As the California marijuana industry shifts into the recreational use market from its recently expired medical marijuana laws, local cannabis business owners say they want to keep a stake in the game — but stiff competition for permits, compliance hurdles and out-of-town competition continue to pose challenges.
Cannabis start-up costs can be in the hundreds of thousands — or even millions — of dollars, industry insiders say, and that’s aside from the stringent regulations for safety and security.
Three San Luis Obispo County cannabis ownership groups are among those transitioning — Megan Souza and Eric Powers of Megan’s Organic Market in Morro Bay, Andy Zepeda of Papa Bear Farms of San Luis Obispo and Helios Dayspring of Natural Healing Center in Grover Beach.
To get marijuana businesses off the ground, they say it takes seed money, cannabis industry know-how and keen awareness of what local government agencies require.
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“Mom-and-pop businesses like ours are going out of business (with the Jan. 9 expiration of Proposition 215 replaced by new adult use laws through Proposition 64), and large corporations are buying them out,” said Megan Souza, co-owner of Megan’s Organic Market in Morro Bay. “It’s happening in the state, and it’s definitely happening in SLO County.”
But with patience and persistence, they say, opportunity awaits.
“It’s definitely a challenge to get a foot in the door,” Dayspring said. “But we’ve grown 20 to 23 percent each month since we opened the (Natural Healing Center) store in July.”
After more than a year of planning, and $200,000 of business investment, Zepeda is planning to start a countywide delivery company in March, from which he anticipates earning between $3 million to $5 million annually by 2020.
“I’m really excited about the transition,” Zepeda said. “We want to help this area rise to the level of distribution that you’re seeing in other parts of California.”
As the industry evolves, here’s how each got started and their plans for the future.
Megan Souza and Eric Powers (Megan’s Organic Market)
A prominent medical marijuana suppliers, Souza and Powers both worked double shifts as servers in local restaurants to fund their first medium-scale indoor grow in Cayucos starting in 2010.
Souza is an Arroyo Grande High School graduate who also holds a master’s degree from Cal Poly. She was introduced to small business through her mother, who owned New Waves vintage clothing in Pismo Beach.
As medical cannabis business owners, Souza and Powers made as much as $1 million in a year, though they say most of that money went back into the company that included a farm, hemp store and delivery services.
They’re currently applying for retail licenses, one each in San Luis Obispo and Morro Bay, which will either be a major boon for their growing business, they believe, or a major new competitive challenge.
SLO County cities such as Arroyo Grande, Paso Robles and Atascadero don’t allow retail cannabis stores, thus local options are limited.
SLO’s application process in particular favors local operators through an objective point-scoring system to determine who qualifies — and Souza and Powers hope their community participation will get them through the door.
As they wait, they’re dipping into their savings and will depend on business partnerships to jump start plans.
“The city of SLO waited a long time to create their cannabis ordinance to start accepting applications for permits,” Souza said. “But it was worth the wait because they did such a good job in forming their ordinance.”
Souza and Powers also have hosted educational campaigns and events, developed a free medical cannabis program for patients in need and joined local chamber of commerce organizations, while donating to the Morro Bay Skateboard Museum and Morro Bay library.
“Working in the cannabis industry in San Luis Obispo County presents its challenges,” Powers said. “There’s never a day that goes by that I don’t put in a full 10 hours of work.”
Helios Dayspring (Natural Healing Center)
Dayspring, a graduate from Morro Bay High School, has one of the largest of the SLO County cannabis operations.
Before he started in the medical marijuana industry in 2011, he worked a variety of jobs, including installing septic tanks and glass windows, as well as busing tables at a Morro Bay restaurant.
Dayspring now owns 18 properties in San Luis Obispo and Santa Barbara counties, where he either grows marijuana or is planning to cultivate once plots are permitted (all of his Santa Barbara County properties are permitted, while three of his 11 plots are in SLO County).
“I love the plant. I love growing it. I love smoking it,” Dayspring said. “This has been a passion of mine for a long time.”
He said he has spent millions transitioning into the legal cannabis market.
Dayspring’s retail store, one of two up and running in Grover Beach, offers a wide variety of psychoactive (THC-based) and non-psychoactive (CBD-based) products.
Clerks stationed behind a glass case are eager to answer questions about the different varieties of cannabis for sale such as concentrates, edibles, drinks and flowers.
A typical customer buys an average of about $95 worth of products per sale.
“Our fastest-growing customers are ages 55 and over,” Dayspring said. “And most of those who come in with health ailments and use the non-psychoactive products eventually gravitate to the psychoactive ones. That’s because they get curious and the barrier is broken.”
Natural Healing Center is among six businesses now operating in Grover Beach that will collectively generate an estimated $750,000 in tax revenues for the city this fiscal year, City Manager Matthew Bronson said.
Next year, the city estimates that will rise to $1.2 million, Bronson said.
Security is a major concern for local police. Cameras are positioned throughout the store, and police can observe the goings-on at all times.
Natural Healing Center currently has more than 20 employees, and hundreds more cultivate the plants, including an accountant, an informational technology and lobbyist and a land-use expert, along with a team of lawyers.
Dayspring has future plans to open retail stores in Morro Bay and San Luis Obispo as well as manufacturing and tasting rooms for “wine and weed” should on-site consumption one day be allowed, which isn’t currently permitted in SLO County.
“We plan to grow and become a place where we can provide head-of-household jobs for local people,” Dayspring said. “Unlike out-of-town companies, we want to produce everything here and have it all go back into the local community.”
Andy Zepeda of Papa Bear Farms/Better Living SLO Delivery
Before operating family-run cannabis business Papa Bear Farms — involving his parents, sister and son — Zepeda said his parents needed education and acclimation to get used to the idea of a cannabis business.
“My dad is a former captain for corrections, and my mother was a bookkeeper in corrections, so the idea took a little getting used to,” Zepeda said.
But he said when his parents saw the medical benefits of cannabis, including how well CBD products helped his father sleep and relieve shoulder pain, they were committed to making it a family business.
Zepeda, a Morro Bay High School graduate, looked for locations to house their combined manufacturing, distribution and mobile delivery operation for more than a year.
With limited options due to selective zoning for cannabis businesses, they finally found one in a business complex on county land near the San Luis Obispo County Regional Airport.
It has been renovated to meet safety and security requirements, and Zepeda jokes that you couldn’t drive a car through the walls because they’re so solid.
They have local permitting for their mobile delivery company, called Better Living SLO Delivery, and are awaiting state approvals with expectations to be up and running by March.
Their business hub will be a centralized location to dispatch drivers, with the goal of reaching customers countywide within 45 minutes, similar to a pizza delivery service.
Already 1,200 customers have registered, and he expects many more by the time deliveries are up and running.
In the first year, Zepeda thinks he can hit the $2 million mark in revenue, with income climbing to $3 million to $5 million within a few years.
“Good delivery can outsell retail depending on where it is,” Zepeda said. “Those ages 21 to 35 are likely to go to stores, but this is a small community. And those in the age bracket of 35 and over sometimes don’t like to stand in line in a pot shop while neighbors drive by.”