jennifer is a local cannabis and criminal defense attorney and Vice President of MCCIA. The views and opinions expressed in this article are those of the author and do not reflect an official position of the Association.
By now all operators in the County should have submitted their conditional use permit and building permit applications. If you did not submit building permits and/or your conditional use permit, the County will no longer consider you in good standing . If you are not in good standing at the County level you cannot continue operating.  Be aware, the County will be conducting site visits and inspecting both building conditions and canopy size. In the event the County red tags the site, all cannabis operations will be forced to stop and there is a possibility plants will be cut down.
Another local requirement is the business registration form submittal. The business registration form reports to the County Tax Assessor your actual canopy size so you are not overtaxed to the full amount of your temporary state licenses. It is important to note that this form reports your square footage for the entire fiscal year. The County requires that you report the maximum amount for the entire year, despite whether or not that the canopy size fluctuates during that time period. In essence, the County is taxing you quarterly on the maximum amount of square footage you will have at any point in time throughout the year. The County’s fiscal year runs July 1 through June 30. The form can be found on the County’s cannabis website and it must be submitted to the County Tax Assessor in order to remain in good standing.

Leading the way…

Smoke Stacks Leads the Way After Implementation of Harsh Regulations

California’s cannabis testing regulations became effective July 1, 2018, increasing the cannabis test thresholds to levels never before experienced in the California market. Most California producers believed the state would, yet again, extend the regulatory implementation period another six months. Grupo Flor however, took a contrary view. We organized our processes and lab partner relationships so that our in-house flower and concentrates brand, Smoke Stacks™,  would hit shelves July 1, 2018 being fully tested, labeled and packaged in full compliance with the law.

The July 1, 2018 implementation impact was massive and sudden. Whole swaths of California wholesale supply chain producers were unable to meet the new test standards and Facebook and Instagram posts went viral of empty dispensary shelves across the state. One winner emerged: Smoke Stacks™.

While certainly exciting in terms of validating and testing our products and business processes, the most thrilling aspects has been relationship development and the acquisition of market share. The cherry on top is the great response to the quality of our product from shops throughout the state.

While betting on July’s implementation and preparing to mobilize may not seem genius, consider that Grupo Flor’s distribution company had to source goods from a small and diverse archipelago of farms that were themselves producing compliant cannabis.

Quite a feat in the absence of a robust and standard supply chain.


Distributing the highest quality cannabis throughout California

Regulatory compliance and accountability is the “What” we do; but when it comes to distribution, it’s really the “Why” and “How” we do that sets FlorX apart. FlorX is the distribution arm of Grupo Flor and it’s run by cannabis retail veterans, supply chain logistics experts and straight-up process nerds whose combined efforts create a killer distribution service with one singular goal: reduce back-end hassles so shop owners can focus on the front of shop.

“FlorX is paving the way with cannabis distribution by embracing forward-looking supply chain strategies. The team at FlorX is obsessed with procuring quality product and delivering world-class customer service.  The team at FlorX is also very focused on compliance with local and state regulations. This has allowed FlorX to be there for dispensaries when others were not prepared,” said Steve Podell, President of Distribution.


New Faces Join the Grupo Team

FlorX welcomes new Bay Area sales team members Ashley Palma and Vittorio Lagorio.  

Ashley joins FlorX from Riverview Farms, where she successfully built relationships with dispensaries in San Jose, Santa Cruz, and Monterey County. Her experience selling flower, pre-rolls, topicals, and edibles will continue with FlorX and we look forward to seeing her thrive with us.

Vittorio joins FlorX from W.M Dickerson and Farmers Produce, where he excelled as a broker for the past ten years.  He is excited to take his sales experience to new heights in the cannabis industry as he covers wholesale sales for the East Bay and San Francisco.


Federal Legislative Look

Could A New Bill End Federal Prohibition of Marijuana? A bipartisan group of lawmakers introduced new legislation that highlights the growing divisions within the Republican Party on the nation’s current patchwork of marijuana laws. The effort to allow states to decide their own marijuana policy potentially pits President Trump, who has voiced support for the state’s right to choose their own policy, against his own staunchly anti-marijuana attorney general. Additionally it highlights the chasm between anti-marijuana GOP leaders in Congress and the growing number of rank-and-file Republicans who are demanding federal protections for their state’s burgeoning marijuana businesses.

After Sens. Gardner and Warren introduced the legislation, advocates called it the “most significant piece of marijuana-related legislation ever.”


