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New Marijuana Shops Underway in Bend

Owners jockey for remaining real estate

Original article By Kathleen McLaughlin on The Bulletin Jul 28, 2019.

The Bend marijuana shop Creative Crops has faced nearby competition for the duration of its two-year existence, and now, the business and its Scott Street building are for sale.

Co-owner Denise Drazil said her customer base is increasing, despite the fact that a large chain, Mr. Nice Guy, bought out her competitor around the block on Davis Avenue late last year. Drazil and her partners — her three grown children — decided to list the shop for sale because of unexpected changes in their lives. “If we do keep the business, we’re going to do OK,” she said.

Marijuana business owners say a dwindling supply of eligible locations and a backlog of applications before the Oregon Liquor Control Commission has created an opportunity for shop owners to sell.

It’s been almost four years since the Oct. 1, 2015, start of recreational marijuana sales in Oregon. Since then, more than 600 shops have sprung up around the state. By now, those pioneering retailers can see that “things are going well, or they’re not,” said Kale Gray, co-owner of Tokyo Starfish, which has three locations in Bend [and one in Salem]. “We’re seeing consolidation in the marketplace.”

Yet marijuana’s retail footprint is expanding in Bend, which is home to 24 shops, according to the Oregon Liquor Control Commission. A new store is under construction in the former Riverbend Brewing sports pub building at 2650 NE Division St., just up the road from The Herb Center. Frye of Bend LLC applied for a retail license at 2650 NE Division, but it has not yet been issued, according to the OLCC.

Entrepreneur Jacob Jenkins said he hopes to open his first store, CannaVida, at 325 NE Franklin Ave. by Sept. 3. The location is the former home of the medical marijuana shop Garden Kings.

“There’s still a lot of people that think you can make a lot of money at it, and you can,” said Josh Kelleher, a Southern Oregon real estate broker who works with cannabis businesses, including Creative Crops.

While some shop owners who’ve been in business from the start of legalization are looking for an exit, plenty of entrepreneurs still want in, Kelleher said.

There’s an advantage to starting a marijuana business at this stage of the industry’s evolution, Jenkins said. “Now, there’s some actual statistics to base your future on.”

The CannaVida store on Franklin Avenue will be part of a vertically integrated business that includes production and processing, Jenkins said.

Jenkins hopes to set CannaVida apart from the competition with a technology-centered sales floor. The store will be equipped with iPads where customers can learn more about the inventory and see suggestions based on past purchases, Jenkins said.

As with other types of retail, location is key to marijuana stores’ performance, Kelleher said. A store with “decent” performance will have gross sales of $1 million per year, he said.

In Bend, there aren’t many places left where one could legally open a store, said Nick Harsell, former owner of High Grade Organics on Davis Avenue, just east of the Bend Parkway. That made it easier to market his shop, which he sold to Mr. Nice Guy for an undisclosed amount.

In May 2018, the Oregon Liquor Control Commission declared it was too backlogged to process new marijuana license applications of any kind after June 15 that year. The “pause” only added to High Grade Organics’ value, Harsell said.

The OLCC does not allow marijuana retailers to transfer licenses, but the agency will facilitate the surrender of one license and issuance of another for an existing business, spokesman Mark Pettinger said.

“It was definitely a leveraging play,” Harsell said of the licensing backlog. “There was no other way to get a dispensary.”

The “pause” that OLCC enacted is still in effect for retail businesses, Pettinger said. “You may remember that we had a surge of applications in the run up to that date,” he wrote in an email. The agency is still assigning those applications to investigators, and until that’s complete, it won’t work on anything that was submitted after June 15, 2018.

Separately, the state has placed a moratorium on processing new applications for marijuana production. That could be in effect until Jan. 2, 2022.

Bend’s larger marijuana businesses are looking to expand in other parts of the state.

Oregrown Industries, which has a store downtown, will open three locations between Labor Day and the end of the year in Cannon Beach, Portland and Eugene, CEO Aviv Hadar said.

Buying out existing stores might have been quicker, but Hadar said the company and its investors wanted premium locations. The Eugene store at 211 W. Sixth Ave. is near the Hult Center for the Performing Arts, he noted.

