Medical marijuana businesses plan for recreational market
Recreational cannabis isn’t yet sold in Connecticut retail locations, but medical cannabis providers are already reckoning with how to adjust now that adult use of marijuana is legal.
Thames Valley Relief in Montville, which recently rebranded to The Botanist, and Curaleaf Groton, are two local purveyors — owned by larger companies — of medical cannabis trying to determine how to adjust to the new recreational market.
Recreational cannabis dispensaries won’t open until at least May 2022. Existing medical cannabis businesses have to pay a fee of anywhere between $1 million and $3 million to enter the recreational market, depending on whether they partner with a social equity applicant. The equity applicant program is designed for those who live in specific geographical areas that have been disproportionately impacted by the war on drugs, allowing them to have an easier and separate process to start a marijuana enterprise, rather than competing with corporations.
Curaleaf operates in multiple states as a cannabis grower and retailer. Patrick Jonsson, the company's regional president of the Northeast, oversees operations in Connecticut, Vermont, Maine, Massachusetts, New York, New Jersey and Maryland. He said Curaleaf is interested in joining the recreational cannabis market and Connecticut's fee isn’t prohibitive.
“It’s a decent chunk of change. Curaleaf is fortunate enough to be fairly large these days. I can’t speak for some of the smaller standalone operators, but I would say most of the people operating in the medical space see the value of an adult-use program,” he said. “I don’t think anyone would not want to get into adult-use. I think what’s important is the social equity partnerships. Each operator has an ability to partner up with two social equity applicants.”
In order for operators to get into the adult-use market, they can either pay a slightly higher fee and go it alone or they can put social equity applicants in business in exchange for a smaller start-up fee.
“We believe it means we have to identify one partner and two locations, or two individual partners and one location each, then we have to stand them up,” Jonsson said. “We have to do the expansion of their site, train them, set them up with initial product, and make sure they can operate.”
Jonsson said Curaleaf is “obviously considering” expanding its Connecticut locations to offer recreational cannabis as well. The company is only allowed six locations to sell cannabis in the state. “I think it makes sense for us to have 12 stores at those six addresses,” he said. He added that it will depend on space at those current locations.
Acreage Holdings is also a multistate cannabis cultivator and retailer that operates three medical dispensaries in Connecticut and is interested in recreational sales.
“It’s all depending on the valuation of the business operations because the fee is pretty high,” said Carl Tirella, the company's general manager in the state. “It comes down to a business decision. I don’t think it would be prohibitive if we found it a good business investment. It is high relative to other states, though. We’ll just analyze the bill itself and then do an evaluation from a business perspective about whether it would make sense for us in these local municipalities.”
Still, he said, the opportunity for medical producers to apply for a hybrid license is appealing. He said it’s “likely” that Acreage will make a foray into recreational cannabis.
“We’re still in the process of evaluating the bill and working with the towns to make sure they’re OK with it because it does become a municipality decision, and then we’re going to make a decision at a future date,” Tirella said.
Towns including Greenwich, Newtown and Prospect already banned the selling of marijuana. Southeastern Connecticut towns are still weighing the decision.
“All these towns have to opt in or opt out, and that hasn’t been finalized yet. We don’t know if the locations where we’re at will want to play ball, so it’s a very what-if scenario right now,” Jonsson said. “We’re trying to strategize about where would we go. We haven’t heard anything from any town yet. All these towns are going wait for the regulations to come forth before acting.”
Tirella said Acreage noticed that in other states, the number of medical marijuana patients dip down at the onset of legalization, "but our longer-term priority is to make sure medical stays in Connecticut, and we normally see an uptick in the medical program shortly after legalizing recreational."
Tirella and Jonsson noted that medical cannabis establishments can sometimes have a wider range of products as well as lower taxes on its products.
Jonsson rejected the claims of recreational cannabis advocates who spoke out against large, multistate operators like Curaleaf during the legislative session, saying that helping such companies in any way would corrupt the larger purpose of the bill: righting past wrongs against people — mostly minorities — harmed by the failed war on drugs. Advocates further argued that the cannabis bill should attempt to help communities regain what they lost due to the drug war, which, they say, naturally leads to more small- to medium-sized businesses and economic parity.
The anti-big-business sentiment is “an unfortunate way of thinking,” Jonsson said.
“There’s room for everyone, and what I continue to try to educate people on is you need both,” he continued. “You need the base, which tends to be the larger, multistate operators. We’re the ones who can get up and running early and create a baseline, but then our goal, our corporate social responsibility, is to help other operators get up and running.”