Santa Rosa’s CannaCraft to merge with San Diego cannabis retailer

CannaCraft, the Santa Rosa-based cannabis pioneer that has carved out a niche in the marijuana industry by producing innovative products from vape cartridges to drinks, announced Wednesday it will merge with San Diego-based March and Ash, which operates a string of retail dispensaries in Southern California.

The two businesses will operate under the holding company of Groundwork Holding Inc., but they will operate as separate companies under the structure, said Dennis Hunter, CannaCraft founder and co-chief executive officer.

Breton Peace, co-founder of March and Ash, will become CEO of Groundwork Holding. Hunter and his co-founder, Ned Fussell, will remain as co-CEOs of CannaCraft.

CannaCraft was founded in 2014 and employs 185 workers, some of whom are unionized. No layoffs are planned, Hunter said.

March and Ash has “been in the industry for a long time like we have. We are similar in so many ways. They are community oriented. They are active with the state in really trying to create a viable industry,” Hunter said.

The deal is beneficial for both sides as the two privately held companies have little overlap, he noted.

March and Ash has seven dispensaries in the San Diego area and has delivery services. CannaCraft has no retail outlets but provides products to such licensed dispensaries across California as Solful in Sebastopol. Those current relationships will continue under the merger, Hunter said.

“It’s a natural fit,” Blake Marchand, co-founder of March and Ash, said in a statement.

“Our combination also provides a platform for other like-minded companies in it for the long-term to expand through partnership and hard work as an alternative to selling or giving up control.”

The company will open three locations this year.

The deal marks a significant new chapter for Hunter, who learned as a young adult to grow cannabis in Mendocino County and later spent more than six years in prison on pot-related convictions. During his time in prison, Hunter took UC Berkeley Extension courses in real estate and appraisal for a future business career.

Over the years, CannaCraft has become a leading producer of a range of products, using its research team to find creative ways to extract oils to make into such products as chocolates, rosin and gummies.

The products are typically based on a formula of a mixed ratio of cannabidiol (CBD), a cannabis compound that has been used more as pain relief to treat aches, and tetrahydrocannabinol (THC.) That is a principal psychoactive chemical in cannabis.

CannaCraft also grows marijuana and has a large cultivation site in Lake County.

The company operates out of a west Santa Rosa facility where it produces more than 200 products. Its plant was the subject of a 2016 police raid that was later settled with prosecutors.

CannaCraft subsequently grew in the aftermath of the November 2016 ballot initiative that legalized adult use within California even though it remains an illegal substance under federal law. In 2018, the company hired Bill Silver, then dean of Sonoma State University's School of Business and Economics, as its chief executive officer to help chart its growth. He left the company last year.

Most notably, it has worked with Lagunitas Brewing Co. of Petaluma to develop cannabis drinks that are sold through licensed dispensaries.

The two recently released a new version earlier this year of their Hi-Fi Sessions brand as that product category is slated to grow from more than $200 million in 2021 to $2.4 billion in 2026, according to BDSA, a leading market research firm covering the legal cannabis market. It also has a popular sparkling winelike drink called Gem and Jane.

The CannaCraft/March and Ash merger makes sense because it will become one company that will be completely vertically integrated from seed to sale, said Erich Pearson, chief executive officer and chairman of SPARC, which also operates a cannabis business that is fully integrated and with major operations in Sonoma County.

“When you put those two companies … it makes it a more profitable business,” Pearson said.

There should be more such deals coming in the future given the financial pressures within the sector, he said.

The complaints include a high burden of taxes; the overall lack of dispensaries; and a massive drop on the wholesale price for weed by as much as 50%, as illegal pot from states including Oregon and Oklahoma have come into the state.

“We are going to see it moving in that direction,” Pearson said.