Oregon Small Weed Farmers And Producers Sue Cannabis Giant Chalice Brands Over Consistent Non-Payment

One of the largest purchasers of Oregon’s marijuana, Canadian-based Chalice Brands CHAL CHALF owes lots of money to cannabis farmers and producers who are tired of waiting, so they’re taking the company to court.

Chalice purchases products from over 20 Oregon cannabis farms and product makers for its more than 15 dispensaries in addition to its own brands and product lines.

“Chalice is financing its business on the backs of small farmers,” says Marianne Cursetjee, owner of Alibi Cannabis in Clackamas County, just south of Portland. “People are too afraid of saying things out loud because we have no power to collect anything outstanding. I really, truly feel that Chalice is a house of cards.”

Power Dynamics: Chalice’s unpaid invoices, says Beau Whitney, senior economist for the National Cannabis Industry Association (NCIA), demonstrate the power dynamics between big companies with outside capital that sell recreational pot and homegrown businesses and farmers that grow the cannabis and live from paycheck to paycheck.

“If you lose money during a quarter but have $100 million in the bank, it’s easier to bridge yourself versus a small individual firm that doesn’t get paid for a few months and struggles to make payroll,” Whitney said, per Willamette Week (WW). 

Unlike alcohol retailers who are forbidden under Oregon law from buying liquor on credit, cannabis retailers often buy on credit, essentially agreeing to pay after the product changes hands.

Fortunes Rose Then Fell Due To Pandemic

Like most states, Oregon experienced a rise in fortunes during the pandemic when sales increased from $795 million in 2019 to more than a billion in 2020 and stayed at that level until late 2021.

It was during this time that Chalice announced a number of dispensary acquisitions and the launch of numerous new product lines. 

Meanwhile, in the winter of 2021, cannabis sales across Oregon began to drop. By April 2021, sales had reached $110 million a month, then dipped further in December to $89 million. 

It was around this time that growers had stopped getting paid by Chalice, reported WW, which recounted stories of local manufacturers, wholesalers and producers across the state whose invoices dating back to late 2021 have yet to be paid. 

“It got so bad that at one point we had over three months’ worth of payroll in late invoices that we couldn’t collect,” one farmer said. “We were forced to lay off 36 of our 38 staff.”

Amy Margolis, founder of the Oregon Cannabis Association, said unpaid bills are “indicative of the widespread economic challenges the industry is facing as a whole.”

“When producers and processors don’t get paid, or don’t get paid on time, the entire cost burden rests on their shoulders,” Margolis told WW. “This is especially difficult for smaller, less capitalized businesses who need to get paid on time to fund the next round of edibles, next run of flower, or even to stay alive.”

Stock movement: Chalice Brands stock was trading down 9.09% at $.05 per share at the close on Jan. 6, 2023. 

Photo: Wikipedia