A Budding Industry

Proposition 64 passed in November, legalizing recreational marijuana use in California. Starting Jan. 1, 2018, commercial cultivation and retail sales of cannabis will also begin, legalizing a potentially multibillion dollar industry.

The Daily Bruin traveled to Northern California and Oregon to investigate what changes are ahead for California’s cannabis industry, which has long produced a majority of the nation’s cannabis, and see how a pair of college students built a successful business with the plant.

Made in California

The snowy cap of Mount Shasta pokes through dairy farms in the northernmost tip of California. Not far away, a lone trailer stands off the highway next to a square of wooden fencing on a grassy hill.

The trailer, filled with fans, wires and hangers, looks abandoned. But in the winter, it is used to hang and trim thousands of dollars of high-quality marijuana.

The owner of the trailer, Connor Kramme, a recent UC Berkeley graduate, finished trimming the year’s crop a few months ago. While he tended to his 198-plant farm, his younger brother Christian Kramme, a third-year microbiology, immunology and molecular genetics student at UCLA, brainstormed innovative cannabis product ideas.

The brothers began a cannabis delivery company, Green Box, in 2014 with significant success. But they know big changes are coming.

The Budding Industry: Christian & Connor
Connor Kramme, a recent UC Berkeley graduate and brother of third-year UCLA student Christian Kramme, highlights how the Proposition 64 decision affects the brothers’ cannabis business and his day-to-day experience living in a trailer on the farm.

Cannabis cultivation, both medical and recreational, went from being an illicit underground endeavor to a protected industry in November 2016. Proposition 64 legalized and began regulating recreational use and personal cultivation of marijuana in California, and will allow commercial sale of cannabis starting in 2018.

The proposition will allow the Kramme brothers to expand their outdoor medical grow to a larger commercial endeavor.

“Cannabis grows best outdoors,” Connor said. “(But) because people were afraid to grow outside, terrified that cops are going to come over and raid your house, they started going indoors.”

Connor previously sold cannabis illegally. In high school, he discovered that cannabis helped alleviate his chronic migraines and aches from playing varsity football. Seeing how beneficial cannabis could be, Connor took his first steps into the industry at Berkeley by dealing marijuana to fellow students.

In college, Christian suffered from a condition known as cannabinoid hyperemesis syndrome, apparently caused by excessive cannabis use, which made him vomit incessantly if he wasn’t in a hot shower. Because of his experience, the brothers focus on providing therapeutic, not recreational, cannabis.

“People don’t want to just get stoned,” Connor said. “There are side effects of using and overusing cannabis.”

The Krammes founded a medical marijuana delivery service called Green Box in 2014. They have since branched out, catering specifically to clients who seek cannabis therapy. (Jintak Han/Assistant Photo editor)

Christian said cannabidiol, or CBD, recently gained popularity in the marijuana market because it balances the psychoactive effects of tetrahydrocannabinol, or THC, which is the most prominent cannabinoid, while retaining the therapeutic effects of marijuana. His clientele, he said, prefers one-to-ones, which contain equal ratios of CBD and THC.

Growing one-to-ones is not easy, however. For decades, growers have bred cannabis to contain more THC for stronger psychoactive effects, which in turn lowered the CBD content of plants, Connor said. Because it takes years to breed CBD-high plants, they instead started with clones, which are small plants genetically identical to an original mother plant, with high CBD levels.

Starting a farm proved difficult in itself. Funding for the 64-acre property came from a private investor since banks were not willing to loan money for federally illegal endeavors. The brothers also spent time learning techniques from veteran growers in the area, and before growing the marijuana themselves, they received advice on when to plant and how to water efficiently.

“Family members who wanted to see what we were doing came and helped out every now and then,” Connor said. “We learned how to build a farm from the ground up.”

Meanwhile, Christian tried different processing and extraction techniques to develop new products focused on dosage control and accessibility. Instead of the conventional plant product or premade joints, he developed an oral spray with controlled dosage, akin to a breath spray, and concentrate capsules, which work like pharmaceutical pills.

The brothers said they foresee smaller growers struggling against larger farms in the neighboring Emerald Triangle, a collection of three counties in California known for cannabis cultivation. To prepare for the competition, they are working to band together small growers in the Siskiyou region as an association and influence local regulations in a way that will support commercialization.

