‘It’s going to be hot’: Maryland cannabis firms stockpile and staff up for big demand starting July 1

June 24, 2023 · Yahoo!News

Along a flat road in rural Cecil County, where the sky is big and the towns are small, stands a long, nondescript building. Inside is one of the most important cultivation and processing operations for Maryland’s new cash crop — cannabis.

SunMed Growers and its 150 employees are harvesting, testing and packaging as many products as they can in preparation for July 1. That’s when any individual 21 or older will be able to buy vapes, gummies, pre-rolled joints, edibles and more from about 100 dispensaries statewide.

Dispensaries are preparing for a flood of customers, ranging from lifelong users stepping out of the illicit market to curious newcomers, plus shoppers from states such as Virginia and Pennsylvania that don’t have recreational markets.

Long lines at dispensaries are expected, and SunMed owner Jake Van Wingerden wants to make sure no stores run out of product. That means stockpiling flower, adding a shift for packaging, buying more delivery vehicles, and building a $16 million, 25,000-square-foot facility to make edible products.

“We cranked it up,” Van Wingerden said of production. “We believe that demand will skyrocket for those first couple months.”

Maryland is setting up its recreational marijuana industry in just a matter of months. Voters approved it in a referendum in November and lawmakers settled on a framework for the business in April. The state is doing do so partly by piggybacking on the existing medical cannabis industry, which was legalized in 2014 but didn’t see its first sales until 2017.

Industry insiders feared it would take years for lawmakers and regulators to approve and set up the recreational industry, too, especially after the 2022 legislative session, when the General Assembly pushed the legalization ballot question to voters. After two-thirds of Maryland voters approved it, cannabis dispensaries, processors, cultivators, trade groups and other related businesses spent $1 million on lobbying as the specifics were drafted into law in Annapolis, according to a review of state records.

Lawmakers faced a tall order, said Del. C.T. Wilson, a Charles County Democrat who helped shepherd the recreational cannabis legislation into reality. They wanted to create a recreational cannabis industry with affordable products available statewide, he said, putting the illicit market out of business. But Wilson said lawmakers also studied the launch of the medical cannabis industry, which was dominated by white-owned businesses.

“The goal, again, is to make sure this is fair and equitable,” he said. “But we need to have product available on the market July 1.”

They decided to allow businesses in the existing medical market to pay a fee and join the recreational industry, while carving out funds and licensing opportunities for Marylanders from disadvantaged communities.

Van Wingerden praised lawmakers for getting the legislation done this session.

“It’s a heavy lift and they did it fairly quickly. Hats off to the General Assembly and the people behind the scenes,” he said. “They got it all done and I think it’s going to be a model for the rest of the country.”

According to Van Wingerden and other industry insiders, Maryland’s recreational cannabis rollout might look a lot like Missouri’s. Both states have about 6 million residents, established medical cannabis industries, and voted overwhelmingly Nov. 8 to legalize recreational cannabis.

It took Missouri fewer than 100 days to get its recreational industry up and running, with sales beginning in early February. Almost instantly, total monthly cannabis sales in Missouri tripled and they’ve stayed at roughly that level.

Marylanders are expecting a similar trajectory, meaning annual revenue from the cannabis industry could top $1.5 billion. The state’s medical cannabis business experienced several years of rapid growth and consolidation until last year, when the market appeared to mature and sales flattened.

Almost every existing medical cannabis dispensary, processor and cultivator in Maryland has been approved to join the recreational industry, according to state regulators, paying fees that typically range between $100,000 and $2 million based on their revenue.

Anticipating future growth, the legislature roughly tripled the number of licenses for dispensaries, processors and growers, while adding micro licenses for smaller operations.

Since the inception of the industry, the state’s regulator has been the Maryland Medical Cannabis Commission, which oversaw inspections, product testing, and regulatory enforcement. Will Tilburg has been its executive director since 2019.

Under the cannabis law passed this year, the commission became the Maryland Cannabis Administration, with Tilburg as its acting director. Tilburg was not available for comment, but with the license conversions issued and a public education campaign underway, regulators are working toward the impending July 1 rollout.