Oregrown intends to pair the high-traffic locations with expensive interiors.

In Portland, the vaporizer company Pax Labs will build a store within Oregrown’s store at 1111 NE 12th Ave., Hadar said. “That Portland location’s going to be a tourist mecca.”

Tokyo Starfish is looking for opportunities in the Willamette Valley, Gray said.

“We opened up multiple locations in town because we feel that people shop for cannabis like they go to 7-Eleven — the one they like the most, nearest to them.”

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Oregon Faces Black-Market Marijuana Problem

Illegal market grows in Deschutes County

Original article by Suzanne Roig on The Bulletin Oct 14, 2018.

Legal cannabis grown in Oregon. Photo: Andy Tullis

Law enforcement authorities intercepted $48 million worth of black-market marijuana headed from Oregon to 37 states over a three-year period, and officers blame the illegal exports on a statewide glut of regulated marijuana and low prices.

Some of the black-market marijuana comes from illegal growers, some diverted from legal recreational producers, processors or retailers and some comes from medical growers, acknowledged the Oregon Liquor Control Commission, which oversees the Oregon’s legal recreational marijuana program.

Most of the illegal product seized — about 14,500 pounds — was probably grown on U.S. Forest Service land, and came from Jackson, Multnomah, Josephine, Lane, Deschutes and Washington counties, according to a report from the Oregon-Idaho High Intensity Drug Trafficking Area, a federally funded program that collects data from 14 counties in Idaho and Oregon.

“This could be larger in scope than the data sets show,” said Chris Gibson, executive director of the Oregon-Idaho High Intensity Drug Trafficking Area. “We have a state law that says cannabis cannot go out of state, and that’s our focus.”

Deschutes County has seen a six-fold increase in the amount of seized marijuana so far this year, said Bend Police Lt. Brian Kindel, who is part of Central Oregon Drug Enforcement team. In 2017 the CODE team confiscated about 100 pounds of cannabis, compared to 600 pounds in the first 10 months of this year, Kindel said.

“We’re only stopping a small amount of it,” he said. “There’s a lot more going out. We’re not getting all of it.”

With more than a million pounds of excess cannabis logged into the Oregon cannabis tracking system and retail prices at a record low, black market sales — skimmed product from the legal recreational market, medical growers or illegal growers — have become tempting and profitable.

In many cases, it’s as easy as loading up an SUV and driving it to another state.

Officials say it will take a multipronged approach to combat black market sales. Allowing Oregon-grown cannabis to be sold in other states could relieve the pressure caused by the surplus, said Gary Bracelin, owner of Bend cannabis store Tokyo Starfish.

Many argue in favor of tightening regulations to prevent diversion, when cannabis grown in the regulated market finds its way on the black market.

Three recent criminal cases in Deschutes County underscore the rise of illegal growing and processing sites. One of the cases was even from a Oregon Liquor Control Commission sanctioned site.

In the most recent case, two Bend residents were charged with unlawful manufacture of marijuana and unlawful possession of marijuana for allegedly exporting cannabis products out of state. They are alleged to have used picture frames to hide cannabis to mail from a farm on Back Alley Road in Bend to Massachusetts. Law enforcement officials seized 93 mature marijuana plants and 55 immature plants, 5.8 pounds of dried marijuana and butane hash oil.

In another case, police charged two Crooked River Ranch residents with unlawful manufacturing of marijuana and charges related to allegedly running a butane hash oil operation used to produce a concentrate.

And in September, the OLCC revoked the license of a legal marijuana producer, High Cascade Farms, after numerous violations were uncovered along with alleged black market activities.

“We acknowledge there may be licensees conducting illegal activity, but it comes to light through anomalous activity in the cannabis tracking system, which is especially noticeable since our monitoring and detection has improved,” said Mark Pettinger, OLCC spokesman.

“Even before the High Cascade case surfaced, we were paying attention to the unusual ‘wasting’ activity and in some instances asking for video recordings to reconcile and do compliance checks,” Pettinger said.

With one cannabis growing site for every 25 users, Oregon has the ability to produce more than 2 million pounds of marijuana per year, far beyond what it can consume, leading law enforcement to believe that the surplus is contributing to diversion into the illegal market.

