Cannabis has become a massive industry in Oregon since its transition to a recreational market, which has seen sales explode from $7.3 million in December 2016 to a peak of $106.6 million in July 2020.
“The growth in sales has been pretty significant,” says Mark Pettinger, Oregon Liquor Control Commission director of communications and education. “We had multiple months where sales were more than $100 million. It’s gone down a little bit, but it’s still considerably high. Even in September and October, it was $97 million.”
The OLCC was the third state agency in the United States to implement a regulatory framework for recreational cannabis sales. While the program has seen yet another record-breaking year in terms of sales, it has also endured its fair share of unprecedented challenges with wildfires, persistent oversupply and the ongoing coronavirus pandemic. For the OLCC, those challenges are in addition to providing support to the Department of Agriculture’s hemp program, overseeing the distribution and sale of alcohol, providing relief services to the thousands of bars and restaurants that were forced to close in 2020 and enforcing the state’s bottle bill, a landmark recycling program that helps keep more than 100 million pounds of waste out of landfills annually.
“Pick any of those challenges and we’ll be busy,” Pettinger says.
As part of its focus on Oregon, Marijuana Venture interviewed Pettinger to discuss the current state of Oregon’s legal marijuana industry and the agency’s plans for a brighter 2021.
Marijuana Venture: How would you describe the overall state of the industry coming out of 2020?
Mark Pettinger: I think, like a lot of industries, the cannabis industry has been challenged by the pandemic. There are now a lot of safety procedures and protocols that they had to put into the workplace.
The other shock to the industry was the wildfires all along the West Coast. There was some impact, and I don’t know if it’s been completely accounted for in the system. It appears to have disproportionately affected retailers. That’s not to say that there wasn’t crop damage for some producers, or damage to their infrastructure systems, their security or irrigation lines, but it has been hard to tell because of the federal designation and a lot of these businesses were not allowed to apply for any assistance.
That said, I think the sales figures reflect that the market is doing fairly well. We have another supply study that we will be doing this year. We’re required to report to the Legislature so we will see what that looks like.
MV: How important has the cannabis industry become for Oregon?
MP: Well it is pretty significant, especially when you look at tax revenue. Since the pandemic started there’s been about $700 million in taxable sales, which would be about $100 million in estimated tax revenue. Industry employment has generally been pretty healthy. The industry has grown in terms of jobs that are on the market.
The industry is sizable, it is certainly maturing and there are a lot of (industry) best practices that are developed here. The industry was deemed important enough to remain open during the pandemic. Because of the responsibility that has been shown we approved curbside delivery, that is a reflection that the industry is growing up. There are still a lot of things to iron out, but it is a significant contributor to the state’s economy, especially right now as cannabis sales are adding a lot in the absence of some industries collapsing.
MV: What are the OLCC’s top priorities for 2021?
MP: I think what we’re looking for is the impact of two recent, significant changes. One is what we call “verification of compliance.” For some lower category violations, we are now essentially giving folks a “fix-it ticket,” if you will, that is designed to keep them up and operating and not bog them down or bog us down. Early on, we found that a number of licensees would have violations for a camera not working or a hard drive wasn’t recording and maybe it was unbeknownst to them or they couldn’t get someone to repair it for days on end; this change is an acknowledgement of those challenges. Essentially, it offers folks the opportunity to fix it and become compliant without getting a category violation. The idea is to give our licensees a chance to quickly get back in business and not worry about the red tape of an administrative hearing or going through that process.
The other thing is that we have made improvements to our licensing process, which has been a bit of a challenge all the way back to when we began licensing in 2016. We’ve made tweaks before to try and deal with the backlog. Now we’ve changed or modified some of the requirements around licensing to eliminate a burdensome and time-consuming step both for license applicants and for our investigators. One of those things is that we have made it less difficult to make ownership changes, and that makes it easier for applicants to begin operating before the final approval of changes in ownership and financial interest changes have taken place. Another thing we have done is added some temporary staff to help with the backlog.
Those are priorities for us going into 2021. In the second quarter of 2021 and beyond, we can assess the efficacy of those changes and then see where else we can do some trimming.
MV: What lessons has the OLCC learned since the launch of recreational sales?
MP: Be ready to pivot like a bobble-head. I say that because we started issuing licenses four-and-a-half years ago and there were just three other legal states (Alaska, Colorado and Washington). In a very short period of time, a lot of things have changed.
A sort of obvious lesson for us and for new states that are entering cannabis is underestimating the degree of interest as reflected in our license numbers. We didn’t staff up with enough employees to support the program; we staffed up with numbers that were reflective of the best-case projections. In that way, you could say we didn’t know our market, but who could have at that time? Now I think late-entry states can benefit from the market analysis of states that have been up and running. We also know that the industry is entrepreneurial and that they are often pushing for change and innovation. It’s not to test the boundaries of what is legal, but more to test the boundaries and see where the market could go, but oftentimes there is a lag between the innovation of industry and the regulation by the state.
What we learned is to share the information because every state is going to want to put its own imprints, and the citizens and the legislators are not going to want the same things. But at least by sharing that information it is helping the industry as a whole.
It’s still a fast-moving industry. It’s still entrepreneurial and innovative. I think the pandemic may have constrained some of that activity, but it hasn’t curtailed and in a post-pandemic operating environment a lot of that will be unleashed.