The administration has taken steps to educate the consumers, including making informational videos, a list of frequently asked questions, and a list of participating dispensaries.

As the new top regulator, the cannabis administration will award the new cannabis business licenses in the coming years. Many are reserved for “social equity applicants.” That designation is based largely on whether an individual has lived in an area disproportionately impacted by the criminalization of cannabis.

This designation also allowed Hope Wiseman to pay a smaller fee to convert her medical cannabis dispensary to a recreational dispensary. Wiseman owns Mary & Main in Prince George’s County. For years, she has been one of relatively few Black women business owners in the cannabis industry.

Wiseman said this is the first time her business has received a material benefit because of her background.

It’s just the latest attempt by lawmakers and regulators to diversify an industry dominated by white-owned businesses.

Historically, Black people have been disproportionately harmed by the criminalization of cannabis. Despite having a population that is nearly one-third Black, Maryland awarded all 15 of the original cultivation licenses to white-owned businesses.

Adding licenses for social equity applicants will diversify the industry, Wiseman said, but she compared the situation to starting a race when the other competitors are 10 laps ahead.

“At the end of the day, these are going to be the strongest businesses, at least for the foreseeable future,” she said, adding that new participants will struggle to get the capital to compete.

While a chef can get a loan backed by the U.S. Small Business Administration to open a restaurant, a budding dispensary owner has far fewer options because cannabis is illegal under federal law and most banks won’t lend to cannabis companies.

The General Assembly did create a program to encourage more lending to the cannabis industry. The state will back loans of $500,000 for dispensaries and $1 million for processors and growers if the owner is a social equity applicant.

But industry experts say starting these businesses can take several million dollars — sometimes tens of millions of dollars.

“We’re not going to give you a license and all the money to start,” Wilson said. “This is not a golden ticket and not every dispensary owner is a millionaire.”

Chris Chick is the chief operating officer of CFG Bank, a Baltimore County-based bank that lends to the cannabis industry. Even though the bank is positioning itself to lend more to cannabis companies, Chick said there still are strict underwriting rules that make it almost impossible for lenders to provide the funds needed to start a cannabis business.

“For people to be successful, you have to have access to that private capital to get up and started,” Chick said.

Even then, it can take more than a year to build a cultivation facility, Chick said. Some existing cannabis companies in Maryland have been preparing for recreational cannabis for two years — or longer.

Culta, a vertically integrated cannabis company with a Federal Hill dispensary, recently bought the licenses of two other medical dispensaries, one in Frederick County and another in Ellicott City, and has increased staffing at its stores by 20% to 50%, according to Chase Lessman, the company’s director of sales.

Adding dispensaries was always a goal of Culta, Lessman said, but rules passed by the legislature “put us under the gun” to acquire Greenhouse Wellness and Kannavis. Starting July 1, there will be a five-year moratorium on buying and selling existing licenses. A similar rule at the outset of the medical cannabis industry discouraged consolidation in the industry.

Surrounded by densely populated states without recreational cannabis, Maryland will benefit initially from some “canna-tourism,” Lessman said, but that will subside as neighboring states start their own programs, pushing competition to a regional level.

Mitch Trellis said his company, Remedy, has spent years preparing for this new normal. Remedy has two locations, in Baltimore County’s Windsor Mill and in Columbia; both are larger than most medical dispensaries. Trellis said each store is more than 9,000 square feet and has hundreds of parking spots and at least 20 registers.

“We now have two superstores,” said Trellis, comparing the legalization of adult-use cannabis to throwing gasoline on a fire.

On a typical day, the stores see 300 to 600 patients, he said, but starting July 1, that number could hit 2,000 or more.

Eventually, he said, the winners in the new marketplace will be the dispensaries that rely on traditional retail principles such as convenience, experience and variety. But on the first day, Trellis expects it will be gangbusters everywhere.

“Expect long lines at most places. It’s going to be hot,” he said. “People are definitely excited.” (Full Story)

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