By: Ian Bremner
Even if you don’t like politics or you hibernated through the voting polls, you probably still woke up Wednesday, November 5th with 2 headlines in your face from which ever news sources you subscribe to. 1. THE REPUBLICANS TOOK BACK THE SENATE! and 2. WASHINGTON DC, OREGON & ALASKA PASS LEGAL MARIJUANA! This time 2 years ago, Washington State and Colorado were the first states to take the plunge and make history in the process. Between then and now, Washington and Colorado have been the brunt of stoner jokes and increased tourism, but behind the scenes, they have been pioneers passing laws, reforming policies and creating an entirely new industry in the United States; An industry with rapid growth both financially and common interest. People are trying to get their heads around what exactly it means for their state to have marijuana “legal.” For the most part, the federal government has shied away from having a distinct opinion on the matter, seemingly letting the states decide for themselves. Here in Washington State, Solstice Co-Founder, Will Denman has been at the forefront of this movement with his business partner, Alex Cooley. I invited Will into the Old Rookie lounge, which, for the time being is just a kitchen table, to discuss what the recent election means for his business, for the state of the cannabis industry in the now-legal territories, and what looms ahead.
Old Rookie: here with Will Denman, co-founder of Solstice
Will Denman: Roooook, like what you’ve done with the place!
OR: As a Washington resident and someone who is around cannabis, I am interested in what the recent elections mean for “legalizing marijuana” and how it effects the industry here in Washington. Waking up Wednesday after the election, pretty much the main headline coming out of it, was that Washington DC, Oregon and Alaska has followed Washington and Colorado’s lead in “legalizing” marijuana. You as someone in the business, had to have seen that as a victory of sorts?
WD: Yeah, I mean its huge. What it means to me is, as a conscious voting public, we’re starting to understand some of the reasons for regulating and legalizing cannabis. It’s taken a long time to gain traction, Colorado and Washington were the first to jump, but you can see that message is starting to move across the country. People are seeing the legitimate medical application and realizing it’s not an affront. A lot of time the evidence is anecdotal, but its palpable. More and more people are encountering it within their own circle of family and friends and once it hits home, it makes sense. Then on the other side, people are tired of the drug war. Anyone who can rationalize it, can look at it and say, “ok what we’re doing isn’t fucking working.” And it’s cool to see the ability of our democracy work and say, “hey we can change this,” even though currently, the federal government won’t say anything. You can see that with Washington Colorado, Alaska, Oregon and DC, and there’s going to be 5 or 6 more on the ballot in the next voting cycle and it’s exciting because I believe in this.
OR: As it looks now, California, Massachusetts, Maine, Nevada and Arizona are looking to be the next states up to vote in 2 years. Does it even make sense to speculate what might happen in those elections?
WD: You look at Oregon, Alaska, DC, you see the headline, its “Legal.” Same sort of thing that happened with Washington in 2012. Everyone expects it to be in the store next week. It doesn’t really work like that. Take Washington DC’s law for example–it only allows home grows, 3 plants and then small possession. So there’s not really even a system set proposed for cannabis to be produced, processed and sold at retail. In Oregon, it’s going to take time, like here in Washington State, to create a system. But their initiative is really good. Same with the other states, it’s hard to say how it will present itself. I think it’s safe to say that states are starting to see that if they don’t jump on board, they might miss the boat a little bit, miss an opportunity. I think we will see a lot more states come into the frame. Particularly states with strong medical systems that have proven it can be controlled, regulated and TAXED. Tax dollars are huge. You’re starting to see that in Colorado. In a down economy, people see that and respond to it.
OR: It was on the ballot in Florida. It didn’t pass, but politically, Florida is a state that democrats and republicans are constantly vying for. Is the political climate indicative of anything or is Florida just a case of needing time to… cultivate?
WD: I see what you did there, Rookie. Veteran move.. Want to know something crazy about Florida? 57% of people voted YES on it. But in Florida, an amendment needs a super majority to pass and it was put on the ballot via amendment so it needed 60% or more to pass. More than 50% of people said “yes”. AND in Florida, it shows that 90% of people believe they should have medical marijuana, but not a lot of people got out to vote this time around, especially the demographic that would typically vote for this issue. It is largely an older, more conservative demographic that votes in the midterms, so you didn’t get the same turnout, but you still saw 57% vote FOR it. I think it is still a Win.
OR: I think I know what demographic you’re speaking of. I feel like between scandal and governmental gridlock, in general, a lot of young people are down on government and are losing interest in voting. Looking forward, does the fact young people aren’t as willing to vote pose any problems as more and more states look to put this on the ballot?
