Rusty Wilenkin Weighs In on Pot Myths, Trends & Buying Tips

The landscape of legal marijuana is evolving at breakneck speed. It can be a challenge for even seasoned tokers to make sense of the new product technologies, the regulations, and why the price of a quality herb is still so darned high.

To make sense of it all, we spoke to someone who’s been in the game since 2014. His name is Rusty Wilenkin, and he’s one of California’s most successful cannapreneurs. He’s the founder of Old Pal, 2019’s largest cannabis brand in California by volume. Wilenkin and his business partner established Old Pal with the goal of bringing people back to the dispensary: affordable, accessible

cannabis that isn’t inhibited by buzzwords or complicated extractions.

During our conversation, Wilenkin provided a number of intriguing insights into the trends and regulations affecting cannabis consumers. For instance:

• Why are cannabis prices so high?
• Could the recreational market actually be bad for medical marijuana patients?
• Has regulation ultimately been a good or bad thing for consumers?
• Are dispensaries degrading their own products with improper packaging?
• What new exciting cannabis technologies are on the horizon?
• Is legal cannabis actually that much better than illicit cannabis?
• How can consumers actually get the best value for cannabis (hint: the answer has nothing to do with price)?

Many of his insights were surprising even to us.

Cannabis Regulations Have Been a Good Thing…Mostly

Wilenkin notes that the good outweighs the bad when it comes to cannabis regulations, especially when it comes to testing.

Wilenkin has worked in California cannabis since 2014, first with Kiva Confections. He watched as the company spent over a million dollars a year in testing before the state even required it. Most companies weren’t doing this, and beacuse of that it was hard to say what was actually on the shelf and how safe the product was.

“In terms of providing a safe, tested and consistent product to the consumer, the regulations are doing a good job,” notes Wilenkin. “Are they efficient? Are there things that could be better? Totally. But I really believe the consumer should at least be armed with the information to know what they’re buying. And

today the regulations do that.”

The system is far from perfect, though. Different states have vastly different regulations, and as a result, it can cost significantly more to produce cannabis in one state than in a neighboring state. Wilenkin noted that his business operates in California, Nevada, and Oklahoma, all three of which have different testing requirements.

• In California, 50 pounds of dried flower cannabis can be tested at one time.
• In Nevada, you can only test up to 5 pounds at a time. That’s a tenfold higher testing cost.
• According to some estimates, testing costs about $136 per pound of dried cannabis flower in California, accounting for about 10% of the average wholesale price in the state. So based on the regulations noted above, it could potentially cost more than $1,000 to test a pound of cannabis in Nevada. This is partly to blame for Nevada’s sky-high weed prices.

Not all regulations may be in the best interest of the consumer, though. For example, Wilenkin notes that–in California and in other places—it used to be possible to gift cannabis to someone in need. “In the Prop 215 days, there were a lot of groups that

distributed free cannabis to vets or people with cancer, and when 2018 came around, that became impossible to do legally. It was a bit disappointing.”

Prop 64 created this roadblock in California. It allowed legal residents over 21 to gift up to an ounce of cannabis to one another but prohibited state-licensed medical and adult-use stores from giving away cannabis even to medical patients and veterans in need. The Brownie Mary and Dennis Peron Act—signed into law by Gov. Gavin Newsom in October 2019—re-enabled charitable giving.

The Reason for High Cannabis Prices Can Be Summed Up in One Word

There are numerous factors that play into the high cost of cannabis: licensing costs, testing, packaging, markups at every level of production and distribution. But the biggest reason, as you might expect, is taxes. But the issue is a bit more complicated than just a high tax rate.

Consider that Prop 64 alone imposes a 15% state excise tax on all retail sales and a cultivation tax of $9.65 per ounce in addition to the state’s standard 7.25% sales tax. Add in the local sales taxes, and the cost can be significant. And while some of these taxes are imposed at the cultivation and distribution level, the costs almost always get passed down to the consumer.

According to Wilenkin, the local taxes in California are really where you feel the pain. “Just being in one city vs a neighboring city, you might have a 3% gross receipts tax vs zero. And a 3% gross receipts tax on wholesale ends up getting passed on to the consumer as basically 6% at retail.”

The taxes compound at the supply chain. So if a tax is imposed on the original cultivator and then gets marked up by the distributor and then the retailer, the consumer ends up paying the full sum of those markups.

Wilenkin further notes that “in California, by the time cannabis hits consumers, there’s probably an effective 40-50% tax on it. And that’s pretty incredible relative to almost any other CPG item sold in America.”

In 2019 alone, California is estimated to have collected about $635 million in cannabis tax revenue.

The Most Exciting New Cannabis Technology Isn’t Really a Technology

When we asked Wilenkin about the most exciting new cannabis technologies, he didn’t talk about fancy extraction tools, nanoemulsions, or state-of-the-art dab rigs. Once again, he brought it back to the basics and highlighted a potentially world-changing advance in breeding: autoflowering.

Wilenkin’s company has been partnering with autoflower breeders for about 2 years now, and they’ve been amazed by how rapidly the genetics have improved. “Just the idea of a quicker flowering plant that’s mold-resistant and does well in various humidities and that isn’t as finicky as the typical cannabis plant. It really changes the dynamic of how cannabis cultivation can work in a wide range markets.”

Autoflower seeds require a shorter planting window and have less risk of crop failure. Whereas the traditional photosensitive cannabis plant will only start flowering when it receives 12 hours of daylight and 12 hours of darkness, autoflowering plants don’t have such stringent requirements and can be grown year-round.

Of course, autoflower seeds haven’t always enjoyed the best reputation. The original Dutch autoflowering strains from Sensi Seeds were largely ignored because they were highly unstable and had only about a 50% success rate. Even as other breeders produced better strains, autoflowers remained controversial due to their smaller yields and lower potency.

Wilenkin notes that this is all changing for the better. “I’ve been walking our partner’s R&D field for about 2 years, and just seeing the improvement in bud density and terpene potency, autoflower are becoming increasingly exciting.”

This could have enormous implications for the cannabis industry as far as prices and product availability. Because of the prohibition on interstate commerce, cannabis must be sold in the same state where it’s grown. Many states, though, have inhospitable growing conditions, resulting in more complex (i.e. expensive) cultivation demands and lower-quality products.

But as autoflowering strains continue to improve as a result of selective breeding, it’s possible that every state will be able to produce cannabis that rivals Humboldt County bud. And they’ll be able to produce more of it at a better price.

Big Tobacco Isn’t Likely to Disrupt Cannabis in a Big Way

Tobacco and alcohol companies are spending billions of dollars to break into the cannabis industry. Consider that:

• Altria, the owner of Philip Morris and Marlboro cigarettes, has invested nearly $2 billion in the Canadian cannabis producer Cronos and now owns a 45% stake in the company.
• Constellation Brands, which owns Corona beer, purchased a 38% stake in the Canadian cannabis company Cano