State Legislative Look

Flash Sales Throughout the State at Dispensaries not Compliant by July 1

Since the state of California fully legalized cannabis on Jan. 1, the industry had a six-month transition period to adopt new testing, packaging, and ingredient standards. Any leftover products that didn’t meet the new requirements were destroyed or sold in lash sales on June 30.

The deadline had many in the cannabis industry scrambling to sell tens of thousands of dollars worth of old, non-compliant stock by the end of June, touting discounts and parties to lure customers.

First Look at California’s Proposed Final Marijuana Regs

California regulators released the first draft of permanent adult-use and medical marijuana regulations on Friday, July 13, starting the clock on a process of hearings and public comment that will end later this year with a final set of rules governing the nascent industry.

The proposed rules are contained in 315 pages of documents issued by the Bureau of Cannabis Control, the Department of Food and Agriculture and the Department of Public Health.

The changes that were most apparent were:

  • Deliveries anywhere. The new language will allow licensed marijuana deliveries in any city or county in the state, even those that ban retail outlets, processing and cultivation. The provisions are similar to legislation, now shelved, that would have barred local governments from stopping state-regulated companies from delivering to their residents. That bill drew opposition from cities and counties, which argued that local control is a key tenet of Proposition 64, the 2016 voter initiative legalizing recreational marijuana. Companies including WeDrop Cannabis Delivery, CannaWagon and Weedmaps lobbied for the bill.
  • Advertising restrictions are increaseded. New rules expand restrictions on marijuana advertising that might appeal to children, such as the use of inflatables, toys and cartoon characters. Additionally, outdoor advertising must be affixed to a building or a “permanent structure.” That would appear to bar roving billboards attached to trucks or truck trailers. As for billboards, “It would depend on the billboard,” said Bureau of Cannabis Control spokesman Alex Traverso. “We’d have to look it at case-by-case.” The bureau’s proposal also offers guidance for how advertisers can show that 71.6 percent of their audience is 21 years of age or older.
  • Attention events-holders. Changes will require cannabis event-holders to provide more details about where licensed retailers will be set up, where attendees can light up or consume marijuana and where sales will occur. Cannabis-focused events have proven challenging for organizers working under the state’s emergency regulations. Organizers of the Chalice Festival sued the Bureau of Cannabis Control and the city of Victorville in June after they declined to issue permits for the event planned for the San Bernardino County fairgrounds this month.

View the proposed text of regulations by clicking here.


Local  Look

A New Beginning
Jennifer Rosenthal Iverson, Esq.
Jennifer is a local cannabis and criminal defense attorney and Vice President of MCCIA. The views and opinions expressed in this article are those of the author and do not reflect an official position of the Association.

July 1 marked the beginning of new and exciting times at both the State and local levels.  The most impactful regulations facing operators are the testing and packaging requirements.  These requirements have had a substantial effect on the market. Across the state dispensaries and retail facilities are experiencing the fallout of the supply chain.

The County of Monterey is gearing up on enforcement for all cannabis operators.  As indicated in the County’s recent memorandum released June 29th, in order to remain in good standing you must submit your conditional use permit application by August 1, 2018.  If you do not submit your conditional use permit application you will not be able to continue cultivating on site.  Further, the County is conducting both canopy audits and inspections for building code violations. Any building code violations found on site could have a substantial negative impact on the operator’s ability to continue cultivating and moving forward through the regulatory scheme.  If you are conducting structural improvements to buildings and greenhouses it is critical to go through the required permitting process.

In addition, the County and State will be issuing enforcement actions against all entities that are currently operating with over 25 employees and do not have a permitted public water system. If you are operating with more than 25 employees it is critical to start the process of the State Public Water System application.  The process alone can take up to 6 months and your conditional use permit application will not be deemed completed until you have submitted your application.

Adjusting Perspective

Adjusting Perspective on the California Cannabis Transition

The six month report card on California’s first steps into regulated cannabis came in with a sobering grade: “Needs Improvement.” With its heavy emphasis on local (county and municipal) controls, administratively intense applications and compounded State and local tax rates exceeding 45% for each cannabis dollar earned, most legacy California cannabis operators and indeed consumers, have simply elected not to participate.

Of the ~2,500 cannabis dispensaries operating before regulation, less than 500 have thus far become state-licensed shops. (The remaining 2,000 or so shops are electing instead to make as much money as they can until their Prop 215 rights sunset on January 1, 2019.) Because regulated operators cannot sell to legacy Prop 215 shops, the entire regulated marketplace has suffered massive constriction, forcing layoffs, reduced SKUs, and intense financial restructuring.