Christian shows his father, who occasionally helps out at their 198-plant farm, new product ideas that he developed from last year’s harvest. (Jintak Han/Assistant Photo editor)

They want the region to focus on local grows and specialty products to stand out from mass-produced cannabis.

“Like a microbrewery,” Connor said, “We would like to be able to take everyone’s product and show what Northern California cannabis is, because it is an artisanal product.”

A Neighbor to the North

A few dozen miles north of the Krammes’ farm, a different landscape unfolds across the California-Oregon border.

Oregon is two years ahead of California in developing the marijuana industry. The state passed Measure 91 in 2014, which legalized recreational marijuana and allowed the Oregon Liquor Control Commission to regulate and tax cannabis. In those two years, some Oregon residents have come to see the cannabis industry as legitimate as the alcohol and tobacco industries.

Wood supports and wires line the edges of Siskiyou Sungrown, a commercial producer of recreational marijuana. Each plant of the 40,000 square feet of organic cannabis is tied to the supports to keep the 14-feet-tall herb upright during growing season. (Jintak Han/Assistant Photo editor)

Cedar Grey, a veteran grower, owns and operates Siskiyou Sungrown, an outdoor cannabis farm and processor in Williams, Oregon. Unlike the Krammes’ farm, Grey’s company grows 40,000 square feet of mainly recreational marijuana. The area, which only includes the space occupied by the plants, is the upper limit set by the OLCC for canopy size. Proposition 64 in California currently allows similar-size farms up to one acre of canopy, and will also begin issuing licenses for canopies larger than one acre starting in 2023.

Managing such a large-scale operation requires more than two brothers. Siskiyou Sungrown employs 20 people to breed, cultivate, trim and process cannabis. Their schedule is not the dawn-to-dusk workday of a farmer, but rather a daily 8-to-5 shift of a corporation.

Cannabis Kingdom: The Process of Weed Farming
Growing cannabis is more complicated than one might think. In this animated graphic, the Daily Bruin walks through how farms cultivate and process the buds sold at dispensaries.

A specialized facility on the farm cultivates mother and clone plants before moving them into the soil in June.

Each plant in the facility is individually monitored and tracked. After employees harvest the crop at the end of the growing season in October, they process the harvest for sale as flowers, or as oil extracts.

The farm and facility together cost almost $1 million to build, which Grey acquired through family and private loans. A significant portion of the costs went to meeting state requirements, which entails hiring full-time employees for tracking the products on their way to retailers.

The medical and recreational marijuana programs in Oregon are controlled by two different entities and have very different rules. For example, farmers can cultivate up to 48 medical plants, but the limit of a recreational grow is determined by the canopy size, which encourages growing multiple smaller plants.

“(The Oregon Health Authority) has tended to focus on protecting the public from cannabis,” Grey said. “The OLCC running the recreational program, they’re supporting cannabis production. They’re trying to support a healthy, abundant, productive industry.”

Cedar Grey, a veteran cannabis grower in Oregon, founded Siskiyou Sungrown in 2015, a few months after his state legalized recreational marijuana in 2014. In addition to operating one of the largest legal cannabis farms in Oregon, Grey also works with local officials to effect change on Oregon’s cannabis regulations. (Jintak Han/Assistant Photo editor)

The support has proved effective, according to New Frontier Data, a cannabis industry analytics company. Oregon’s industry was worth $571 million in 2016 and that number is expected to grow to more than $1 billion by 2025. Since its founding in 2015, Siskiyou Sungrown has doubled in physical size and quadrupled in its number of employees. Grey has also started to pay down loans using the farm’s substantial revenue.

Because of the state’s support, larger growers have had little incentive to dive into unregulated markets such as interstate cannabis trade. Instead, Grey and others in the industry work with legislators to improve policies surrounding cannabis, which has been a rough endeavor itself.

“Some of these (lawmakers) are completely unfamiliar with cannabis, so there’s been a real dynamic process these last three or four years as we’re sharing with them our information and our knowledge,” he said.

Grey advises state legislators and OLCC committees on building rules to help consumers get better cannabis more safely. He hopes that by making cannabis cultivation more responsible, the federal government will reconsider its stance on the plant.

But for now, Grey will prepare for the 2017 season, sticking to any changes in state guidelines.

The Road Ahead

Siskiyou Sungrown and the commercial cannabis scene in Oregon may predict how Proposition 64 will ultimately change cannabis cultivation in California, which produces more cannabis than any other state.