WD: Anytime you have a progressive issue, and you don’t have the young and more liberal base coming out to vote, you have a tougher mountain to climb. BUT it could be the inverse. Issues like cannabis being on the ballot could GET those people to vote. It’s that polarizing of an issue. When Barack Obama first ran, he got people who don’t normally vote, to go vote. Cannabis could be that same thing. Our democracy works so much better when everyone participates and numbers are showing that’s not necessarily happening, especially this time around.
OR: Between young people, democracy, Obama.. . does the fact that Washington DC passed the vote hold any special significance being so close to the nation’s capital?
WD: Yeah I think it has to. It’s easy for the federal government to push it under the rug when its out here in Washington and Colorado and look at us like were a little bit wacky and ignore it, but when it’s in their backyard, its more relevant. If successful and demonstrated in a positive way, that close to our federal representatives, that’s great. It shows them a more intimate representation of what it can be.
OR: Do you have any idea how the federal government feels about it? It feels like they’re just seeing how it turns out with Washington and Colorado and then just encouraging others to follow their lead in whichever methods work best.
WD: Our federal government works very….slowly
OR: That’s one thing we ALL know to be true
WD: We all know we have a hard time getting things done as a country and the only statement the federal government has made regarding cannabis is that as long as cannabis businesses aren’t breaking any of the 8 tenants- – and the 8 tenants are things like, trafficking drugs, carrying weapons, dealing to children, interstate trafficking, things like that — as long as they were not breaking any of those 8 tenants, they are not to interfere..
I mean, they’re fed up too. They’re looking at spending somewhere in the neighborhood of 14 billion dollars in sending people to prison and bringing people to trial for cannabis. You flip that on its head and its close to 14 billion dollars they are losing out on in tax revenue from cannabis. Looking at that large of a swing? You’d be stupid to ignore that.
OR: That’s wild
WD: It is wild, man
OR: WA and CO are in the “lead” and with you being most familiar with WA, are there any legal challenges you see? Between taxes, land ownership, etc. from a business standpoint?
WD: I just wrote a blog on this today. (Founders’ Blog) You know, any startup has issues. We all have obstacles, it’s never easy starting a business and there are so many ways to fail, but there are unique factors to cannabis that make it even more difficult. I talk about a few of the key hurdles in my post and I won’t get to into the weeds (ba dum ch), l know you love those puns rookie, but banking and taxes are the biggest additional issues we face.
We don’t have access to regular banking so it’s largely a cash industry, and that horse has been beat a bit but what’s lost in that shuffle is a line of credit. Normal businesses starting out have a line of credit. That allows them to understand cash flow during a selling cycle without the risk missing payroll or missing rent payments. We don’t have that. There’s no line of credit so we have to be more conservative with decisions. It makes cannabis businesses move slower.
With taxes, it’s craziness. So 280-E, not to get too granular, but 280-E is a tax code that was setup to bring down drug kingpins like Al Capone and hardened criminals who had become so successful selling drugs without being caught. And these guys were running it like a business, really tight, writing off expenses and everything. So during the Reagan administration they got smart and said, “wait a minute, were not going to allow you to expense anything that has to do with the sale of a controlled substance.” So normal business expenses like marketing, travel..
OR: hotel, flights, food,
WD: Yeah, anything that has to do with the sale of your product. And it worked. It was innovative and it worked.
But now cannabis is falling into that category and the IRS is treating us like Al Capone. At the end of the year, you look at your bottom line and say, “ok I made X profits and that’s my taxable income.” For cannabis, because it’s a controlled substance, all these expenses don’t get to count so it looks like you made a ton more money than you actually did. For a startup, it looks like we were making a lot of money, but we were actually in the red. For the first two years, we weren’t profitable, but we still had a large federal income tax. An added expense to a company that’s not making any money. That’s crazy and that’s a hurdle that’s unique to cannabis. BUT, it was always going to be hard. It’s a brand new industry, it’s history in the making, so we have to patient. I’m not complaining, just trying to explain the reasons that it’s taking longer to get going.
OR: How has your business changed in the last 2 years since Washington voted in 2012? Getting your start, establishing yourself and now getting over the hump, creating profitability, mass distribution, etc.
WD: We kind of pivoted. Our thought when we started Solstice was to legitimize the supply chain in the medical cannabis and really nothing more. At the time, recreational wasn’t on our agenda. We wanted to be vertically integrated from seed to sale, to demonstrate legitimate production of quality cannabis. We were so focused at the beginning, we put the retail store off and it’s probably a good thing we did because the new market doesn’t allow us to do that. We pivoted to being just a producer and processor and really focused on that side of the market, refining so that we can scale our production and processes and provide our products to more and more retail access points.
