First look: Denver's social-equity Cannabis Cares program
First look: Denver's social-equity Cannabis Cares program
Also: The IRS blows our mind & inside The Clear's expansion strategy
Hey hey! Thanks for tuning in for the second biweekly issue of Regulated State, where we take a look at what’s happening in cannabis — in Colorado.
This is a jam-packed newsletter with a first look at what could be a critical new social-equity program in Denver, an interview with the CEO of a Hispanic infused-bakery with big plans, an exclusive look inside The Clear, new product drops and more!
Stoned thought of the day: I’ve recently been listening to a lot of the 1990s hip-hop that was the soundtrack to my youth, chalking it up to pure nostalgia.
And nostalgia absolutely is in play here, but I’m also realizing there’s more to it than that.
Hip-hop of the 1990s was INCREDIBLY apocalyptic. A new millennium was around the corner, signaling the end times to many. From Busta’s “Extinction Level Event” to Wyclef’s “The Carnival” and just about every solo Wu album, hip-hop heads knew the world was on the verge of collapse.
Fast-forward to 2023, and all of those artists are still making music (“Extinction Level Event 2: The Wrath of God” is a must if you haven’t yet).
Those ‘90s albums are a better-fitting soundtrack to 2023 than they were to 1995, imho, and it’s a fucking national disgrace that we’re still having the same societal issues — racism, poverty and police violence — in 2023 as we did in 1983 and 1993.
Makes Colorado’s social-equity experiment even more important in my mind.
One last note: A big shout to at who’s trying to figure this thing out just like I am. Any email overlaps are entirely coincidental. Good work, my man.
Denver program will tell you who’s working with social-equity licensees
In a move that advocates are calling a good first step, the City and County of Denver announced today its Cannabis Cares program — a way to recognize city cannabis businesses making a positive impact that aligns with municipal social-equity goals and values.
Quick background: It’s been nearly three years since the state of Colorado made social equity a stated priority in cannabis licensing and regulations, and about two since Denver and Aurora opened up certain licensing — like delivery, hospitality, cultivation and manufacturing — exclusively to social-equity entrepreneurs.
BUT: It’s safe to call much of this effort to inject equity into a decade-old industry a well-intended dud. So far, delivery (or transporters) make up more than two-thirds of the 26 total social equity licenses approved by Denver. And hundreds of retailers in the city aren’t playing nice.
“The most concerning number is that only 18 marijuana store locations in Denver among 329 have authorization to have their product delivered by the social equity transporters,” Department of Excise and Licenses Communications Manager Eric Escudero told me. His department oversees the Mile High cannabis industry. “This is a major threat to Denver’s social equity efforts because a delivery business is generally much less expensive than starting a store, manufacturing or cultivation; so it is a pathway for many people left behind financially with legalization from benefiting economically if they have no stores to do delivery for.”
Escudero pointed to new licenses for four new retail stores, three manufacturing facilities and one grow approved so far for social equity applicants as a bright spot.
What Cannabis Cares does: The new program, which will launch with a kickoff event on May 4, essentially lets Denver cannabis businesses advertise the fact that they work with social equity licensees, as well as meet other city goals when it comes to going green, beautifying neglected neighborhoods or trails and volunteering.
The gamifying element: Businesses that meet certain criteria in several categories qualify for badges they can publish on their website and display in their stores. It’s a way to encourage cannabis companies to engage more with social-equity businesses and also receive recognition from both the city and public.
Is it enough? Sarah Woodson, an advocate, entrepreneur and consultant (and the woman behind The Color of Cannabis and Kush & Canvasses) told me that it’s a good start, but that it might be more helpful to call out the majority of Denver business who aren’t working with social-equity businesses.
Social-equity entrepreneurs have poured hundreds of thousands of dollars into their businesses only to be left on the sidelines as multistate operators come in and snap up retailers across the state — many showing little interest in working with these local businesses, according to multiple sources I’ve spoken to.
“I think that cannabis cares also needs to make sure they’re holding folks who aren’t doing any of those things accountable as well,” Woodson told me. “Black and Brown people are consumers at these stores. They should know they don’t support your cause or your community, and they don’t give a damn that you’ve been negatively affected by the drug war. They don’t deserve your dollars.”
Instead of a “naughty list,” Escudero told me, the city will have a website with businesses listed that are meeting their stated goals. And consumers can choose to shop only at those retailers who have earned (and display) their own badge.
He also pointed to obstacles such as the added expense to a consumer ordering cannabis delivery, when there are 329 cannabis stores in a city of 700,000 residents.
