The First Day of the First Year

The first day of January was an important one for the California cannabis shops that managed to cut through local and state red tape before the end of 2017 to begin selling products on New Year’s Day to any adult looking to purchase them. Fewer than a hundred stores statewide were ready to go on the first day of legal adult-use sales but the ones we visited seemed mostly on top of what could have been a chaotic launch.

While stores were more crowded than usual, lines seemed manageable and wait times drew few complaints from a public that was in a celebratory mood. That is something of a feat considering California’s budtenders are accustomed to serving medical patients, most of whom have been buying cannabis products for years. On the first of January, these experienced customer service reps were faced with a stream of new customers, many of whom had never set foot in a retail cannabis store.

The shift in consulting focus from palliative to experiential is significant – as was the training that must have accompanied it, considering the need to fully understand topics including legal dosages for non-medical customers, medical cardholder benefits, applicable taxes, as well as the ability to understand (and meaningfully convey) the somewhat subjective effects of consuming various types of cannabis product.

In this business mistakes can be costly but, during our time in stores on the first, we didn’t note any major issues, albeit there were some close calls. One customer attempting to purchase a 1,000mg edible almost accomplished the act but the budtender serving him realized in time that the product was only legally available for purchase by medical patients in the new year (non-medical edibles are restricted to 10mg each, in a package containing 100mg total).

The fact that many of California adult-use customers are either new to cannabis, or at least haven’t frequented retail stores with labeled product, means budtenders spend more time per customer – time spent showing the range of products available, discussing consumption methods, and so on. Most stores have compensated with more staff and more point-of-sale capacity to handle the additional load. That seems to have paid off during the first few days of legal adult-use sales.

Those conditions, however, likely won’t fully abate after day one or even week one, as the base of potential cannabis consumers in California has just expanded about 30-fold – from less than a million registered patients to more than 30 million total adult residents. Add to that millions of visiting out-of-staters (67M visited CA in 2016) and you have the conditions for an awful lot of store and market expansion in 2018.

Our forecast has the market growing from $3 billion to just $3.7 billion this year. As expected we have seen that regulators won’t be able to get adult-use permitting regimes in place in most of the state. But the permitting process may be accelerated now that January 1st seems to have come and gone without incident.