(This is the second installment in a series chronicling the challenges and successes one prominent dispensary – Berkeley Patients Group – is experiencing as it transitions from California’s unregulated marijuana market to a statewide regulated industry. Read Part I here.)
The official launch of recreational marijuana sales in the largest market in the United States is just days away.
And the longest-operating dispensary in the nation – Berkeley Patients Group (BPG) – is working until the very last minute to make sure it’s ready for California’s historic day.
The dispensary – which has enjoyed a close relationship with local authorities for years – is even going to have Berkeley Mayor Jesse Arreguin on hand at 6 a.m. New Year’s Day for a ceremonial ribbon-cutting to mark the start of the Golden State’s fully legal cannabis industry.
BPG, which first opened in 1999, will be among the few California retailers that has gotten formal permission to begin rec sales on New Year’s Day.
While Los Angeles regulators last week said that city’s MJ businesses aren’t permitted to open Jan. 1, the Berkeley City Council in October approved an ordinance to allow the municipalities’ existing MMJ dispensaries to begin selling rec.
But that doesn’t mean the road to rec has been all roses.
Rather, BPG has spent hundreds of thousands of dollars and countless man hours on the transition, with changes to their security systems, remodeling the dispensary interior, installing updated inventory tracking software, stockpiling inventory and more.
“I’d overall rate it as a pretty difficult and tumultuous and harder-than-it-has-to-be process,” said Sean Luse, BPG’s chief operating officer.
In fact, there are so many unanswered questions when it comes to specific compliance with state regulations that Luse expects to have to make some course corrections, perhaps on inventory tracking procedures.
“It’s just about the proof of concept, making sure we’re actually interpreting these rules right,” Luse said.
“I think we probably won’t know how tricky things are until we have our first inspection, and see if we have the same perspective as the inspectors on what we’re supposed to be doing.
“Because some things, you think you get it, think it makes sense, but it could be interpreted different ways.”
BPG does, however, have a proverbial “leg up” on other dispensaries making the transition, Luse said, because the city of Berkeley has been strictly regulating the few dispensaries allowed in the municipality for years.
Still, there are plenty of details to attend to, ranging from the lengthy state rules the dispensary must comply with to simply enduring BPG staffers are prepared for what the expected big rush of customers Jan. 1.
So far, BPG has gotten the go-ahead from Berkeley and, perhaps more important, has obtained three temporary licenses from the California Bureau of Cannabis Control.
Those permits are for both medical and adult-use cannabis sales, along with a distributor license.
“Even though we don’t necessarily plan to be a real big wholesale player in the distribution market,” Luse said, “it just gives us a little more flexibility in terms of the transactions we can conduct, in bringing things in from a cultivator that maybe has a temporary (license) but doesn’t have a good distributor.”
Asked why Berkeley Patients Group didn’t also seek a small cultivation license – as many California retailers are doing so they can grow some of their own flower – Luse said the dispensary simply doesn’t have the space for a grow.
But he didn’t shut the door completely to that option moving forward.
“We’d love to have more of a vertical going here,” Luse said.
“It’s just a question of the best way to get there for us, whether we go more of a specialized route, or have more of a deeper partnership with someone who’s more of a cultivation specialist, or try to build out more on our own.
“It’s always that tough choice of, do you try to do everything, or try to do one thing really well? You’ve got this little firehose of opportunity we’re trying to drink out of here.”
BPG has also been making additions and changes to its longstanding location – northeast of San Francisco – Luse said, including adding cash registers, installing security cameras in a new inventory room required for distributors and figuring out how customer lines will flow.
“We are constrained by our lack of space … but we are definitely trying to redesign ourselves for a higher volume (of customers),” Luse said.
Those changes have come with costs, however.
Sabrina Fendrick, BPG’s director of government affairs, estimates the dispensary spent almost $90,000 on new security cameras for an inventory room required for all distributor licensees.
And she estimates that overall, the company has spent “probably in the million-dollar range” on the transition and becoming compliant with state rules for the regulated market, including expenses for “redesign, public relations, product inventory, training and security upgrades.”
One upgrade Luse is hoping to have ready on New Year’s Day is a cannabis vending machine that would expedite trips for customers who know what they want and don’t want to wait.
Luse said the vending machine will feature vape cartridges, pre-rolls, edibles and both grams and eighths of flower.
“It’s sort of a ‘best of’ from the menu,” Luse said. “It’ll be a neat little novelty.”
BPG also plans to devote one purchase lane to customers who placed orders online and need only to pick up their product and pay for it, Fendrick said.
“It’s sort of like an express lane, just for pickup,” she added.
Luse said BPG hopes to improve customer flow by installing a few more checkout stations with MJ Freeway’s point-of-sale system, “depending on space restrictions.”
Staffing and marketing
Two areas in which BPG hasn’t had to expend resources are staff and marketing, Luse and Fendrick said.
Though BPG is planning for a spike in business come New Year’s – Luse said he expects sales to roughly double because of rec MJ – the dispensary hasn’t seen the need to add more staff.
Why? BPG and other California retailers saw a significant downturn in sales in 2017.
Luse estimated that sales overall were down 10%-20% from 2016. He attributed that to the rise of unregulated delivery services and illegal MJ lounges that also sell product.
“Business has been down, and if we were really just running a straightforward operation, we would have had some fairly substantial layoffs this year,” Luse said.
“But we chose to not do that, and to burn some money on extra labor, just to keep our team together for the anticipated surge in business in January.”
On the marketing side, BPG hasn’t felt the need to burn extra capital to advertise that its adult-use sales begin New Year’s, because so few retailers have gotten formal permission from local or state governments to sell to anyone who’s 21 or older.
“I think there are going to be less than 20 (retailers) in the Bay Area” starting rec sales Jan. 1, Fendrick estimated.
“Advertising isn’t as critical because we don’t really need to do too much of a push to stand out, since there’s going to be such a small number of places.”
She said BPG is concentrating more on getting press via news outlets, as opposed to traditional advertising online or in print.
On the brink of California’s rec launch, Fendrick pithily summed up BPG’s situation:
“One way or another we’re flying this plane into 2018. We know how to take off and will figure out the rest once we get to cruising altitude.”
John Schroyer can be reached at [email protected]