Could Cannabis and Wine Collaborate?

DtC Wine Symposium dives into new world of legal marijuana and potential collaborations

by Andrew Adams
wine vineyard cannabis AVA DtC
Brian Baker (from left) moderates a session about legal cannabis featuring Scott Zeramby and attorney Lauren Ayn Mendelsohn.

Concord, Calif.—It’s been another stellar year for direct-to-consumer wine sales, but the large crowd gathered for the first day of the Direct to Consumer Wine Symposium seemed particularly interested in legal cannabis.

A keynote session of the 11th annual event and fundraiser organized by the wine shipping advocacy group Free the Grapes! drew a crowd of more than 500 wine industry professionals who seemed eager to learn more about how the legal cannabis business and the wine industry will coexist and possibly benefit each other. Moderated by Chateau Montelena vice president of sales and marketing Brian Baker, the session included insights from Scott Zeramby of Mendocino Agricultural Products and attorney Lauren Ayn Mendelsohn from the law office of Omar Figueroa, who specializes in cannabis law.

But while both industries may be hoping to collaborate, state cannabis and liquor laws could make that difficult. A joint tasting of cannabis and Cabernets is currently illegal. Competition for the time of consumers who seek a premium, farm-grown product to enjoy may also dampen a spirit of collaboration.

Legal in California
California voted to legalize recreational marijuana use by adults older than 21 in 2016, but the change did not take effect until Jan. 1 of this year. In that time, the state has put together a regulatory framework of permits and taxes through the Bureau of Cannabis Control on top of a local and county permit structure.

Some estimates put the value of California’s cannabis industry as high as $7 billion, generating about $1 billion per year in state and local taxes. While it is the largest cannabis market in the United States, California was not the first to legalize its recreational use. Currently Washington, Oregon, Nevada, Colorado, Alaska and Connecticut allow recreational and medical use, and several other states allow medicinal use.

U.S. attorney general Jeff Sessions recently rescinded the Obama administration’s policy of a hands-off approach to cannabis enforcement in states where it had been legalized. The federal government still classifies marijuana as a Schedule 1 narcotic along with heroin and cocaine.

Mendelsohn said Sessions’ move was “a bit of a concern,” but the memos detailing the policies of president Obama’s administration were non-binding, and federal district attorneys in states such as California enjoy a great deal of discretion on whom to prosecute.

“At the end of the day, if you’re complying with state law…chances of the federal government cracking down and raiding you is pretty small,” she said.

A prosecutor would also have to gamble on finding a jury willing to convict someone for a cannabis-related crime, and that could prove challenging in California. “We don’t really think it’s a crime the way they do in other states,” she said.

Mendelsohn expects federal authorities in California to pursue charges against people arrested for operating unregulated cannabis operations, selling on the black market or selling marijuana across state lines.

A question of collaboration
Mendelsohn told Wines & Vines it would be risky for a winery or vineyard company to obtain a state cannabis license or allow cannabis consumption at a location permitted to serve and sell alcohol. “That being said, there are still other ways for the wine industry to collaborate with or get involved in the cannabis industry,” she said. “For example, a person could hold an ABC license and a cannabis license for different premises. To be extra safe, they could be held by different entities.”

The attorney added that she knows of a few wine and vineyard companies in Sonoma County that have applied for cannabis permits. “California is absolutely the place to explore that collaboration,” she said. “I really do think there are more opportunities than challenges in the future.”

On Jan. 19, the California Department of Alcoholic Beverage Control (ABC) released an industry advisory with several of the most frequent questions received from producers or retailers of alcoholic beverages. According to that advisory, someone with an ABC permit can secure a cannabis permit, but that person cannot sell cannabis and alcohol products from the same location.

The Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) also prohibits any premise licensed for the sale of cannabis from selling alcohol, and the Bureau of Cannabis Control also prohibits a licensed operation to be in a location where consumers have to pass by alcohol or tobacco for sale.

Even if a person holds both an ABC and cannabis permit, state law does not allow production of both on the same premise. As stated in the ABC advisory: “Due to the restrictions on licensing and permissible activities, premises may not be licensed with both an ABC license and a license issued under MAUCRSA, even though a licensee may hold licenses (at separate premises) under both statutory schemes.”

The ABC further states that any food, wine and cannabis pairing events would be illegal, and it would be illegal for anyone to consume (either smoking or eating) cannabis products at a location permitted by the ABC. State law prohibits the use of cannabis in public, and while there are a few exceptions to this law, “The sale or consumption of alcoholic beverages in the same area is expressly prohibited.”

Mendocino Agricultural Products, Zeramby’s company, produces organic soil amendments and planting mix, and he’s a consultant in the cannabis industry. He said California approved medicinal marijuana in 1996, and the plant has been an element of Mendocino County’s economy for nearly 30 years.

When Baker, the moderator, asked if the state’s green rush was going to mean a flood of cannabis-scented cash for those willing to jump in, Zeramby said the cost of doing business legally is high.

He said a small operation would entail a 10,000-square-foot grow space that could support 300 to 1,000 plants producing a crop of around 500 pounds. While an indoor grow operation could produce multiple crops per year, the average price for cannabis has fallen to around $500 per pound. State excise taxes for such an operation would run about $150,000 per year plus around $40,000 for the state producer permit and $2,000 to $5,000 for local permits.

Tiers of production

Just as in the wine industry, there likely will be high-volume, low-margin producers and lower volume, higher margin boutique operators that will rely on a hospitality component. Zeramby said cannabis tourism is the “greener pasture” and a definite area where the North Coast’s wineries and cannabis farms will most likely find opportunities to collaborate. “DtC sales is the way the small cannabis farmer will survive,” he said.

Cannabis producers can ship their products where legal, and Big Moon Sky is one such company, founded in part by former Naked Wines executive Zack Crafton.

There is no “Free the Weed” just yet though, and while there are proposed cannabis appellations for Mendocino County, the industry is hardly as uniform and organized as California’s wine business. “I know you will find this hard to believe, but coordinating the cannabis industry has not been easy,” Zeramby said.

With recreational use now legal, cannabis producers and wineries are now trying to attract the same type of consumer. Zeramby, however, said such consumers have already been making that choice for years and he doesn’t expect a major change but rather “dollar sharing,” in which consumers adjust their budgets to buy both. “I don’t think we’ll see a massive shift from wine consuming to cannabis consuming,” he said.

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