Welcome to the eighth annual “State of the State” submit on Oregon hashish. Final 12 months was memorable for Oregon the business, pockmarked by OLCC scandal, heavy regulatory swings, and even marquee litigation. We additionally noticed the state’s first very-large-business failure, extra commerce affiliation consolidation, and different altibajos as my mother-in-law may say. Let’s go!
Gross sales fell (once more) together with licensee numbers (first time)
In line with OLCC knowledge, retail gross sales between January 1, 2023 and November 30, 2023 clocked in at $874 million. By my math, the state is on tempo for roughly $953 million this 12 months. That tally could be a 4.1% lower from $994 million in 2022, which itself was the primary calendar 12 months hashish gross sales contracted in Oregon. Somebody with higher credentials than me might verify whether or not this 12 months’s drop is because of pricing decreases, quantity decreases, or each, alongside no matter different elements (like inhabitants shrinkage). General, a 4.1% decline isn’t nice information for business, but it surely’s not horrible. The very massive unregulated Southern Oregon market, nonetheless, continues unfettered.
Almost half, or 48.7%, of OLCC retail gross sales are “useable marijuana” (dried leaves and flower). The concentrates/extracts class sits at 24.7%; edibles/tinctures are 13.7%; inhalable merchandise with “non-cannabis components” are 7%; “different” is 5.2%; and industrial hemp merchandise deliver up the rear at 0.7%. This follows a years-long pattern of usable marijuana gross sales lowering per capita in favor of different classes. Like final 12 months, my impression is that near-term progress could also be restricted to pick out SKUs and product classes.
Along with decreased quantity, costs stay low; however not as dangerous as final 12 months. At the moment in 2022, wholesale useable marijuana had been sitting at $600/lb for months, bottoming out at $550/lb for December. For the newest three months of 2023, we’ve hovered at a decent $745/lb. That mentioned, the total results of the Croptober harvest haven’t rippled by way of the system. This 12 months’s harvest got here in at an unwelcome 15% larger than 2022.
To the plus, we have now barely fewer licensees vying for market share than a 12 months in the past in the present day. It’s not a giant drop, however this was the primary 12 months I noticed license numbers fall for the reason that 2016 roll-out of the grownup use program. Regardless of the variety of “pending” license purposes under, you possibly can count on the quantity to flatline or fall a bit once more subsequent 12 months. Sure, the HB 4016 licensing moratorium sunsets on March 31, 2024, however I’m guessing our legislators will move an extension invoice early within the 2024 session. Let’s see.
| 2022 | 2023 | 2023 (lively + pending) | |
| Producers | 1,408 | 1,389 | 1,520 |
| Processors | 331 | 312 | 363 |
| Wholesalers | 276 | 269 | 299 |
| Retailers | 827 | 818 | 881 |
| Labs | 19 | 15 | 15 |
| Analysis | 1 | 1 | 4 |
Business is within the doldrums, with one spectacular flameout
Final 12 months presently, I wrote that “fairly just a few companies are struggling and others have failed.” Identical deal in the present day. All all year long, we helped individuals promote (and attempt to promote) companies we had helped them purchase simply a few years in the past. It seems like the most important variety of “enterprise gross sales” are little asset buy agreements for bare licenses. We’ve additionally helped fairly just a few shoppers throw within the towel, and our litigation workforce continues to help in a collection of disputes associated to enterprise dysfunction—for individuals who can really afford to litigate.
Nothing higher exemplified the weak state of the Oregon market than the Chalice receivership sale (see: Chalice Receivership Replace: Weak Market, Insiders Pounce). Curiosity was scant, provides have been few, and in the end 20+ companies offered for a mere $3 million. Final 12 months presently, I noticed that Chalice was one of many largest operators in Oregon, trailing solely Nectar Markets. At this time, in one of many greatest Oregon hashish tales of 2023, the Canadian heavy has gone stomach up, to the detriment of stiffed collectors and hapless workers.
Powerful 12 months for OLCC
If one state company must be pleased to depart 2023 behind, it’s obtained to be OLCC. I defined in an earlier submit that OLCC and the hashish business have been “at a nadir with two-bit scandals” this spring. Stellar investigative reporting round OLCC’s dealing with of the La Mota chain induced the Oregon Secretary of State to resign, but in addition result in some unlucky, reactionary guidelines for the hashish business (extra on that under). Individually, the OLCC’s Govt Director resigned as properly, within the context of separate misconduct.
Most just lately, the Fee obtained some excellent news in that the previous Secretary of State’s hashish program audit will stand, albeit with a disclaimer, turning the web page on a troublesome chapter for just about everybody and giving the Fee room to maneuver. As an apart, one former OLCC official commented that the audit “reads like a Leafly weblog”, resulting from its normal and particular suggestions to loosen regulatory strictures. Business favored these findings clearly, and it’s a disgrace the method was tarred.
