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Massachusetts recreational marijuana sales approach $140 million

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After six full months of operations, Massachusetts adult-use marijuana sales continue to rise, with aggregate sales approaching $140 million through the last week in May.

The market enjoyed a solid launch the week of Thanksgiving 2018, and Massachusetts retailers have seen average month-over-month sales increases of 21% between December 2018 – the first full month of sales – and May 2019.

Average monthly sales to date are just under $23 million, with May sales of $34 million through May 29.

The state’s total aggregate of $139 million comes from sales of more than 3 million units of cannabis products, with average per-unit spending of $44.

As seen in other markets, raw flower comprised just under half of all dollar sales, with concentrates and infused products – both edibles and nonedible products (i.e., topicals) – collectively accounting for just over 50% of sales.

Raw and infused pre-rolls, kief and shake/trim each represented less than 1% each of dollar sales.

Massachusetts was the first on the Eastern seaboard to legalize recreational use, and its retailers were expected to benefit from out-of-state traffic from population-dense New England neighbors in addition to sales to local residents.

Analysts with Crain’s New York estimate that up to 50% of adult-use sales in Massachusetts may be coming from New Yorkers.

The recently released Marijuana Business Factbook estimates 2019 recreational sales in Massachusetts will be in the range of $450 million-$500 million.

Here’s what else you need to know about the situation:

  • During the last week of May, average spending per customer was $44.30. Average units sold during this period were 29,140.
  • As of late May, the Massachusetts Cannabis Control Commission (CCC) had issued final licenses to 58 retailers, 48 cultivators, 42 manufacturers and three testing labs.
  • In late May, the CCC voted 3-2 to approve a proposal that would launch a future social consumption pilot program in 12 volunteer communities across Massachusetts. Although this move has the potential to create new business opportunities in the state, a firm timeline for the pilot program has not been set.

 

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Cannabis Control Commission proposing pot lounges, nonmedical delivery services

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BOSTON — After unanimously agreeing to them last week, cannabis regulators released rewritten rules Tuesday that would govern both sides of the legal marijuana world, proposing regulations to eliminate an annual fee for medical patients and set the stage for home delivery of recreational marijuana and marijuana vaping lounges.

The Cannabis Control Commission set out to revise and republish its slate of regulations after assuming control of the medical marijuana program from the Department of Public Health in December and as regulators approved the first licensed pot stores in Massachusetts. The product of months of policy discussions and hearings, the new draft regulations for the medical marijuana world as well as the adult-use or recreational industry will be open for public input until Aug. 16.

Before a pilot program for on-site consumption could start, the CCC says lawmakers have to act. In a press release, the agency said the recommended pilot program “would not be able to begin without a change in state law or the passage of legislation that will first allow cities and towns to authorize social consumption in their communities.”

The CCC approved a policy in May allowing for a social consumption pilot program in a limited number of communities.

Mirroring that policy, the draft regulations would permit a social consumption pilot program to operate in up to 12 municipalities. Towns that participated in a CCC-led working group on social consumption — including North Adams, Amherst, Springfield, Provincetown and Somerville — would be among those able to opt into the pilot, the CCC said.

For the first two years they are available, licenses for cannabis cafes — officially referred to as primary-use locations — will be held aside exclusively for microbusinesses, craft marijuana cooperatives, applicants with priority status through the CCC’s economic empowerment system, and participants in the CCC’s social equity program as a way of trying to level the playing field between big companies and smaller operators.

Before the licenses are made available to general applicants, the CCC will collect and report data “measuring certain criteria to determine whether goals of the exclusivity period are met.”

The CCC’s Cannabis Advisory Board had previously recommended allowing social consumption and suggested it could reduce the risk of children getting ahold of the drug and could limit how much legal marijuana is illegally transported out of state by tourists. The advisory board also suggested that the CCC develop state limits on the “serving size” for social consumption, establish a maximum number of servings allowed per “immediate use package” that cities and towns could adjust, and set a maximum daily exposure limit at which point a budtender could decide to stop serving a consumer.

The commission had drafted regulations in 2018 to allow so-called social consumption but put the issue on the back burner after pushback from Gov. Charlie Baker. The governor indicated this year he could support the idea of starting social consumption as a pilot program before rolling it out more widely.

“I think the issue around sort of enforcing the general rules of the game associated with how recreational marijuana is going to work when you get into the social consumption sites and all that comes with it are really hard and really complicated,” Baker said in May. “And I think doing it on a pilot basis would make a lot of sense.”

Baker proposed a change to the state’s marijuana law in 2018 that would have spelled out a local initiative petition process for towns considering on-premise consumption of marijuana, but it was not taken up in the Legislature.

The draft regulations also set the table for delivery-only licenses, a license type that advocates have said would help level the playing field between large corporations and small businesses because the barriers to entry for delivery would be far less burdensome than those for retail licenses.

Delivery companies would be required to obtain their marijuana from other licensed operators in the state and consumers will have to pre-verify their age and identity with the retailer before placing an order for delivery. Deliveries for nonmedical marijuana will only be made to residential addresses in cities or towns that allow marijuana retail sales.

To get to this point, the CCC worked through five specific policy issues at a meeting last Tuesday: ownership and control, home delivery of marijuana, public marijuana consumption at certain licensed establishments, suitability and the removal of product.

