Berkeley Patients Group Turns 20: Settling Into California’s Legal Cannabis Market

Berkeley Patients Group turns 20 this October, and the past two decades have dealt the dispensary its fair share of challenges, with California’s post-Prop.64 landscape perhaps one of the most daunting.

Here, BPG Co-Founder and Vice President Etienne Fontan shares how the state’s cannabis industry has evolved since legalization and how the dispensary is navigating the market’s inevitable growing pains.

Editor’s Note: Read Part I of this series here.

Cannabis Business Times: How has California’s cannabis industry changed post-legalization?

Etienne Fontan: When the laws changed with Prop. 64, we saw a significant change [in] our demographic. [We were] dealing with 18 years of patients that had seen the trends [and] these products come through. They knew what they wanted and what they didn’t want. On Jan. 1, 2018, all of us that were in the legal corridor were overwhelmed for a time by a new era of customer, one that wasn’t a patient and that wasn’t familiar with 18-plus years of products that we had in our stock. Other states had done it, so we knew it was possible here in California; however, California is unlike other states that have [legalized], just due to its large size. California wanted to embrace the regulatory aspect of it, so they spent a year or so speculating [on] different aspects of the law, which were challenging to us as the retailers because we were no longer wholesalers or distributors anymore. We were now retail [only].

Regulations have opened up to allow for advertising. But at the same time, good luck finding a bank. The challenges are still there. They have changed somewhat, but at the same time, due to the federal prohibition, we are still all illegal.

CBT: What kinds of challenges has BPG faced in its 20 years of operation?

Photos courtesy of Berkeley Patients Group
The BPG leadership team beat the federal government in an asset forfeiture case in 2016.

EF: In 2011, the federal government came. We had spent the first 12 years in a location that was over 1,000 feet from a private French school. The government came and tried to evict us, saying that as the crow flies—which is corner to corner, property to property—we were within 980-some-odd feet. They basically went to our landlord and to the landlord’s bank and said, “If you do not evict Berkeley Patients Group, we’re going to take your bank.” So, we were forcefully evicted in 2012. We closed down on May 1 as a retail location and by the end of the month, we opened up as a delivery service. That delivery service kept us going, and we found a new property. In December 2012, a mere six months later, we would open up at our location where we currently are.

The federal government then changed its rules and wrote to us and tried to forcefully evict us, saying we were now within 1,000 feet of a daycare center or childcare facility. The law stops at K-12. It has nothing to do with pre-K or anything like that. So, we sued the federal government and after four years, we won. In 2016, the federal government threw in the towel against us, and we ended up winning our case, allowing us to exist in our current location.

CBT: Has the new regulatory landscape in California caused new obstacles for the company?

EF: Prior to [Prop.] 64, we had to buy our cannabis [and] we had to store that cannabis for three weeks because we had to get it tested. Once it’s tested, it either passed or failed. If it passed, then it could go to be weighed and dealt with. If it failed, it was given back to the farmer. Now, [in] the post-[Prop.] 64 situation, we no longer deal with the farmer directly. We deal with distributors and manufacturers. Manufacturers, of course, make the products and they have to be sold through distribution centers here in California. They have sort of a separation of church and state now. Where we used to deal with every aspect of it, now we just receive product, so things have just changed in the past two years with how we deal with product. We have to store a great deal of product to have on hand.

CBT: How is running a 20-year-old dispensary in a legal marketplace different than the first five years or so of operation?

EF: Back then, in the first five years, we were only hiring activists. We were not hiring retail people because, again, we were all expecting to be arrested. We went through raid scenarios. We had raid drills. We would have dispensaries that were raided, and we organized and sent people with signs to be active and stir up the media so that people could see what was actually going down.

The reality is, you had to put your absolute freedom on the line to be a dispensary person. Every person that we hired, we made them aware that we could be arrested today—that was a reality. Over time, in 2009, when the Obama presidency stated that they were going to leave state’s rights to their realities, we then started to reach out to real companies and start to look at, how do we look at our inefficiencies and how do we improve every aspect of what we’re doing? We started to hire real consultants to come in.

It’s cultural change, which has been exponential. There has been a product change, which has [also] been significant and exponential. Not all of [the] products and product lines that were available prior to [Prop. 64] even exist anymore. Not many of them could afford to make the leap. It’s very expensive to go from an illegal operation to a legal operation. You have to do things like spend $100,000 on a camera system that has eight months back-up. It’s just incredible the type of impediments they put on progress for people who were bootstrapping. BPG was able to bootstrap all through the 20 years.

It was very challenging early on because you could not advertise. You had to rely on word of mouth. You had to build your reputation from the ground up. You take care of your reputation. You make sure your product is good. You make sure it’s consistent. You make sure it’s at price points that are available to every buyer that’s out there, or you will feel the wrath. The public are not afraid to tell you what they think, especially if you fall below the expectations or the criteria that you set. You have to live up to your expectations every single day, and you have to hold the standards that you believe in, from the start, and maintain them all through every aspect of your outfit. That’s the reality.

It’s just incredible the type of impediments they put on progress for people who were bootstrapping.

-Etienne Fontan, Co-Founder & Vice President, Berkeley Patients Group

Berkeley Patients Group made its first legal sale in California on Jan. 1, 2018.

CBT: How have BPG’s hiring practices changed over the years, especially post-legalization?

EF: You have to hire good people. As opposed to activists, we changed to looking at people who had retail experience because they could understand products [and] product lines, and [they could] educate people at a more concise level than in the past. That then requires us to be better educators. Berkeley Patients Group takes a week educating and training our people before they even go to the floor because there’s so much education that has to be imparted. There’s so much you can gain from on-the-job training, but at the same time, we have 20 years of experience that we’re imparting on people to help them get up to speed, to educate them on who we are, what they’re doing and what we’re dealing with on a day-to-day basis. For a business owner, it’s a significant change.

We used to hire for all departments. Berkeley Patients Group had a front desk. We had a store, which was basically a little head shop where we’d give out free papers for people to sit and smoke. We had security, and then we had people behind the counter. So, originally, we would hire people and then see where they fit because we’re activists—there were no real job descriptions back in the day.

As we became more professional, we realized we have to have job descriptions. You have to have real breakdowns of what your expectations are of people. Then we started to look at things like benefits packages, doing things like 401(k) [plans], paying for the majority of [employees’] health insurance, looking at different ways to benefit our employees. When we were activists, no one was thinking about a 401(k). However, when you go to a regular job, these are aspects that people are looking [at], to save for their futures. So, we looked to other businesses for how to normalize and what benefits packages would be beneficial to our people—everything from payroll to banking to benefits packages and insurance. Those are all challenging.

Editor’s Note: This interview has been edited for style, length and clarity.

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