“Pioneers get the arrows, settlers get the land,” goes the saying. With regulation came a great reckoning that leveled the playing field and reset the marketplace, but with a much smaller footprint than anticipated. Some contraction was expected, but governments are scrambling to reset a healthier course. For example, our own County of Monterey was the first in the state to reduce cannabis tax rates, and it did so by almost 75%!  In the meantime, most operators in California who chose the regulated path are reeling to down-scale to a constrained market. Those who did not, the Prop 215 operators, have less than six months of existence left and time will only tell how many will migrate to the regulated environment.

As the hangover excitement of regulation fades, a new market emerges – even if slowly. Ours is a challenging landscape and Grupo Flor will surely earn its fair share of arrows.  However, unlike others, Grupo Flor was specifically designed to weather these transitional years. From our blend of cannabis and ancillary business units, to our aggressive acquisition of permits to the very architecture of our supply chain, we are specifically built to weather this transitional. Successful scaling will require more than a strong foundation, capital and guts; it also demands a mature adjustment of perspective with balanced expectations.

 



New Faces Join the Grupo Team

This spring, Grupo Flor hired two key players who bring a new level of expertise to cultivation and greenhouse operations — meet Sam Burgner and Mikey Towey.

Sam Burgner, Harkins Farm Indoor Lead Grower, is a recent Master of Science graduate from Purdue University — one of the nation’s top horticulture programs. Sam also worked alongside NASA Kennedy Space Center on how to efficiently grow plants in zero gravity on the International Space Station and conducted research on ways to cultivate food crops under the harsh conditions present aboard spacecraft.

Sam’s in-depth knowledge of plant and environmental physiology is being put to good use on the vertically-tiered production project at Harkins Farm, which will utilize cutting-edge fertigation, lighting, and climate control systems for 22,000 square feet of intensive production.

“Joining Grupo Flor was a natural fit. For years they have had their eyes on the future of Cannabis in California, and mine have been fixed on the future of crop production. I appreciate the innovation that they bring to the industry and the easy-going nature of the team makes the difficulties of building an industry from the ground up flow smoothly,” said Sam Burgner.

As a former whitewater raft guide, an avid outdoorsman, and devotee of fresh and local agriculture, Sam is already finding himself at home on the Monterey Peninsula with the natural beauty, great trails and hikes to explore.

********

Mikey Towey, Compliance Manager, who overlooks Grupo Flor’s ongoing compliance efforts, including the identification and prioritization of applicable regulations, development of internal processes and procedures, and the rollout to partners, stakeholders, and employees. Mikey’s expert knowledge in the state-mandated track and trace program is instrumental in the successful implementation and integration.

Mikey ran operations for one of the largest indoor cultivation centers in Washington State and most recently managed greenhouse operations in Monterey County. With this type of expertise, Mikey plays a major role in the design of Harkins Grow and the general A to B operation flow, as well as the procurement of genetics.

“I’m excited to be a part of such a talented team where everyone shares the same vision for excellence and innovation. This position gives me the opportunity to create infrastructure and procedures for a fast growing company in a nascent industry and that is pretty cool,”  stated Mikey Towey.

When Mikey isn’t overseeing major cannabis operations, he enjoys spending time with his girlfriend, Serina, and his french bulldog, Napoleon. As a former substitute percussionist for the Seattle Symphony, he still likes to practice music and composition (when he isn’t at the gym or yoga, of course).


Federal Legislative Look

In Washington, evolution on the marijuana issue is moving forward at warp speed in political terms.

Senator, Mitch McConnell fast-tracked a Senate bill to legalize low-THC hemp. Democratic Senate Minority Leader Chuck Schumer of New York introduced a bill to remove marijuana from the Controlled Substances Act, which would deschedule marijuana entirely. Colorado Senator Cory Gardner struck a deal with President Donald Trump, who promised to not target Colorado’s legal marijuana industry in exchange for Gardner releasing his hold on Trump’s Department of Justice nominees. The Food and Drug Administration opened a comment period on the scheduling of marijuana ahead of a special session of the World Health Organization convened to re-evaluate marijuana laws, and both chambers of Congress passed “right to try” bills that might have accidentally legalized medical marijuana for terminally ill patients. Taken together they suggest that nearly 50 years of federal marijuana prohibition is about to disappear, and it’s happening in the face of an administration that has expressed its outright hostility to the notion. Bipartisan efforts are picking up steam to push for access to banking for legal marijuana businesses at the least making it so marijuana businesses don’t have to be all cash.


State Legislative Look

What’s Noteworthy About California’s Newly Released Regulations?
California released its updated regulations in late May and they’re largely seen as a baby step between the initial rules released late last year and what will become the final regulations later this year.