In my opinion, nonetheless, a key challenge with OLCC stays unaddressed, and that’s the Fee’s disparate therapy of enormous and small hashish firms (see: The Actual OLCC Scandal is that There are Two Units of Guidelines). OLCC has allowed the most important Oregon hashish retailers to coast after citing them for important and repeated violations– together with allegations of hashish diversion. Small companies get their tickets punched for much less. In all, I see scant rhyme or cause to OLCC’s erratic enforcement efforts.
New guidelines, highlighted by tax compliance (perpetually) and aspergillus testing (for a minute)
The Oregon regulatory panorama is ever altering. We had new guidelines to kick off the 12 months, adopted by new legal guidelines handed in Salem. Rulemaking commenced all through the autumn per regular. The largest change, nonetheless, was the arrival of “emergency” (and now everlasting) tax compliance guidelines that arose from the La Mota scandal referenced above. All retailers and their “applicant” house owners (however not producers or processors or wholesalers) are actually required to certify tax compliance with OLCC through the Oregon Division of Income, to resume or switch a marijuana license. Right here within the workplace, we’ve seen the foundations impression fairly just a few renewals and gross sales already.
One other large story in Oregon hashish for 2023 entails a rule that got here and went, concerning aspergillus testing. In March, the Oregon Well being Authority (OHA) promulgated a rule that required marijuana testing for sure microbiological contaminants, together with aspergillus. The Hashish Business Alliance (CIAO) and others filed a movement for emergency reduction. These events received a short lived “keep of enforcement” of the rule, pending completion of judicial evaluate. Moderately than defend the rule at a subsequent listening to, OHA withdrew it. And doesn’t seem to need a second chunk on the apple.
It is a nice consequence for our hashish producer shoppers, no less than within the quick time period. I admittedly didn’t suppose they may win. Whether or not it’s a very good long-term play stays to be seen. Oregon producers have lengthy pushed for hashish export rights— which conceivably might occur sooner somewhat than later if federal regulation adjustments. (See: Audit: Marijuana-rich Oregon should prep for US legalization.) That is salient resulting from the truth that most states require aspergillus testing for hashish. It’s onerous to think about a situation the place these states agree to just accept Oregon hashish “contaminated” with aspergillus.
Commerce organizations merged
Lastly, we have now only one main commerce group in Oregon hashish. Previous to October, the Oregon Hashish Affiliation (OCA) and the Hashish Business Alliance of Oregon existed aspect by aspect (fairly just a few others have come and gone through the years). Now, it’s all CIAO. Judging by all of the emails I’m getting, the big-tent outfit is energized.
The primary large process for CIAO ought to come up within the 2024 legislative session. The Oregon legislature appears much less eager on coping with hashish points over the previous few periods, than traditionally. Given collateral injury to OCA from the La Mota scandal and all the oxygen being taken up by Measure 110 scrutiny, CIAO may have its work lower out come February.
Hollowed out hemp
Oregon has solely issued 187 hemp grower licenses as of December 7. It is a noteworthy drop from 294 licenses in 2022, to say nothing of the 1,961 licenses issued within the heyday of 2019. Despite all of it, Oregon continues to be a hemp chief on the nationwide stage, in some way, per the 2023 Nationwide Hemp Report.
Final 12 months I wrote:
the continued downward pattern can’t final perpetually. Congress is scheduled to resume the Farm Invoice in 2023. Modifications on the desk embody all the pieces from elevating the “hemp threshold” from 0.3% THC to 1.0% THC, to addressing regulation of intoxicating cannabinoids derived from hemp. One other large driver would be the continued adoption of hemp-based textiles and constructing supplies. Although Oregon hemp has slowed dramatically, count on the state to stay on the fore if and when the pattern reverses.
All of that’s most likely nonetheless true, besides that Congress missed its deadline and we could not see a renewal of the Farm Invoice till late in 2024. Within the meantime, I and plenty of others have been asking, “What Happed to Hemp”?
Odds and ends
We’ve seen some noteworthy exercise across the edges, regionally, which I’d be remiss to depart off:
- Longtime hashish champion, Earl Blumenauer, introduced his coming retirement as an Oregon congressional consultant. We’re going to overlook him.
- Scotts closed 4 hashish provide warehouses in and across the Portland metro.
- Curaleaf gave up on Oregon (and Colorado and California).
- The dormant commerce clause lawsuit filed by our colleague Andrew DeWeese inched slowly ahead, with a listening to now set for January 2024. Good luck Andrew!
- Left Coast Monetary Options, a shady money-services startup serving the business, had its license suspended by the State Division of Monetary Regulation.
- Oregon’s hashish gross sales tax revenues dropped at the side of falling gross sales, and continued diverting partly to poor Measure 110 applications.
Oregon hashish: that’s a wrap
Let me know within the feedback should you suppose I missed something value mentioning, or shoot me an e mail. There may be all the time one thing. Within the meantime, right here’s hoping for higher instances for Oregon hashish in 2024.
For earlier posts on this collection, take a look at the next:
