California OK'd getting high, but all's not kush for L.A. sellers

Image: Recreational marijuana is displayed for sale at the MedMen store in
Recreational marijuana is displayed for sale at the MedMen store in California. Los Angeles marijuana dispensaries say that, because of delays in getting approval from Los Angeles, they are losing out to competitors like MedMen, located in neighboring Wes Copyright Lucy Nicholson Reuters
By James Rainey with NBC News
Share this articleComments
Share this articleClose Button

Interest in recreational marijuana is booming in California since Jan. 1 legalization, but pot sales are stalled in Los Angeles due to the city's slow process.

State law has made it legal since New Year's Day for Californians to buy marijuana to get high — not just to treat their medical ills. Full legalization of the drug has been a blockbuster hit for many of the 134 businesses licensed as of Wednesday for "recreational" sales, with sales up nearly three-fold in some stores.

But the boom times in the state's fledgling legal marijuana era have not been spread equally. Fresno and Riverside counties have prohibited cannabis sales. Many other cities have been slow to write regulations and grant permission. And the single largest market in California, the city of Los Angeles, is still scrambling to permit its first legal establishment — 10 days in to what was supposed to be a new era for so-called "adult" sales in America's most populous state.

The slow pace of permitting in Los Angeles has infuriated some marijuana dispensary owners, who said they are losing a huge amount of income and watching customers flock to competitors in cities like West Hollywood and Santa Ana. Los Angeles has defended its system, saying it is more intent on getting the rules right than in being first.

That stance has been of little consolation to marijuana dispensary owners like Jerred Kiloh, owner of the Higher Path on Ventura Boulevard in the sprawling San Fernando Valley. He estimates that he is losing as many as 150 customers, and perhaps $10,000, per day.

"Being first to market is important in any industry, but especially in this industry right now," said Kiloh, who previously ran a birthing center and a 3D-printing business in Northern California. "We lose market share every day. ... We are fighting huge losses and I don't think anybody really cares."

While Californians voted in November of 2016 to legalize marijuana sales to adults over the age of 21, the Los Angeles City Council did not approve ground rules for operating within city limits until Dec. 6. The city's Department of Cannabis Regulation only began accepting permit applications on Jan. 3, and only from the roughly 200 shops that have been selling marijuana legally to customers who had received approval from a doctor to use medical cannabis.

Image: Recreational marijuana is displayed for sale at the MedMen store in West Hollywood
Recreational marijuana is displayed for sale at the MedMen store in California. Los Angeles marijuana dispensaries say that, because of delays in getting approval from Los Angeles, they are losing out to competitors like MedMen, located in neighboring West Hollywood. Lucy NicholsonReuters

On the day permitting began, the city's online registration system floundered. At least one hyperlink failed and business owners for a short time clicked through to a dummy form, not to the document they needed to get their applications rolling, shop owners said.

A couple of the merchants said that an intermediary who has been working with the city was given assurances that the first permits would be out by Monday of this week. Then he was told Tuesday, only to have both those days pass, with no permits issued.

The Cannabis Department's first executive director, Cat Packer, told the press three days before Christmas that she imagined that within "a week or two" after the Jan. 3 kickoff date there would be "10 to 30 businesses" with the needed city authorizations. She implied that all the eligible shops would have their approvals within three weeks — by January. 24.

"We're not trying to win a race — we're here to get this right," Packer said in a statement to NBC News Wednesday. "We are implementing a brand new process, and verification of our first set of applicants has taken longer than anticipated. We're going to continue to do what's necessary to ensure the fair, thorough process that Angelenos expect and deserve."

"It's become emotional for a lot of people, because now we are fighting for our lives and businesses."

Packer is a lawyer who previously led policy initiatives for the Drug Policy Alliance, an activist group that pushes for drug policy reform. Appointed by Mayor Eric Garcetti, she took office in August and currently has only two full-time employees. The department also has been working closely with a representative from the city attorney's office and a lone IT worker, according to a City Hall insider, who declined to be named, because he had not been authorized to speak.

Packer has been so jammed with the demands of her new job that it is difficult to get her on the phone. For a time last week, her tiny office was so overwhelmed that the voicemail could not record phone messages. "I know we are going to start processing and reviewing the applications by this week," said the insider, adding hesitantly, "I can't tell if that is for sure, or not."

With the backing of City Hall, Los Angeles marijuana dispensaries have continued with sales of medicinal cannibas. But they have gnashed their teeth as competitors, like the MedMen dispensary in neighboring West Hollywood, reeled in wall-to-wall television coverage on New Years Day and the booming sales that followed.

The California Bureau of Cannibas Control does not track marijuana retail sales. But Green Bits, a tech company that supports the marijuana business, said that four dispensaries that use its software saw their sales jump by a total of 284% in the first week of legalization.

Image: Jerred Kiloh
Jerred Kiloh, president of the United Cannabis Business Association and owner of The Higher Path medical marijuana dispensary poses outside the dispensary on December 27, 2017 in the San Fernando Valley area of Los Angeles. Robyn BeckAFP - Getty Images file

After a decade in business operating the Cornerstone Research Collective in the northeast L.A. suburb of Eagle Rock, Carlos de la Torre sounded exasperated seeing big payoffs for others, while he continues to wait.

"A lot of shops just got into business in more recent years. They continue to sell without all the required permits and without paying taxes," said de la Torre. "So for a person like me, who has been participating and contributing to this industry, it's quite frustrating. We feel like we deserve to participate near the front of the line."

Kiloh heads the United Cannabis Business Association, the 78-member trade group that pushed for legalization and continues pressing Los Angeles to to expedite its permitting process. He said he has tried to remain patient. But it is difficult because, he said, roughly 100 would-be customers walk into the Higher Path store each day, and an equal number call on the phone, only to be told he has not been cleared to sell to those who do not have a physician's approval.

With many previous medicinal pot customers shifting to recreational purchases, members of his trade association have seen as many as 50% of their customers move to stores in cities that have issued permits Kiloh said.

The city's Packer has said she will proceed in the "Los Angeles way," meaning at a deliberate pace. That has led some pot shop owners to employ the hashtag #LAWay, bitterly, each time they text about their lack of permits.

Based on an average sale of $65 spent by current customers, Kiloh estimates he could be losing $10,000 a day, or more. "It's become emotional for a lot of people," said the Mohawk-coiffed entrepreneur, "because now we are fighting for our lives and businesses."

Once they have approval from the city, Los Angeles pot shops will need a final clearance from the California Bureau of Cannabis Control, before they can begin selling to anyone 21 years of age or older. The businesses said they have been told the state agency is ready, and waiting, for their applications. They said they expect the state will be able to grant approvals within a day or two.

Share this articleComments