Appellation program, cooperatives might give small California cannabis farmers a boost

Small California marijuana farms such as Villa Paradiso in Humboldt County could benefit from some initiatives in the works in the state. (Photo by John Schroyer)

Learn more about what to expect in the marijuana industry in 2021 at MJBizCon 2020. But be aware, the $99 ticket price goes up $50 after Nov. 19.

(This is the second of two stories focusing on small marijuana farmers in California’s Emerald Triangle. The first story is available here.)

Small marijuana farmers in California who’ve struggled in recent years – either to launch their own brands, expand their businesses or survive the transition to the new legal market – might have a brighter future, thanks in part to various programs and ventures now in the works.

Some of those include:

  • An appellations program run by the state.
  • Farming cooperatives designed to bolster craft growers.
  • Co-branding ventures between distributors and farmers.
  • The likelihood of new banking access, business loans and capital to allow for expansion and brand development.

“Brand building is massive. I believe brand value will far exceed our product value,” said Nik Erickson, the owner of Full Moon Farms in Humboldt County. (Humboldt, Mendocino and Trinity are the three counties that comprise the Emerald Triangle.)

He believes more craft growers will be able to launch their brands over time. It’s a question of the right timing and getting the proper market conditions to align.

“It’s coming. I believe it’s coming,” Erickson said. “We’re all one brand. If one of us succeeds, we all succeed.”

If you grow it, they will come

Other industry officials share Erickson’s confidence, based on various factors.

One is the upcoming appellations program, which is slated to launch at the beginning of 2021 and is unique to California among states with legal marijuana markets.

The program is based on the longstanding appellations that winemakers use to establish reputations for quality and distinct characteristics of products from specific regions, such as Bordeaux or Champagne in France.

That designation helps protect the value of French wines.

In the same vein, California regulators and marijuana industry officials hope to protect the inherent value of the state’s cannabis.

As with wine, the new appellations will reflect the microclimate, soils and geology – or terroir – that factor into each region’s cannabis.

“The appellation process is absolutely going to be an enormous benefit for us,” said Robert Steffano, the owner of Villa Paradiso, another small farm in Humboldt County.

Steffano said he and neighboring cannabis farmers have agreed to team up to pay for a petition to receive an appellation label from the California Department of Food and Agriculture.

“We’re going to be one of the first. That’s how strongly my community, my neighborhood feels about it,” Steffano said. “It’s such an important marketing tool.”

Not everyone is sold on the appellations program, though.

Wendy Kornberg, the CEO and founder of Sunnabis, another Humboldt County farm.

“The truth of the matter is appellations are a joke,” Kornberg said.

“The petition for application of an appellation is estimated to be between $80,000 and $100,000. Then we have to fund that appellation and fund all of the costs associated with it, including defending it in court.”

“There’s just not enough money in it,” Kornberg added. “I don’t see this as benefiting anyone in Humboldt or Mendocino (counties).”

Only time will tell if the program will benefit craft growers.

The appellations program will be a “long game,” warned Natalynne Delapp, the executive director of the Humboldt County Growers Alliance.

She said it will probably take at least three years – and possibly up to 10 – before the appellations program pays dividends for participants in the form of higher prices and demand.

Cooperatives and co-branding

The cooperative farming model is another factor fueling optimism that more farmers will get their own brands.

Under this approach, small farms band together and share the costs of packaging, labeling, manufacturing and other functions needed to get their crops and products to market.

“I strongly believe the co-op model is going to grow in importance and value in coming years, especially for small growers,” said Scott Watkins, a consultant and principal at Buildaberg in Trinity County.

Watkins reckons that co-ops, combined with the appellations program, will provide a great foundation for more farmers to work together to overcome the financial obstacles in California’s current market landscape, such as securing commercial space to package flower or manufacture pre-rolls.

“I think it’ll incentivize small farmers to start looking for larger teams to join – not necessarily in a consolidation model, acquisitions and mergers, but in that co-op model to incentivize people to start working together a little bit more,” Watkins said.

In addition, several distributors and farmers have been experimenting with co-branding and co-packaging in various forms and agreements for several years.

Several industry officials see promise in such a situation, depending on the agreement struck between farmer and distributor.

“This year, we’re actively getting into more and more co-branding,” Erickson said.

Delapp said Emerald Triangle-based distributors – such as Redwood Roots, Tangled Roots and others – are also focusing more on showcasing local farmers and their products and strains through co-branding.

“Because more companies like Redwood Roots are going to work with small-batch farmers, that will allow more farms to get their products on shelves,” Delapp said.

Other factors

Sunnabis’ Kornberg said the potential for federal marijuana reform under the incoming Biden administration could also be a game changer for farms such as hers.

Access to banking services, for example, could open up if Congress approves the SAFE Banking Act this year or next and the onerous 280E provision of the federal tax code was reformed and small MJ businesses could take standard tax deductions, Kornberg said.

“All of those things would absolutely change the face of this in a heartbeat,” he added.

The Growers Alliance’s Delapp also noted the Humboldt County government is pumping millions into a new marketing campaign to generate more awareness of the local cannabis industry.

Also, more distributors are planning to get craft farmers’ products to market.

But, she acknowledged, there’s still a long way to go before California’s craft marijuana farmers get the market access they deserve.

“This is decades of work ahead of us,” Delapp said.

John Schroyer can be reached at [email protected]

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