Business

Still mellow but ready to fight. That’s the state of Washington’s pot industry

Welcome to the serious business of cannabis in Washington state, 2018.

The industry, which voters in the state legalized in November 2012, was met at the time with giggles and eye-rolls from some business types and late-night TV hosts.

In the six years since, it’s shown the money and jobs it generates are no laughing matter.

Since stores opened in July 2014 through November 2017, Washington has seen more than $3 billion in total sales, including $1.94 billion in retail sales and $715 million collected as excise taxes, according to state figures.

The industry also is responsible for 10,000 new jobs, by one estimate.

Despite its vibrancy from the money and jobs, the industry still faces federal challenges.

In early January, U.S. Attorney General Jeff Sessions rescinded federal policies that had let states proceed with their legalization plans.

On the whole, industry leaders see themselves on the front lines for state’s rights and honoring the will of Washington voters.

Toward that end, House Bill 2124, proposed in the state Legislature by Rep. David Sawyer, D-Tacoma and a handful of Republicans, would stop the state from helping the feds with activities that might interfere with the state’s legal marijuana industry.

“This is a bipartisan effort, and we’re with all you folks, too,” said one of the bill’s co-sponsors, Rep. Cary Condotta, R-East Wenatchee, at a recent House Finance committee hearing, “and this is just one piece of many things we’re trying to do to keep this industry intact.

“We’ve worked very hard to build a good system and we intend to keep it.”

BY THE NUMBERS

The billions spent on marijuana in Washington doesn’t all go for buds to roll joints. Studies by the cannabis industry analytics company Headset have shown the gradual diversification of product taking hold, even among generations.

Flower (buds) topped every generation’s buy list in a report from October, but the second-most popular products were different, depending on age.

For millennials: concentrates. Gen X: concentrates and vapor pens. Baby Boomers: Vapor pens and pre-rolled cigarettes. The Silent Generation’s second most popular purchase was vapor pens.

Another telling part of the industry story is in concentrates, a broad term including wax, tinctures and even THC-free cannabis oil.

Headset’s August report noted two of the more dominant market forces driving sales of concentrates — medical patients looking for more potent pain relief and younger consumers seeking vaporized products as an alternative to traditional smoking.

From the report: “With the advent of licensed processing facilities where extracts could be made safely and consistently, as well as legal stores to educate consumers about these products, the category has grown significantly.”

One business housed in an unremarkable Seattle warehouse is a leader in that part of the state’s industry.

Evergreen Herbal has taken on the role with a decidedly no-nonsense approach, preferring to focus its creativity on its product lines rather than a flashy workplace.

THE FACTORY

Evergreen Herbal is a leading maker and distributor of cannabis-infused beverages, chocolates, candies, oils, sugars, teas and other products.

It has 36 employees, but isn’t a carefree “Willy Wonka-style” chocolate factory.

“We are a food manufacturer that happens to use cannabis as an ingredient,” said Jackie Brassington, the company’s general manager. “We don’t consider ourselves a cannabis-only company.”

“Take the oil extraction, for example,” CFO Andy Brassington said. “We’re not doing anything different than other industries — peppermint oil, terpenes for hops, lemon zest for cleaners, all those use standard extraction methods.”

In addition to the endless accounting to comply with seed-to sale-state traceability standards, company officials make it clear they follow federal standards in its food production.

Think paperwork, testing and a basic food factory work environment to prevent any product contamination.

Upon entering the nondescript manufacturing/warehouse site, visitors sign in and receive badges.

Even those touring the site are outfitted with lab coats, booties to cover their shoes, and hairnets or beard nets, if applicable. There’s also a long sink reminiscent of a surgical unit with foot pedals instead of faucet knobs.

Once inside, a modest assortment of candies, chocolates and sodas are produced in batches. In one part of the room, a vat of chocolate spins.

Don’t expect to get a contact high here. Rather, the scent of hot, melted chocolate permeates the air.

The company says it creates up to 30,000 hard candies in a day, and that’s just for starters.

“We go through about 900 pounds of chocolate in a week. We make about 18,000 chocolate bars in a shift, with about 300 pounds of chocolate melting at all times,” Jackie Brassington said during a recent tour of the facility.

In addition the candies, sodas were in production that day. Depending on stock, 1,500 to 3,000 sodas can be produced in a day.