But because of the large amount of discretion the proposition gives to local authorities in setting cannabis policies, it may be years before people feel the full force of the proposition.

“Local, state and federal public officials are all over the place, doing different tax rates, approaching licensing differently,” Connor said.

Proposition 64 allows cities and counties to set tighter guidelines than provisioned in the state law. For example, Siskiyou County has had harsh restrictions on outdoor cultivation and banned nonmedical cultivation entirely since 2015, but neighboring Humboldt County and Oregon allow for commercial grows exceeding tens of thousands of square feet.

Christian also said that laboratory testing, though good for consumer safety and product quality, could become a bottleneck for cannabis production.

Oregon’s venture into legalization initially funneled cannabis into a single lab, he said, which caused massive delays in testing marijuana.

“It would take eight weeks to get it tested, eight weeks to get it back, and then it’s 16 weeks in and your product’s dead,” Christian said.

He also expressed doubt in the reliability of some laboratories in California, stemming from his experiences with Steep Hill Labs.

“They essentially claimed that something we had a hundred pounds of was non-psychoactive,” Christian said. “As it turns out, it was only THC.”

However, as the industry matures, the Kramme brothers expect Proposition 64 to bring bigger changes over Proposition 215, which legalized medical marijuana in California in 1996.

“The best way to (transport cannabis) under Prop 215 is your in your car, doing it yourself,” Christian said. “There’s actually going to be marijuana transport companies, basically armored cars.”

Veteran growers also welcomed the new interest in the industry brought by Proposition 64.

Christopher Malandrini, head grower at Siskiyou Sungrown, inspects mother plants which are used to breed genetically identical plants in a cultivation facility. (Jintak Han/Assistant Photo editor)

“We learned (how to grow) from working at smaller medical farms,” said Christopher Malandrini, head grower at Siskiyou Sungrown who started growing under a medical license. “These young guys that are learning, they’ll learn from working at the (recreational) farms.”

Although the starting points on growing may differ between the old and new, Malandrini said he welcomes the change.

“It’s an amazing time to watch California come correct,” Malandrini said. “It’s going to be amazing to see how the rest of the world reacts.”

Contact Han at [email protected] or tweet @jintakhan.

Growing Green

California is moving marijuana from an unregulated to a regulated market – and there’s more green than the just the plants themselves.

Daily Bruin columnist Jasmine Aquino argues that people in the industry must make a proactive effort in not only learning but also creating the rules of the market.

To be blunt: New smokers attempting to obtain legal weed might find it difficult.

You either need to have a medical recommendation or be 21 by the start of 2018. You need to find and travel to a licensed, government-approved vendor – which can be few and far between – to actually buy it. And if the gas expenses aren’t enough to sober the high, the limit on how much and what type of marijuana you can purchase will.

But the tedium is nothing compared to that of cannabis providers. After all, they don’t just have to jump through hoops to run their businesses legally – they also have to make a profit.

Medical marijuana is legal in 28 states and eight allow recreational use, including the District of Columbia.

But moving an unregulated industry into the regulated market is difficult – especially one as big as the cannabis industry, in which California has the potential to become a global leader.

The cannabis industry will have amassed a whopping $50 billion by 2026 for California, better than the wine industry and on par with the smartphone industry.

When big money is involved, there is no room for error. Both the industry and those regulating it need to work together in drafting and implementing laws that will have large effects on the economy.

Proposition 64, or the Adult Use of Marijuana Act, created two markets: medical and recreational. Californians may apply for medical marijuana cards and consume cannabis with the recommendation from a licensed doctor. Adults 21 and over may legally consume cannabis, but they cannot buy it until California begins handing out licenses in 2018.

But while the law states that recreational marijuana is legal, different counties and city councils can inhibit or even entirely ban these businesses. In other words, Proposition 64 is likely to create a patchwork of rules.

The California legislature’s sluggishness enables the patchwork by creating a hazy understanding of marijuana laws that make it difficult for cannabis providers to lawfully guide them under Proposition 64. The ambiguity also threatens other businesses like smoke shops.

For example, Dipesh Pandey, a student at San Jose State University, and his family own a glass and smoke shop down the street from UC Berkeley’s campus, next-door to a medical marijuana dispensary. They are legally required to claim that all their pipes are for tobacco use only, even if the pipes they sell are clad with painted marijuana leaves.