This is something Woodson and other advocates are currently working on in this Legislative session. I’ll post a special edition of this newsletter focused on those efforts next week.
The categories: Denver will recognize businesses in several categories, each of which requires true and confirmed action:
Community Engagement
Contracting
Diversity and Inclusion
Sustainability
Social-Equity Supporter
Social Equity Licensee (this is automatic for such licensees)
What’s next? Though it was announced today at a marijuana industry check-in meeting, Cannabis Cares will actually launch in April and have a kickoff event on May 4 where, Escudero says, they hope to connect cannabis businesses with charitable and social-equity organizations.
A website should launch in the coming weeks, and should live here.
Social Equity Spotlight: La Vida Dulce and High Point Transport and Delivery
High Point Transport and Delivery was founded by husband-and-wife duo Desiree and Dijonn Duran. La Vida Dulce, a licensed cannabis bakery, whose name translates to “The Sweet Life,” is the first panaderia de cannabis owned and operated by women of color. CEO Desiree Duran took the time to chat over email and tell me more about her companies — and tease future plans. The answers have been edited for clarity, style and brevity.
Tell us about La Vida Dulce and High Point Transport and Delivery, and how they work together. My husband and I started High Point because it was the best financial option for us entering the industry. When we were unable to secure a contract due to dispensaries not wanting to partner with social equity, Irefused to give up.
No one wanted to work with us, so we decided to deliver our own products. Infused products had been a conversation between myself and my cousin Christina who is now my head baker.
There was a lack of diversity in dispensaries and we wanted to change that. While still maintaining our transport license, we started La Vida Dulce- the first Panaderia de Cannabis! “The Sweet Life”
You’re a Latina-run business, but each of your team members is an entrepreneur themselves. How do you avoid the “too many cooks in the kitchen” issue with such strong leaders all operating one business? We all know our strengths and what we bring to the table. There is a level of respect we live by and have for each other. As CEO, I don’t hold myself to a higher level based on my title. We are all here to make a difference and be successful. It’s a great team and can’t wait to see it grow.
What other businesses are represented in your company leadership? I’m always proud to represent my team’s businesses. My sister is a barber and working toward opening her own shop. My cousin and head baker has her graphic-designing business. Photography, cleaning business, event setups. Hard workers to the fullest
What is Colorado doing right in the social equity space? There are great organizations who truly want to see a change. Currently we are members of the National Hispanic Cannabis Council and the Color of Cannabis. Just recently, a bill for independent delivery was presented which allows transporters to deliver without partnering with dispensaries and won [in committee] 7-4. We still have a fight ahead of us, but we are pulling together and in numbers we are strong.
What could it do better? There’s definitely still a lot of barriers we face. I can’t even say at this point what they could do better only because we are going through it, we are going through the motions right now. I’m focused on following the rules implanted now to start my business and keep moving.
We’re trying to survive, and as we go, we are involved in meetings and conversations on how we can make change.
What’s your favorite dish you make, and how can people find you? That’s hard to answer! We have been baking so many products. I would have to say the Champurrada, which is our first edible to release. I’m a chocolate person and that just hits the spot on a snowy night with a warm cup of champurrado (hot chocolate)!
We are on Facebook, Instagram and LinkedIn. We are currently going through the motions of setting up shop so I can’t say too much ‘til the ink is dry! But we are coming and can say once we are up, we will announce the first three stores we will be at.
Rare good news from the IRS for cannabis businesses
The IRS just did just something highly unusual — it gave the cannabis industry good news.
Cannabis business owners will not be automatically challenged on certain qualified business income deductions, the agency confirmed during a panel discussion with Holland & Hart Partner Jennifer Benda at a recent American Bar Association Section of Taxation meeting.
Let’s get wonky: The deductions in question fall under Section 199A of the Internal Revenue Code — part of an update to the 2018 Tax Cuts and Jobs Act, which overhauled tax policy for businesses.
199A is an update to Section 199, which some cannabis companies were already taking advantage of.
199A allows “a deduction of income from a qualified trade or business on [a cannabis business owner’s] personal tax return,” Benda told me on a call with Rachel Gillette, the partner at Holland & Hart who leads the Denver law firm’s cannabis industry group.
“It’s not like everybody was taking this. A lot of people were taking the position that [Section 199A] wasn’t allowed,” Gillette said, because of the Notorious 280E.