In addition, prices have fallen in the legal market from over $3,300 a pound to about $330 a pound, and cannabis businesses say some enterprising people are taking advantage of the lower prices and shipping product out of state, said Kindel, of the CODE team.

“What we’re seeing now is because it’s become lucrative to ship out of state, and Oregon has a reputation for quality cannabis,” Kindel said.

“Illegal grows are still at heart, illegal,” said Bracelin. “With the legal market and the glut, prices are so good for consumers to buy legal cannabis, I would guess the local black market is actually a pretty bad business model. Black market growers probably opt to ship out of state where they can get better prices. Illegal black market growers have been doing this for years.”

Bracelin said that regulated cannabis growers and retailers take a great risk diverting legally grown cannabis into the black market. They face license revocation and criminal charges by selling to the black market, he said.

“I’m not so naive to think this does not happen,” Bracelin said. “There will always be bad players.”

Lizette Coppinger, an owner of Cannabend, a Bend retail cannabis outlet, believes that legalizing the exportation of cannabis is important and could grow the cannabis industry. Legal exportation would enable growers to sell off the surplus to other states, Coppinger said. Allowing the export of legally grown cannabis to other states where pot is also legal could wipe out black market sales, she said. As of mid-2018, nine states and Washington, D.C, have legalized marijuana for recreational use for adults over the age of 21.

Said Bracelin: “Oregon is stifling its newest bounty crop and craft industry. While we fight over counties and state’s borders and federal acceptance, other countries are moving much faster and looking at international import/export markets.”

A byproduct of export would enable regulated shops, growers and processors to showcase the best Oregon growers have to offer. Products with high THC (tetrahydrocannabinol) content, unique terpenes and flavor all can be found at the corner retail outlet.

“There’s so much talent, and it’s a fun process,” Coppinger said. “You don’t get that in the black market. You don’t have any choices, just what the dealer offers.”

In Oregon the OLCC has taken steps to prevent the diversion of legally grown cannabis to the black market. This summer saw the start of Operation Good Harvest, a program that requires a growers to notify the OLCC when harvesting begins.

Nearly 70 inspections were done of outdoor grow sites, Pettinger said.

“We acknowledge there may be licensees conducting this type of illegal activity, but it comes to light through anomalous activity that comes through the cannabis tracking system, which is noticeable since our monitoring and detection has improved,” he said.

When growers identify plants as waste, they must take them off their inventory, report the waste to the OLCC, store the plants under video surveillance for three days and dispose of the plants by mixing the plants with yard debris, wood chips or sawdust and taking it to the landfill if composting is not feasible.

This summer also saw the transfer of 2,000 medical growing sites that grow for three or more patients in the Oregon Medical Marijuana Program to the regulator authority of the OLCC. Those growing sites must tag and register their plants in the cannabis tracking system.

Another step the OLCC took to tighten the system came in August when it began limiting the daily purchase amount for medical card holders to 1 ounce.

Previously, the limit was 24 ounces for medical card holders. The restriction lifts in six months.

“None of us have figured out where the point of diversion is occurring,” said Carol Yann, Oregon Medical Marijuana Program section manager. “The majority of our growers are growing for themselves. We want to get a handle on the diversion.”

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Marijuana Tourism Comes to Bend

Original article by Joseph Ditzler, published on the The Bulletin Aug 28, 2016.

John Flannery, a partner of The Bend Tour Co.

Dispensary tour could be “icing on the cake”. Look for an open-sided, six-seat, electric touring car making its way along Bend streets starting in September.

It will mark the advent of marijuana tourism, the next phase in a town already a destination for skiers, beer drinkers and bicyclists.

“By offering this type of tour, we’re demystifying cannabis,” said John Flannery, a partner in The Bend Tour Co. “We’re helping take away the stigma.”

Tourism geared to marijuana is not new in Washington and Colorado, states that preceded Oregon in legalizing recreational marijuana for adults. Portland has its own pot tour. But the Bend Tour Co. plan represents the first of its kind in Bend, Flannery said. He sees tourism as a means to entertain people while educating them about marijuana and Oregon law surrounding it.

“It’s a great tour of town but with a different set of discussion points,” Flannery said. “For a lot of people, it’s the icing on the cake.”

