A Divided Cannabis Industry In California

Can California lawmakers reach a consensus on how to regulate CBD products?

Welcome to Four PM — a newsletter that provides the top cannabis industry news from Canada to California.


In Today’s Issue 💬

→ Conflict In California. 😅

→ A Key Trend In Cannabis. 👀

→ Amazon’s Cannabis Play. 🚚

A Conflicted Cannabis Industry In California

California law-markers are struggling to agree on regulations for CBD…

California may have been the very first state to legalize cannabis for medical purposes, however, 25 years later and policymakers are still at odds as to how they should regulate CBD products.

A bill is currently making its way through the California Legislature which could have significant ramifications for both the cannabis and hemp industry should it gain the necessary support.

Impairing vs non-impairing

THC & CBD are very close cousins.

In fact, both CBD and THC have the exact same molecular structure with the only difference being the slightest difference in how the atoms are arranged.

Despite the most minor of differences between these molecules, their effects are extremely different.

In the case of THC, consuming a small quantity is enough to completely alter your senses, increase your appetite, and an array of other effects.

For CBD, however, the effects are much more subtle with many consumers consuming CBD solely for its strong anti-inflammatory properties.

Regulations…

California lawmakers have been trying to create new regulations for CBD products for several years now.

The primary implication of the current bill is the ability for producers to sell CBD products outside of cannabis stores — as was originally the case up until the 18th of July, 2018.

This approach has already been implemented in Europe where CBD is treated as a “dietary supplement” where it can be added to any & all products, and sold in every type of store imaginable.

Divided opinions…

Despite the fact that this bill would certainly benefit the cannabis industry as a whole, industry stakeholders are at odds with each other.

For cannabis retailers, it’s likely they would lose revenue should consumers have the means to purchase CBD products outside of cannabis stores.

On the other side of the aisle, this update in policy presents a very clear opportunity to unlock new revenue streams for cannabis brands in California.

Should the bill pass, they would then have the means to sell their products in many multiples more stores vs where CBD products can currently be sold.

Regardless of what each party thinks, we should have confirmation by the end of this week as to whether law markers are seeking to maintain the status quo, or whether they are seeking to loosen the current regulations for CBD products.

Our Take

Long term, it seems very likely that cannabinoids such as CBD will be regulated much more closely to vitamins as opposed to the current regulations which are much more in line with alcohol.

Despite the fact that this bill could result in retail stores losing revenue, I think we ought to look at the bigger picture and celebrate such progress.

Gen Z Loves Cannabis

Research highlights a growing trend of college students consuming cannabis…

Cali Sober has been spreading like wildfire in recent years as more & more young adults are choosing to abstain from alcohol in favor of consuming cannabis.

In a recent report from the National Institutes of Health in the U.S — it’s become clearer by the day that young adults are embracing cannabis.

The data…

Cannabis consumption is reaching record highs among college students over the past five years, and remained at historical highs among same-aged peers who are not in college.

Per the 2020 Monitoring the Future study, cannabis consumption among college students has never been higher (no pun intended).

  • → 44% of college students reported consuming cannabis in 2020, compared to 38% in 2015.

  • → For young adults not in college, annual cannabis use in 2020 remained at 43%, the same as recorded in 2018 and 2019

  • → Daily consumption of cannabis by college students is at 8% in 2020 compared to less than 5% in 2015.

  • → In comparison, 13% of same-age adults not in college reported consuming cannabis on a daily or near-daily basis in 2020.

In contrast, similar increases have not been observed among 12th graders, with 35% of high school seniors reporting consuming cannabis in 2020 — unchanged from 2015.

What else is on the menu?

There was also a significant increase in the annual use of hallucinogens, alongside a significant drop in current alcohol use between 2019 and 2020.

  • → In 2020, nearly 9% of college students reported the use of any hallucinogens in the past year compared to 5% in 2019.

  • → Among non-college respondents, 10% said they had consumed hallucinogens in 2020 compared to 8% in 2019.

  • → In 2020, 56% of college students reported alcohol use within the past 30 days, compared to 62% in 2019.

  • → 24% of college students reported consuming five or more alcoholic drinks in a row in the past two weeks in 2020, compared to 32% in 2019.

  • → 4% of college students reported smoking in the past month and 13% of non-college respondents indulging in cigarettes.

Our Take

This data paints a clear picture — the perception of cannabis amongst young adults is extremely different vs older generations.

Subsequently, I foresee the emergence of several successful cannabis brands focusing on the needs of this demographic in the years to come.

Why Amazon Is Now Embracing Cannabis

The trillion-dollar company’s sharp shift in policy when it comes to cannabis…

Amazon founder Jeff Bezos famously coined the term “your margin is our opportunity”, in essence — the profits you're currently making from selling your product will soon enough go to Amazon.

With North American consumers flocking to cannabis in record numbers, it was only ever a matter of time before companies such as Amazon made their entrance into the industry.

That said, the reported reasoning as to why Amazon is currently prioritizing the loosening of its policies for cannabis is slightly different.

Prior announcements…

In June Amazon announced they would no longer test its employees for THC, and would also be “encouraging other employers” to adopt this approach.

“We’re adjusting our drug testing policy.

In the past, like many employers, we’ve disqualified people from working at Amazon if they tested positive for marijuana use, however, given where state laws are moving across the U.S., we’ve changed course.”

Dave Clark, CEO Worldwide @ Amazon.

Additionally, Amazon announced its public policy team would support the legalization of cannabis in the U.S, and in Q2 of 2020, they began this effort.

Recently, however, Amazon has gone one step further than “encouraging” other employers to stop testing employees for cannabis, this time asking its delivery partners to make clear that they are adopting the same policy as Amazon.

A clear motive…

When screening for cannabis, Amazon’s driver applicant pool reportedly drops by close to 30%.

With Amazon and many other companies in the U.S currently having to contend with labor shortages, this poses a big problem.

The solution is rather simple, however, the results are extremely significant.

By instructing its delivery partners to advertise that they don’t screen for cannabis, Amazon expects to see a 400% increase in its applicant pool. 🤯

Our Take

With 36 states having legalized cannabis for medical purposes and 18 states have done so for adult-use purposes, this move makes perfect sense.

Although I personally expected Amazon to greatly benefit from making this move, I’m in awe at the impact this single decision to stop testing people for cannabis is having on its business.

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