And yes, there’s a joint-rolling room, where a worker can roll 500 in a day. (And no, it’s not done on top of a Led Zeppelin album cover. Think countertop, also with the required lab coats and hair nets.)

There’s no rolling machine.

“A lot of people have tried to retrofit cigarette machines, but it doesn’t work,” Jackie Brassington noted.

Production of the various products runs four days a week, 10 hours a day. The warehouse and office staff work five days a week.

The CEO, Marco Hoffman, founded the company in 2013 after starting his first edibles company years before in California.

Asked how many hours he works each day, he chuckled and said, “All of them,” putting in, by his estimate, 80 to 90 hours a week.

“We take this seriously,” Hoffman said. “We’ve got a lot invested and, more importantly, we believe in this as a movement.

“In the prohibition of cannabis, they never factored in how strongly people believe in this. For many people, it was not about profit, it was about social change and personal liberty. ... The values are much more profound than just making a quick buck.”

Andy Brassington agrees.

“Look, the margins for this are very thin,” he said of the company’s business model. “It’s expensive to operate in this industry because of the substantial regulatory oversight. Nobody’s getting rich quick.”

Hoffman and the Brassingtons say they believe strongly in the service their business provides to consumers and the jobs it creates.

Both Brassingtons remarked that they came from a Republican, conservative background.

“We’re trying to change the perception in the world about cannabis,” Jackie Brassington said. “It is such an amazing herb and can do so many things.”

Asked whether they’re pioneers or settlers in the industry, Andy Brassington paused mid-step to consider.

“We’re a little bit of both,” he said. “Marco’s the pioneer. But we’re getting more of the settlers now.”

‘CANADA IS HUGE’

Not many things about the marijuana industry surprise one cannabis policy expert, including Washington’s increasing sales of pot concentrates.

Jonathan Caulkins is a professor of Operations Research and Public Policy at Carnegie Mellon University’s Heinz College in Pittsburgh, and was co-director of RAND’s Drug Policy Research Center.

Extracts, Caulkins said in a recent phone interview, are “much easier to industrialize to drive down the cost curve.”

“The industry would like 50/50 of extracts and flower,” he said. “That plays to the way they like to produce it.”

As for the recent federal moves against the industry, he said was “not at all” surprised by the attorney general’s action.

“I’m surprised that it took so long to reverse those policy memos,” he said. “It was pretty clear in the campaign that there would be some change. But since it took so long ... I thought they would be replaced, not erased.”

For now, the industry faces more uncertainty, Caulkins said.

“We’re in an unstable situation,” he said, “and I think people were deluding themselves that you can operate against federal law.”

And yet, there’s Canada and its plan to legalize cannabis later this year.

“Canada is huge,” Caulkins said. “When it starts legal sales, it will be very hard for us to maintain prohibition. In the long run, Canada matters.”

And, in this case, it appears Washington State matters to Canada, too.

A Canadian delegation already has come through to visit, Jackie Brassington noted.

FIGHTING FOR PROTECTION

As Evergreen Herbal works to grow, the company and others in the industry take a keen interest in whether the state and federal governments work together or continue on separate tracks after Sessions’ January salvo.

Clay Hill of the Association of Washington Business spoke Jan. 16 at a committee hearing in Olympia in support of HB 2124, the state pot industry protection measure.

He noted if that industry’s revenue stream to the state is threatened, “then we think there would be an increased risk of further taxes, new taxes, higher taxes on Washington businesses.

“We’re sort of reliant on this revenue now and it doesn’t make sense to have federal policy potentially undermining our state’s fiscal position.”

A similar message was sent at the same time to Washington, D.C., by the Western Regional Cannabis Business Alliance, which seeks legislative protection from Congress.

The marijuana business group wants lawmakers to include language in an appropriations bill to prohibit the Justice Department from spending money to thwart marijuana businesses in states where it is legal.

The alliance represents marijuana businesses in Washington, Oregon, Alaska, Hawaii, Montana and Arizona.

Back in Olympia, Vicki Christophersen, executive director of the Washington CannaBusiness Association, emphasized the depth of the industry and how far it has come in the state since legalization.

“In addition to the excise tax ... we now know that we have we have over 10,000 jobs in the state of Washington through this industry,” she said at the hearing.

“These are your friends, they are your neighbors, they are your constituents, and they’ve invested their lives into fulfilling the will of the voters.”

The Associated Press contributed to this report.

Debbie Cockrell: 253-597-8364, @Debbie_Cockrell

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