OR: Since retail stores have been open, they have struggled to keep their doors open due to inventory. Do you see retail being a sustainable industry when they rely so heavily on one product that is a crop.
WD: Yeah, well we have perpetual harvests and a consistent supply in the medical market. Consistency is not unobtainable for agriculture. The issue with recreational right now is the lack of producers and the lack of available supply. I actually met with the liquor control board in the last few days, and it seems to be a bit of a running joke now amongst people I talk with outside of the industry, like, “where the hell is all the cannabis? Why is there’s only 2 stores in Seattle, what’s going on?” The message we got back from liquor control board was, “it’s not our job to make a functioning system or increase sales. It’s our job to create a regulated system.” I am confident production will continue to ramp up but they’ve made it difficult so the lack of supply has held stores up.
OR: Here in Washington, just a few years ago it was voted to allow liquor sales in grocery stores. Is that a model that would work?
WD: Yeah! Ok, so prohibition of alcohol was repealed in the 1930s. Just two years ago, Washington brought it out of liquor stores. Meaning, we’re still changing how liquor comes to market almost 100 years later. I mean, yeah, Costco wants to see it on their shelves just like they did with liquor, but I think we have a long time to go before that because the consumer needs to be educated. They need to understand how to consume cannabis in a responsible way and that’s only just beginning. We are just starting to learn and study and figure out what dosages are and label it appropriately. Liquor has been around and legal long enough for people to figure it out. If you drank a glass of Everclear, you wouldn’t feel so good. Maybe you could handle it, but not most people. If you eat a pot brownie from a friend.. we don’t know because we don’t know what is in that brownie. Now with liquor, we know what amounts are appropriate, we know what is in a shot, we know the proof, we can label it. That’s just starting with cannabis. We’re playing with dosages, THC levels and figuring it all out. Right now, it’s appropriate to keep it conservative at the beginning as far as where it’s sold before you launch it out to the masses. It’s a safer product than alcohol. You cannot overdose on cannabis, but anything is scary when taken in excess.
OR: From my point of view, that’s the number 1 argument from opponents of legal marijuana. “oh, you don’t know what you’re taking” or.. “its stronger than it was in my day.”
WD: Well yeah, because it’s coming from the black market. It can be someone throwing a bunch of hash into a pan making a brownie or whatever. If you did that with alcohol, you were drinking moonshine, you wouldn’t know what you were drinking either! If you allow us to put it in regulated format, you allow us to test it, understand it and label it, you can now experience it in the same way you experience alcohol. You can take a “shot” or take a “dose” of cannabis and you can see how your body reacts to it in the comfort of your own home. And that’s something we deserve as a humanity, to say “hey, I can control my dosage on this, but I need information to be able to do that. I need to be able to know what is in this container,”
OR: I’ll leave you with this, besides politics, some opponents will never get over the Cheech and Chong stereotype and the in-the-couch Jack in the Box commercials…. Other than politicians and scientists and those people, what are some obstacles you face in the court of public opinion? Mostly the non-supporters and non-smokers? How do you combat those people?
WD: Combat? Or what are their arguments?
OR: Combat. People know what the arguments against cannabis are, but they’re just so silly often times.
WD: I’ve always said, “you can’t argue ignorance.” It’s unwinnable. We’re over in eastern Washington now and some people will legitimately get up in town halls and call us sorcerers. They talk about how cannabis is going to pollinate their hay and the hay will absorb THC and when they sell the hay to japan for Kobe beef, the cows will get high and people will get high from eating the beef. That’s a serious argument that people have made to us and it’s not based in any facts at all. It’s so far from any scientific facts, it’s hard to start any conversation. But you have to continue to present yourself in a way that is not combative. The best thing to do is offer yourself up to questions and discussions because when someone is that far off, you’re not going to educate them in one conversation. It will take many conversations. I think showing a functioning greenhouse or functioning business from someone who isn’t crazy is the first step.
I mean, it’s 100 years of smear campaigns and fear mongering that have shaped our view of cannabis. I get it, I came from that too. I grew up thinking marijuana was bad, that it was a gateway drug. D.A.R.E. programs taught me that. I get it. It’s not foreign. These people may be a little ignorant, or naive, but they’re not crazy. It’s just going to take time.
OR: Will, appreciate the time man. I know waking up Wednesday was all about legal marijuana. I am just not sure a lot of us know what that truly means.
WD: Give it time brother man, give it time.
Will and his business partner, Alex Cooley started Solstice in 2011. Learn more about Solstice HERE
All Photography by Lindsey Denman