What it means for cannabis businesses: With this new public stance the IRS is taking, many owners of cannabis sole proprietorships, partnerships and S corporations will now be able to claim the qualified business income deduction, which is intended to bring their tax rate closer to the standard 21% corporate tax rate.
This deduction will benefit cultivators and manufacturers more than retailers, Benda and Gillette told me, because of the way the IRS defines gross income and views retailers.
The bottom line: This doesn’t change the IRS stance on Section 280E, which is a thorn in the side of many cannabis and ancillary businesses, but it could put a dent in the heavy tax burden caused by 280E.
But in many ways it’s still a win.
“We never have the IRS say anything helpful for the industry,” Benda, who pushed the IRS for an answer during the panel discussion, told me. “So that’s why we were so excited.”
Read the official Holland & Hart article that caught my eye here.
Clear Cannabis CEO: MSO retreat vindicates our expansion strategy
The Clear is one of the biggest names in inhalable concentrates — aiming for $15 million in 2023 royalty revenue — and has been quietly developing new products while debuting its wares in more and more states, with even more on the way.
Quick background: As once-swaggering multistate operators like Curaleaf and Columbia Care pull out of much of the U.S. market or rethink acquisitions, Clear Cannabis Inc. CEO Richard Batenburg Jr feels some validation in his laser focus on cannabis as a CPG.
The Clear’s model: He calls his process “Capital Light,” and it doesn’t require the vertical integration model many MSOs had been counting on until the realities of U.S. prohibition hit them like a deep dab.
Essentially, for Batenburg — and many other industry folks — the future is cannabis as a consumer packaged good. Many people know this, but what does it mean?
“Our capital light model is really vested in the simple notion that it’s about the brand, and managing those who are good at building things and selling things at the retail level,” Batenburg told me. “And I think our premise has been proven [by MSOs] divesting themselves of brick and mortar.”
How it works: Just like Coca-Cola manufactures its syrup in Atlanta and ships it across the country to trusted partners who then dilute, carbonate and bottle it, The Clear ships its famous noncannabis, plant-derived terpenes from a central location to the manufacturers it partners with in other states. It also gives those partners the knowhow to produce the distillate found in The Clear’s vape products.
“We use a pharmaceutical-type process, and demand far more purification than pretty much any other company distillate manufacturer,” he said.
The parent company also produces the hardware and packaging.
Where it works: Nine states and counting. The Clear is live in California, Colorado, Massachusetts, Michigan, Missouri, Montana, Nevada, New Mexico and Oklahoma. It plans to soon deploy in Arizona, Arkansas, Illinois and Missouri and “is in discussions” with partners in Florida, Maryland, New York and New Jersey, Batenburg told me.
What’s next? The Clear has been working on a new fast-acting gummy line, and rolling out infused-flower prerolls.
Batenburg’s bottom line: “The brand is what matters; it’s all that’s ever matters.”
Quick hits:
Superstar cannabis law firm Vicente Sederberg has officially changed its name and revealed a new logo. The move comes months after a December announcement that Founding Partner Christian Sederberg would be leaving his role at the law firm and focusing on policy and advocacy. VS Strategies, the firm’s consulting arm, will remain the same and become more of Sederberg’s focus, according to a press release. The Vicente Sederberg team was the engine that drove Amendment 64, making Colorado the first state in the country to legalize adult-use weed.
Louisville-headquartered cannabis business intelligence firm BDSA predicts the global marijuana market will push $60 billion by 2027.
OG Denver dispensary L’Eagle is finally able to purchase its longtime home after a protracted legal battle.
New Drops
Is your company dropping new products? Hmu and lmk. jonathan@regulatedstate.com
More on those new products from The Clear: They’ve been working in the lab and now they’re showing their work: Twax by The Clear, which it calls “an infused pre-rolled joint for the experienced cannabis consumer.” Twax are currently on Colorado store shelves.
And then, aiming for around the 420 holiday, The Clear plans to release Dripcees — 10mg vegan gummies designed with The Clear’s “proprietary cannabinoid-delivery technology [called] Lipid In-vivo Transport (LIT).” The company says effects will be felt in 15 minutes or less.
And, finally, Wana Brands is at it again with a new 1:1:1 CBG-CBD-THC in its classic formula (read: not fast-acting). “Allowing consumers to better calibrate their specific desired effect, each gummie contains 10mg of CBD, 10mg of THC, and 10mg of CBG, known for its power to elevate the stress-relieving neurotransmitter GABA,” per the company.
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Great insights, ahead of the game, eagle beak intel. Props.