By Marc Hauser, Esq. Gaw Van Male, LLP
Like the rest of the alcoholic beverages industry, wineries are waking up to the new reality of cannabis in the United States. The question that many in the industry are asking is – how can I play along? The answer to everyone in the industry is, for the most part, you can’t. However, there are some limited opportunities out there right now for wineries to leverage their brand and their position within the cannabis space.
The State of Play
Cannabis is now (October 2018) legal for recreational use in nine states (plus DC), and for medical purposes in thirty-one states (plus DC). Yet cannabis remains a Schedule I drug under the Controlled Substances Act, making it illegal under Federal law. This fact has kept large, multinational companies and institutional investors out of the industry in the United States, although, as we’ve seen in the news lately, that hasn’t stopped US companies from investing in Canadian cannabis companies, where recreational cannabis will be legal starting in October. Whether and when cannabis becomes Federally legal for recreational or medical use in the United States is a guessing game at this point, despite rising public acceptance and demand. State regulation is further fragmented, particularly in states like California, where cannabis companies have to contend with state, county, and local regulations and taxes.
Cannabis and the Hospitality Program
With the continued shift towards reliance on direct-to-consumer sales and increased competition for those customers, wineries have been challenged to find unique ways to draw in visitors and convert them into long-term buyers. This has produced a marked change in the hospitality experience that Napa and Sonoma have developed over the years, making the visit and wine buying more intimate and personal.
This shift has some wineries looking for ways to integrate cannabis into their hospitality program – why not offer an edibles pairing with the wine tasting to enhance the experience? Currently, however, at least in California, bringing cannabis into the mix is not allowed. The California Department of Alcoholic Beverage Control (ABC) recently (July 2018) came out with guidance on what cannabis-related activities are permitted for ABC license holders in California. Cannabis cannot be sold on premises and cannot be mixed with alcoholic beverages, which limits the natural paths towards wineries integrating cannabis into their programs. So for now, the hospitality programs that Napa and Sonoma Valley wineries have worked to build must stay cannabis-free.
What Can Wineries Do?
There are few options at this point for the winery wanting to integrate cannabis directly into their consumer program. However, some wineries have found creative ways to position themselves as cannabis-friendly, as a way to distinguish themselves and get ready for if and when cannabis is legalized on the Federal level:
- Licensing – a winery could license its name for use on a cannabis product that’s sold by a permitted cannabis manufacturer/distributor, although the payment structure for this could be complicated.
- Pairing Events – currently, California doesn’t allow cannabis and alcohol to be consumed at public events. The line between “public” and “private” is gray, but if money is collected for the event, it will be considered “public.” However, a winery could partner on an off-site sensory event where one of cannabis or wine isn’t consumed, but aromas of both are explored.
- Wine and Cannabis Tours – Sonoma County has been a hotbed of tours that pair stops at wineries and dispensaries. The winery is simply receiving tourists, and no cannabis is consumed on-premise.
- Non-Alcoholic Cannabis-Infused Wine – the market for cannabis-infused beverages is booming, and some inventive winemakers are exploring mixing dealcoholized wine with cannabis.
None of this comes without risk – cannabis is indeed still illegal on the Federal level, so each winery considering a move into cannabis needs to tread carefully and thoughtfully. However, for the winery that wants to position itself within the cannabis industry and ahead of the curve as the market grows (and potentially eats into the wine market), there are options.
The foregoing is the opinion of the author and does not express the views or opinions of Gaw Van Male LLP. The foregoing does not constitute legal advice, and cannot and should not be relied upon. Cannabis is illegal to possess, use, distribute, and/or sell under Federal law, and this commentary is not intended to provide any guidance or assistance in violating Federal law.
Expert Editorial
By Marc Hauser, Partner at Gaw Van Male, LLP
Marc Hauser is a Partner with Gaw Van Male, LLP, a boutique business and estate planning law firm in Napa, CA. Marc leads the firm’s cannabis transactions practice, with a focus on M&A and capital markets, in addition to advising the firm’s wine industry and other clients. He last spoke on the topic of cannabis and wine at the Wine & Weed North Coast Symposium in August 2018.