The new rules came from the Bureau of Cannabis Control, the Department of Food and Agriculture, and the Department of Public Health, and what is noteworthy, is that they allow companies with medical licenses to continue to do business with those holding only adult-use, recreational licenses rather than requiring a separation (which would have been a huge disruption to the industry). Of special interest to Grupo Flor, is that a provision requiring that if a product is branded as being from a specific county, 100 percent of the cannabis used in it must be from said county, and all of our cultivation is done is Monterey County.

The new regulations also outlaw what industry folks refer to as the “ice cream truck” delivery model, in which someone can load up a delivery truck with all kinds of cannabis products to have on hand as orders are placed online and a delivery driver cruises through town. Instead, delivery drivers now must receive orders and stock their vehicles at a brick-and-mortar location before making the rounds.

Bigger changes are down the road, most notably, the July 1 deadline, after which all cannabis products sold legally in California must pass stringent laboratory tests for potency, molds and pesticides, with products that fail testing, facing the possibility of being destroyed.


Local Look

On May 22, 2018 the Monterey County Board of Supervisors reduced cannabis taxes! This decision was spurred by pressure from the local cannabis industry about the damaging impacts of the high taxes. This was supplemented by a report from HdL a cannabis consulting firm that analyzes rates in jurisdictions across the State. This report exemplified the challenges growers face to succeed with the cumulative state and local tax rates already at 30 percent. Listed below are the new tax rates that will be adopted in July of 2018.

  • Mixed Light Cultivation (greenhouses): $5 per sq. foot
  • Indoor Cultivation: $8 per sq. foot
  • Nurseries: $1 per sq. foot
  • Manufacturers: 2.5% of gross receipts
  • Distributors: 2% of gross receipts
  • Testing: 1% of gross receipts
  • Retailers: 4% of gross receipts

These new tax rates are a relief for the industry, however, there is still a disconnect between the popular perceptions of the ‘Green Rush’ wealth and the harsh economic realities faced by those seeking to comply with the new law.

The Future Is Bright

It’s been 168 years since the gold rush and with legalization of cannabis California, Grupo Flor is smack dab in the middle of a well publicized “green rush.” This is energizing a whole new crop of investment and participation interest in cannabis. It seems whether we’re at a local basketball game or dinner party, whenever someone hears that we’re in the cannabis industry, the first questions is, How do I get involved? This is usually followed by a litany of questions about investing in cannabis and Grupo Flor’s activities.


The Future Is Bright

Despite what is considered to be an unfriendly administration in Washington D.C., nine states and the District of Columbia now allow for recreational marijuana use, and thirty allow for medical use. Twelve states are poised to join the marijuana legalization wave this year, with more possibly joining as legislative sessions continue. Public support for marijuana legalization reached new highs in 2017. A Gallup poll showed that 64% of Americans favor legalization, and a majority of Republicans back it for the first time. Vermont became the first state to legalize marijuana through the legislature rather than a ballot initiative, in January of 2018. There is a distinct rolling out of increased regulatory acceptance of the cannabis industry throughout the nation.


Spring Boasts Big Yields
With less than a month from the first official day of spring, our first harvests have been soaking up the extra sunlight and will bring the biggest yields yet. Our team of cultivation specialists have been festidigiously perfecting all stages of the plant life cycle from nursery to vegetation to flowering – and are always focused on the golden goal of the highest quality production at the most efficient cost. Our farms are generating highly sought after strains with unique genetics that bode frosty buds with high terpene counts and high cannabinoid levels.
“We’re about three weeks away from our biggest yield yet. It’s our boutique style grow with an emphasis on commercial scale processes, sustainable power and water systems, state-of-the-art facilities development, and clean cultivation practices that enable us to grow cost-efficient high quality consumer safe products,” said Omar Bitar, Co-Founder of Grupo Flor and President of Flor Cultivation.

Federal Legislative Look
The federal picture may at first seem dim in the wake of AG Jeff Sessions decision to revoke the Cole Memorandum (an enforcement priority statement that took a hands off approach on states regulating cannabis.) However, within the industry, this move is also considered valuable because it gives developing enterprises more breathing room to increase their value and stabilize operations before larger, well capitalized companies enter the industry.

Local Look
Monterey County has taken the lead, becoming one of the first to join a statewide oversight agency aimed at collecting regulatory data and improving access to financial services for the emerging industry.The Board of Supervisors unanimously approved a joint powers agreement establishing the California Cannabis Authority, becoming just the second County to do so after San Luis Obispo County.
Backed by the California State Association of Counties, the Authority has made its main goal developing and managing a statewide data platform to gather, collect and analyze a variety of cannabis industry information (including cultivation, track and trace, point of sales, taxation, and local and state regulatory data). The data collection will be designed to help local governments ensure regulatory compliance and provide necessary information for banks wanting to work with the industry.