Cannabis consumers often visit smoke shops to buy pipes, papers or ashtrays for their marijuana. Some smoke shops hang signs to remind their customers about the business policies and federal laws about the drug. Glass shops with “bongs” often do the same. (Jintak Han/Assistant Photo editor)

“The sign will change as the law (under Proposition 64) changes,” Pandey said, unsure of how to responsibly educate the smoke shop’s customers.

This confusion eventually makes it difficult for Golden State smokers to safely consume cannabis under their state laws.

“There needs to be some form of regulation in this industry,” said Connor Kramme of Green Box, a medical marijuana delivery service and farm in California. Kramme, a UC Berkeley graduate, and his younger brother Christian Kramme, a third-year microbiology, immunology and molecular genetics student at UCLA, started the business in 2014.

“It’s become too big,” Connor Kramme added. “There are so many individuals trying to do different things better.”

He lives in a trailer on a plot of land in the green hills of Northern California, studying horticulture and educating himself about marijuana’s effects and policies.

But it’s a difficult job running business because of issues getting bank accounts for their businesses. The federal government still sees the drug as criminal enterprise, so it would be considered money laundering if banks accepted these profits. Thus, businesses have to operate on an all-cash basis.

While nothing has changed on a federal level, state legislatures are drafting regulations that will move the once shadowy business into the light and create the opportunity for recreational cannabis providers to obtain their necessary licenses.

But the process is slow, and cannabis is grown year-round. People cannot afford to just wait for legislation to come by – their livelihoods are at stake.

The constant drive to grow means current market leaders must turn to private investing to forward their establishments.

While Proposition 64 legally allows for license fees to be scaled based on the size of the business and for small-scale operators to apply for “micro-licenses,” which give them the opportunity to operate like a winery tour with on-site consumption, state legislatures need to jump into an already moving system with consideration of the current market’s nuances.

Green Box, for example, came into fruition with the help of a private investor and family friend. Rushed state legislation, however, can threaten that.

“The (investor) is someone who believed what my brother and I really wanted to do in this place, which was the science of cannabis and its applicability to humans,” Connor Kramme said.

Connor Kramme, co-founder of Green Box Inc. and University of California, Berkeley alumnus, tends to his cannabis farm in northern California. Kramme plans to keep working on his agricultural techniques and expanding the company’s presence in the industry. (Jintak Han/Assistant Photo editor)

Considering Christian Kramme is looking to graduate soon and dedicate more time to the business, the brothers have a lot to lose if California cannabis regulation isn’t well thought-out or does not consider constituents’ needs.

Like the Kramme brothers, other cannabis business operators must also do their part in the transition. After state legislatures draft and implement their regulations, cannabis providers must look at the regulations and draft their own language around their operations to present to their county supervisors for approval.

And to do this, cannabis providers must hire compliance officers who take on the work for local communities to move toward sound regulation. This will allow for the businesses to naturally grow and take their place in the economy.

“My goal in life is to reach a wider audience than patients I have now, but take that proven record and develop novel therapeutics and get them to every dispensary in California because I feel that the way I cultivate and extract is a sound way for consumers to consume it,” Connor Kramme said.

Kramme himself took the initiative. He presented his work in the industry to the board of supervisors in his area in late March.

He pointed out to the Siskiyou County officials that their locality faces a 22.6 percent poverty rate, has seen a 3 percent population decrease and a 9 percent unemployment rate. Marijuana is a unique opportunity for the locality. In response, an ad hoc committee was created by Congress for the community to move forward in regulating their local cannabis market.

If all California cannabis providers followed suit, they could ensure that not only are patients and adults medicating and consuming responsibly, but also that districts are not missing out on the economic opportunities presented to them under Proposition 64. Not only will it provide economic benefits like creating more jobs, but the tax funds resulting from legal marijuana sales can also go back to community education and enforcement.

The transition process may seem backward to those who think legislation should determine the behavior of the legislated. But the fact of the matter is that legislators have no choice but to adapt to the already large cannabis market. Poor judgment on their part can really hurt the industry – and therefore California.

“I voted yes on Prop 64 because it is the next logical step to getting this federally overturned,” Connor Kramme said. “If California, as 12 percent of the nation’s economy, really takes leadership with all of our universities, consumers, producers alike, we can be that next step.”

The cannabis industry is a reality legislators can no longer avoid. And while it took years of activism to bring the industry out from the shadows, the hard work has only just begun.

Contact Aquino at [email protected] or tweet @aquinojasmineee.