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San Diego's Legal Cannabis Industry Hasn't Escaped Economic Downturn

A pipe sits next a grinder full of ground marijuana, Dec. 9, 2019.
Shalina Chatlani
A pipe sits next a grinder full of ground marijuana, Dec. 9, 2019.

Tradecraft Farms, a medical cannabis dispensary in Vista, is seeing lines of customers out the door. But looks can be deceiving — since the coronavirus pandemic tanked the regional economy, business is actually down.

Brent Walker, who runs the dispensary with his brother Barry, said they are allowing only 10 people inside their store at a time, including employees, to abide by social distancing. They also put tape on the ground outside to encourage queuing customers to stand farther apart from each other, which makes the line appear longer.

"We're (serving) 300, 350 people a day when (before) we were doing more like 400, 450," he said.

Dispensaries across San Diego County are reporting similar numbers. They haven’t had to shut down thanks to Gov. Gavin Newsom’s decision to designate them essential businesses. But after a surge in sales right after the lockdown in mid-March, when customers rushed to stock up, shops have experienced a decline.

"In the initial phases of the lockdown sales saw a big boost," said Rocky Goyal, co-owner of Apothekare in Mission Valley. "Nobody was really ready for it, but I know that we handled that rush pretty well."

RELATED: San Diego Missing Out On Revenues From Pot Legalization

San Diego's Legal Cannabis Industry Hasn't Escaped Economic Downturn

The rush ended almost immediately, however, as people started losing jobs and cutting back on discretionary expenses. Goyal has reduced employee hours to compensate for lost revenue and is now looking to revive Apothekare's delivery service.

"We had a delivery service for a while, and we shut it down last year because we just couldn't get it off the ground successfully," he said. "The black market was really hard to compete with. We couldn't compete with those prices and that type of turnaround time that they offer."

Meanwhile Harbor Collective in Barrio Logan has seen a surge in deliveries. But less than two miles from the Convention Center, the shop has suffered from the evaporation of the tourism industry.

Chief compliance officer Andrew McPartland said July would always bring a surge in business, with customers visiting for Comic-Con, San Diego Pride and other summer events. With everything canceled, that's a lot of lost business.

"Not to mention we just had the 4/20 that people were waiting for arguably 10 or so years, where the entire month of April was 4/20," he said. "And then most people had to not only shelter in place but events all over the country and all over the state were canceled that would have raised huge revenues for both the local and state markets."

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Jackie Bryant, a cannabis writer based in San Diego, said she recently visited March and Ash, a dispensary in Mission Valley. She said the social distancing and hygiene measures made the visit feel safe if a little less enjoyable.

"They were spacing everybody apart, everybody's got PPE on, it's a very regimented, isolated, impersonal, sanitized, kind of freaked out situation," she said. "Honestly it feels like we've gone back to prohibition a little bit."

One of the main reasons why California ended its prohibition on pot was to raise revenue for local governments. As recently as a few months ago, the city of San Diego was counting on growth in its cannabis business tax revenues to help close a budget deficit. After the pandemic shut down much of the local economy, that deficit has grown to roughly $300 million and cannabis tax revenues are uncertain.

Most cannabis industry professionals interviewed for this story agreed the current situation is a setback for the state's transition to a legal, regulated market. Even before the pandemic, licensed pot shops struggled to compete with illicit operators, who typically don't pay all their required taxes.

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Lincoln Fish is CEO of Outco, a medical cannabis cultivation, manufacturing and retail business in the unincorporated county. He said he is not expecting a crackdown on the black market anytime soon.

"Business had been relatively steady (before the pandemic) and we were hearing more and more about projected additional enforcement on illegal operations," Fish said. "Then COVID hit, and all that discussion went away."

Goyal agreed and added that cannabis consumers may be more tempted than ever to shrug off the distinction between legal and illegal outlets.

"Especially right now where there's so much uncertainty economically if something's cheaper you're not going to ask a lot of questions," he said.

San Diego's Legal Cannabis Industry Hasn't Escaped Economic Downturn
Listen to this story by Andrew Bowen.