Meet the Newest Member of Senior Management

Laura Pruneda is Grupo Flor’s new Controller and a seasoned CPA having worked in various industries including agriculture, fine arts, real estate, banking and also has Big 4 audit experience. In this ever-changing and dynamic industry, Laura’s expertise combined with her strategic approach is a great asset to Grupo Flor.

Laura is involved in all aspects of financial and accounting functions which includes financial reporting, policy and procedures, systems, compliance, taxes, budgeting, and analysis. She has an undergraduate at Stanford where she studied Industrial Engineering and was a varsity collegiate athlete on the softball team. Laura did her graduate work at UCLA in Latin American Studies and Accounting.

“It is an exciting opportunity to be on the forefront of an industry like cannabis that will help shape California’s history and I couldn’t be more thrilled to be apart of a company like Grupo Flor with its extraordinary leadership team and inspiring vision, ” said Laura Pruneda, Grupo Flor, Controller. “At this point in my life, I am selective about where I invest my professional energy and where I align myself. Upon receiving an offer of employment, I responded, ‘You had me a hello.'”

Fresh Perspective: An interview with Millay Kogan

What’s your role at Grupo Flor?

It’s changing all the time, but technically it’s HR and Legal Operations. Right now I’m working under Gavin mostly, who is Grupo Flor’s General Counsel (and also my brother!), to set up a lot of the legal and HR procedures, and to make sure processes are in place. I’m also doing a lot of compliance work to ensure permits are in order.

What is a typical day like?

A typical day is putting out fires and getting everything set up, as we’ve started from scratch. Right now my work involves a lot of meetings and a lot of organization. We’re also spending time focusing on our company culture and defining what type of company we want to be. For example, we just formalized policies to hire locally from Salinas whenever possible, to promote diversity, and to promote and hire from within whenever possible, which is really exciting and important.

Are there any challenges that come with working at a start-up?

I mean, everything. It’s just that nothing is in place when you are in a start-up. Other times that I’ve gone into jobs it’s sort of like, “oh, use this template” or “oh, call this person.”  None of those systems are in place at the moment, however, so we have to make up a lot of it ourselves.

When you were finishing law school did you ever imagine you’d be working in the cannabis industry?

No, no way. My brother Gavin has been working in cannabis for years, so I always considered it “his thing.” I’m also sort of a city rat – I’m from LA and lived in New York and San Francisco for a long time – so I never expected to be living in Monterey County. That being said, it’s really a fascinating industry in which to work. Similarly to how this company is being started, the whole cannabis industry is also getting started, which is cool in my opinion because there’s a lot of creativity involved.

How does your generation view the cannabis industry?

I’ve found that all generations like cannabis!  I’ve noticed, for example, that a lot of Baby Boomers are pretty hip to cannabis, which is great. I was recently at an event where there were a lot of Baby Boomers around, and when they asked me what I did for a living and I replied, “I work in cannabis, in marijuana”, these seventy-year-old women were so excited! They talked to me about how in the Sixties they used to sit in their  “vans” or in “drum circles” and “smoke grass.” With Millennials, I think cannabis is a little more commonplace–it seems to be a lot more ubiquitous, a given in social situations.

What excites you about being in the industry?

I would say the creativity that is required to succeed in cannabis is exciting right now. Like I mentioned, the industry is so new that there are fewer rules, so people have to kind of start from the ground up with things. In cannabis product development, for example, we look at the product and the packaging (which is common in most retail), but we also look at the smell, taste and the psychoactive effects of the product. There are all of these different components to our products, and how we think about, produce and communicate these components to our consumers is really important.

Is there anything that surprises you about being in this industry?

It’s been really interesting to work in an industry that is required to operate solely within the state of California, especially in the realm of banking and distribution. It’s also been interesting to see the cannabis regulatory framework unfold, both locally and nationally. To be perfectly honest, I’m faced with something new everyday.

 

Millay Kogan is a Los Angeles native. She is a graduate of Cornell University (B.S.), Columbia University (M.S.) and Golden Gate University School of Law (J.D.). Millay has worked in a number of sectors and industries, including tourism development and operations in Latin America, affordable housing development in California, tenants rights and more. This is Millay’s first experience working in the cannabis industry.  In her spare time, she enjoys hiking in Carmel Valley, visiting art museums and galleries, and consuming new cannabis products.