OR: Local Pot Industry Surpasses Wine

Photo Credit: Mail Tribune File Photo

Southern Oregon is the state’s economic powerhouse for pot, with more than a quarter of all cannabis-related businesses in Oregon applying for licenses in Jackson and Josephine counties.

Marijuana employment rivals Jackson County’s 31 wineries and 13 vineyards, according to the Oregon Employment Department, which culls data from the state’s unemployment insurance program.

The local cannabis industry, which includes 37 farms and 19 retail stores in the program’s database, employs 439 with total payroll of $12.58 million. The wine industry employs 355 with total annual wages of $10 million.

Not all wineries, vineyards or pot businesses are in the unemployment insurance program, but the data give some idea of marijuana’s rise as an economic player in Southern Oregon.

Cannabis pays better than the wine industry, too. The average annual wage for cannabis farms is $33,731, and for retail stores it’s $24,988, according to the Employment Department. Wineries pay an average wage of $29,512, while vineyards pay $25,478.

A pioneer in Jackson County’s cannabis industry, Brie Malarkey has watched market dynamics shift markedly in an increasingly competitive arena.

“Our area’s just booming,” she said.

Malarkey started with a farm and Breeze Botanicals in Gold Hill. Now she has another store in Ashland, along with a processing facility in Medford. She employs about 40 people with a monthly payroll of about $45,000, or more than $500,000 annually.

When Malarkey started her business in 2014, her Gold Hill store was the only OLCC licensed facility in the county. Now, the Oregon Liquor Control Commission lists 34 active licenses for retailers in the county, with another 18 pending applications.

According to the OLCC, on May 17, Jackson County had the most marijuana-related business applications of any county in the state at 529, eclipsing second-place Multnomah County at 521. Josephine County comes in third at 387.

Together, Jackson and Josephine counties have 938 applications with the OLCC, or 27 percent of the state’s 3,437 labs, processors, producers, retailers, wholesalers and research companies.

Jackson County also comes in first for marijuana producer license applications at 405, and Josephine is second at 346, with Clackamas in third place at 273.

While it’s been boom times for pot, growers have seen a steep drop in wholesale cannabis prices at $300 to $500 a pound, compared to more than $1,000 a pound just a couple of years ago. According to the OLCC, there is almost 1 million pounds of flower in the system. That’s roughly a quarter pound of cannabis for every person in the state.

But savvy growers are preparing to ramp up processing facilities to extract oils from flower to create other products that have a higher value than flower.

Malarkey said she expects continued shakeups in the industry, with some businesses folding and others being bought out by larger companies. She said she’s been approached several times to sell but wants to continue to maintain a family-run business.

While this area has the most grow sites for marijuana, Malarkey said much of the product is being shipped north to the Portland area.

Multnomah has the highest number of retail cannabis store applications in the state at 215, and Lane County comes in second at 99, followed by Marion County at 66, according to the OLCC.

But Multnomah, with a higher per-capita income, is on track to have one marijuana store for every 3,756 people based on U.S. Census population figures. Jackson has 52 retail marijuana applications, or one store for every 4,264 people.

Revenues generated by all of Jackson County’s retail stores amounted to $2.29 million in April 2018, according to the OLCC. But Multnomah, with four times more stores, generated seven times more revenue at $16.03 million.

Pete Gendron, with Oregon Sun Growers Guild, said Jackson County will continue to outpace Josephine County in marijuana production because this county has 10 times the available farmland. Jackson County also has a regulatory system that makes it more straightforward to establish a marijuana business, he said.

Currently, he said, there are 100 processing facilities in the state, but over the next year, Gendron expects to see another 300 based on applications filed with the OLCC.

Despite the downward trend in flower prices, Gendron said there are still sizable investments in grow sites.

He said he knows of one new grow near Medford that has eight separate sites on 10 acres. “That’s a $10 million investment of capital,” he said.

Southern Oregon’s dominance in grow sites has kickstarted a lot of other businesses that provide services to the cannabis industry, Gendron said.

In Grants Pass, a home improvement store now has one-third of its parking lot filled with 500-gallon grow pots, he said.

“You can drive up in your pickup, and they’ll pick up the skid with a forklift and put the pot in a truck bed,” he said.

Stores selling soil, lighting and other equipment needed for pot grows have been springing up throughout Southern Oregon, he said. Contractors, gravel companies and other businesses are performing work to provide the infrastructure for marijuana businesses, Gendron said.

Cannabis companies that started up a year ago have seen significant growth.

Obie Strickler of Grown Rogue founded his business in February 2017 with four employees. He now has 30, with up to 45 in the fall.

He estimates that the illegal and legal market for marijuana in Southern Oregon easily approaches $1 billion annually, considering all the other businesses that have sprung up to support the industry.

It’s difficult to predict the size of the market because the state only captures revenue numbers for retail stores, he said.

His own company distributes product throughout the state, so local retail sales don’t reflect how much his company is pumping into the local economy, Strickler said. He said he couldn’t release financial information about his company.

Strickler is also on the Jackson County Marijuana Advisory Committee. He said one of the concerns raised is that this county doesn’t receive sufficient tax dollars to properly regulate the cannabis industry. He said the four things the task force has been dealing with are neighbor conflicts, land-use issues, livability issues and water consumption.

A booming pot industry has translated into more land-use conflicts as well as other enforcement issues for Jackson County officials, who have been clamoring for more tax dollars to help better regulate the industry.

The black market has been a concern for state and federal officials as well because of the state’s overabundance of supply.

An Oregon State Police report last year identified Portland, Eugene, Medford and Grants Pass as cities with the “greatest level of connection” to black market destinations, which include Illinois, Minnesota, New York, Connecticut, Florida, Georgia, Pennsylvania, Wisconsin and Idaho. None of those other states have recreational marijuana laws.

Rob Bovett, of the Association of Oregon Counties, said different attempts have been made to change the tax formula that would give counties more dollars.

Another idea is to charge a production fee to capture more dollars from the grow sites that are causing the neighbor complaints, Bovett said.

Currently, counties get 10 percent of the $70 million annual tax revenues. Jackson County’s share was $1.18 million as of February.

One proposal that didn’t get traction with the Legislature was to redirect 40 percent of the taxes from the school fund to the county, Bovett said.

“That would have made a bit of a difference,” he said.