Marijuana is taking its place among businesses that play on Bend’s popularity as a destination along with kayak rentals, flyfishing outfitters and brewpubs, said dispensary owners. They reported a jump in sales starting in June, an increase tied to the availability of edible products infused with the psychoactive ingredient in marijuana, but also to the tide of visitors during the first summer of legalized marijuana in Oregon. The Visit Bend website in spring added a drop-down menu that lists the […] marijuana dispensaries in the city. Visit Bend, the agency that contracts with Bend to market the city as a destination, takes a neutral stance on marijuana, its chief executive said.

“The way we see it, now that it’s legal in Oregon, we list them just like we’d list a grocery store or a brewery,” said Kevney Dugan, president and CEO of Visit Bend. “If you’re legally operating under the laws of the state, we can’t dictate who can or can’t be part of the (tourism) industry. Grocery stores, hair-cutting salons, mountain-bike rentals all have that listing. Tourists want that resource.”

Flannery’s tours will provide clients an opportunity to purchase marijuana but not to partake of it. State law prohibits consuming any form of marijuana in public places, and the Legislature last year amended Oregon’s Indoor Clean Air Act to include marijuana and vaporizer pens. The act prohibits tobacco smoking in the workplace, including hotels and motels, with some exceptions. The clean air law permits smoking in cigar clubs and smoke shops, with conditions attached. A marijuana business group in Oregon expects plans for a lobbying effort during the next legislative session to carve out a similar exception for marijuana smoking clubs or lounges.

“What we have to do is get around the Indoor Clean Air Act, that’s the main problem,” said Donald Morse, director of the Oregon Cannabis Business Council. “We’re hoping to allow these clubs, and that would help tourists. They can buy a joint, but they can’t smoke it in their hotels.”

However, dispensaries sell more than dried marijuana flower, which is commonly smoked. Since June, they may also sell drinks or edibles that contain 15 milligrams or less of tetrahydrocannabinol, the active ingredient in marijuana, or a 1-gram container of concentrated THC extract. Adult consumers may purchase up to 7 grams of dried flower or one edible or extract at each dispensary per day under temporary rules for recreational marijuana sales.

Local dispensary owners reported a June sales surge they attributed to sales of edibles like gel candies, ice cream and kombucha with THC, as well as the seasonal tourist influx. Mark Capps, co-owner of Oregon Euphorics, a SW Century Drive dispensary, said 20 percent to 30 percent of the shop clientele were out-of-state visitors. Like other dispensary owners, he said tourism accounted for a bump in sales, along with the sales of edible products.

Edibles “open up the market to a lot of people who may not smoke marijuana but will ingest it otherwise,” he said.

[…]

Dispensary owners and employees estimated between one-fourth to one-third of their customers are tourists whose dispensary visits are incidental to some other activity, whether camping, climbing, a concert or a wedding. For many, a marijuana dispensary is a novel concept.

“We’ve seen many first-time people through the shop that are interested in checking it out,” said Jason McAlister, co-owner of Tokyo Starfish, a dispensary on NW Arizona Avenue.

His business partner, Gary Bracelin, said business jumped appreciably in June because of several factors. Work on a city sewer line on Arizona Avenue that hindered access wrapped up in June at about the same time as THC-infused edibles became available. Plus, Market of Choice opened its new location just east of the dispensary, which attracted more consumer traffic. Bracelin attributed the approximately $2 million increase in tax revenue collected by the state in June, about $5 million total, to the availability of edibles.

“With that being said,” Bracelin added, “tourism is having an impact.”

While the mainstream business community still holds marijuana at arm’s length, some sectors are warming to it, he said. Bracelin said he expects to build on his and McAlister’s ties to the outdoor recreation world. Bracelin founded Bend Outdoor Worx, a business incubator for the outdoor recreation sector, and McAlister is a professional snowboarder. Bracelin said those ties may help elevate the Tokyo Starfish brand. He said he expects to take part in community events as a corporate sponsor, but declined to be more specific.

“We are working on some ideas and, you might say, waiting for resistance to soften,” he said. “Yeah, we want to be community partners and be involved in community events. Our options aren’t really open to us, yet.”