If distributors had power over cultivators, dispensary owners wielded even more sway in the nascent industry, Coulombe said.
State regulations had given local governments the power to approve or deny dispensary licenses. Many municipalities throughout the state were either rejecting the businesses, imposing infeasible taxes or fees, or simply dragging their feet on licensing.
Farms, on the other hand, had flooded into operation, leading to an abundance of product but limited access to consumers.
Dispensary owners would demand steep discounts and if a distributor or their farmers wouldn’t accept the terms, someone else desperate to unload product would, Coulombe said.
When Pacific Expeditors approached one dispensary hoping to stock its shelves, the owners said they would do it, under certain conditions.
They wanted him to buy the store a skateboard halfpipe. Pacific Expeditors rejected the offer. Max Hamerman, a Pacific Expeditors salesman, recalled gifting one San Francisco dispensary owner a pair of shoes from his prized collection of Nike Air Jordans.
That owner never paid for the cannabis Pacific Expeditors provided him, and later went out of business, Hamerman said.
“We had weeks when we were doing no sales and we were literally just collecting,” Hamerman said, “or trying to collect.”
Other distributors with more capital were offering enormous discounts, free product or simply cheaper marijuana than Pacific Expeditors’ small craft farmer partners could offer. Coulombe wanted to push craft cannabis from small farms with histories like the Hagas, but he lacked a standout strain or brand to drive sales, Hamerman said.
Meanwhile, legal action against dispensaries behind on payments or dodging Pacific Expeditors’ attempts to collect meant attorney costs that were unrealistic given the scope of the problem, Coulombe said.
He sought, instead, to focus attention on the policy and regulatory flaws that were creating choke points in the supply chain around dispensaries by limiting access to customers.
“The retailers are not the problem,” he said. “The system is the problem.”
A July 2022 survey by the Cannabis Distribution Association, which represents distributors at the statehouse and elsewhere, indicates Coulombe wasn’t alone in struggling to collect from dispensaries.
Five of the state’s largest distribution companies reported carrying an average of $20.8 million in unpaid debt. An average of $12 million was past due.
The companies polled are established firms, according to Lauren Coté, the group’s president, with annual revenue between $150 million to $300 million.
But with unpaid debt piling up alongside the ongoing steep taxes and costs, “no one is making money,” she said.
Coulombe was a founding member of the distributors trade group but stepped away when he closed his business in 2020.
“I’ve always thought of (Coulombe) as someone who has high integrity,” she said. “It sent shock waves when Pacific Expeditors made the decision to go out of business.”
But the unpaid debts that sunk Pacific Expeditors — and helped sink its suppliers — have worsened, she said. “The issues you’re seeing across the industry now are exacerbated versions of what Pacific Expeditors went through,” she said.
From that perspective, Coulombe and his investors “got out early,” she said.
“The industry as a whole is struggling and that means the cash flow is not strong across the industry,” said Ross Gordon, policy director for the Humboldt County Growers Alliance.
“Distributors want accountability from retailers, and farmers want accountability from distributors,” he said.
But, “it’s very clear that there is no direction to any of these state agencies to police payments in supply chains at all,” Gordon added.
Rogers, the Hagas’ attorney, filed a complaint against Pacific Expeditors with the California Department of Food and Agriculture. An investigator from the agency’s enforcement branch responded in April 2020.
The agency “has no jurisdictional authority to pursue your allegations,” investigator Hardeap Badyal wrote. “Cannabis is not a California farm product enforced by (the department).”
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