Those five issues were all that remained to be ironed out; the bulk of the regulations were prepared by commissioners and CCC staff after holding public hearings and policy debates in recent months.

The CCC plans to hold public hearings on the draft regulations in August and will take public input through Aug. 16.

“Now the public has the opportunity to grapple with some of the complex issues we have considered as we continue working together to build a safer, more equitable, and more effective industry in Massachusetts,” Hoffman said in a statement.

Hoffman has previously said he expects the CCC to vote to finalize the rules “right after Labor Day, maybe mid-September.”

“This has been painstaking; this has been hard,” CCC Chairman Steven Hoffman said last Thursday, thanking staff members for their work on the draft regulations. The CCC voted 5-0 Thursday to approve the draft regulations, but they were not released publicly until Tuesday.

In addition to eliminating the $50 annual registration fee for medical marijuana patients, the draft regulations spell out the proposed rules for two areas that have been topics of much discussion since the early days of legal marijuana and the CCC: authorized social or public use of marijuana and home delivery of nonmedical marijuana.

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More pot shops seeking Worcester approvals

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WORCESTER — Two more companies are seeking special permits from the Planning Board to operate adult-use marijuana retail stores in the city.

Suns Mass II LLC is looking to operate a marijuana retail store at 56 Millbrook St., a two-story building that was formerly used as an automotive garage.

As part of its plan, the applicant is also looking to reconfigure and expand the existing surface parking lot on the property to 23 spaces.

The property is in a manufacturing zone.

Meanwhile, Nature’s Remedy of Massachusetts Inc. is looking to operate a marijuana retail store at 142 Southbridge St. in what is currently a vacant two-story commercial building.

The building is in a Business-General zone as well as within the Commercial Corridors Overlay District.

The Planning Board is scheduled to take up both requests for special permits at its meeting on Aug. 7.

In order to be able to operate an adult-use marijuana-related business in the city, potential business owners must receive a special permit from the Planning Board. The operators of adult-use marijuana retail stores must also receive a license from the License Commission.

In addition to the local approvals, applicants must also receive final approval from the state Cannabis Control Commission.

Businesses that want to operate a medical marijuana dispensary need to receive approval from the Board of Health, as well as from Cannabis Control Commission.

The city is limiting the number of adult-use marijuana stores to 15 — a figure that is based on 20 percent of the number of off-premises alcohol licenses the city is authorized to issue.

There is no limit on the number of other marijuana-related businesses that do not have points of sale with the public, such as marijuana cultivators, independent testing laboratories, product manufacturers, research facilities, transporters and micro-businesses.

So far, the License Commission has approved five licenses for adult-use marijuana retail sales.

Meanwhile, the Planning Board has so far granted seven special permits for adult-use marijuana retail sales at 9 Harrison St., 65 Pullman St., 74 Grafton St., 143 Southwest Cutoff, 645 Park Ave., 64 West Boylston St. and 640 Lincoln St.

The board has also granted special permits for three adult-use marijuana product manufacturing operations and three special permits for cultivation operations.

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Boston’s First Licensed Cannabis Shop Is a Big Win for Equity

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When Massachusetts voters approved cannabis legalization in 2016, the lack of diversity in other state markets was already becoming clear. Earlier that year, BuzzFeed described the industry’s growth as “America’s whites-only weed boom,” noting that black people had largely missed out on legalization’s economic opportunities.

To counter that trend, Massachusetts became the first state in the nation to include a social equity program to shape its newly legal industry. The program includes provisions for training and technical assistance as well as priority license for people impacted by the war on drugs.

Rollout of the nation’s first statewide cannabis equity program, however, has been excruciatingly slow. Only last month did regulators issue the first retail provisional license under the state’s economic empowerment program, designed to give applicants an early shot at licenses. The Boston shop, Pure Oasis, is set to open in the Dorchester neighborhood in October.

Co-owner Kobie Evans praised the program in concept—”If you aren’t a person of color, you have no idea what the war on drugs did to certain communities,” he said—but added that the local approval process has caused significant headaches.

“There was an expectation that towns would embrace equity, because the ballot measure was pretty clear,” Evans said. Instead, they’ve become some of the state’s most frustrating hurdles to building an equitable industry.

Cities Seeing Green

To submit a state license application, an applicant first needs to secure what’s called a host community agreement (HCA)—essentially local approval for the business. These host communities can charge businesses so-called community impact fees, which by law can’t exceed 3% of a company’s annual sales.

Swarmed with applications, some municipalities got greedy. Local governments have pushed applicants to sign HCAs that call for higher-than-allowed fees, up-front payments to the municipality, and “voluntary” donations to various local organizations.

Because local governments handle the approvals individually, there’s been a variety of approaches—some better than others.

“Some cities have made a major public commitment to be leaders and develop an equitable process in both theory and practice. I see others being openly greedy,” said Shaleen Title, a member of the state’s Cannabis Control Commission. “Most municipalities are somewhere in the middle. They just want to do what’s right for their communities. Unfortunately, that often means they go with the most well-resourced, flashy applicant.”

Given that most equity applicants are of color, it could be easy to assume race is a factor in municipal negotiations. But Evans isn’t convinced local governments see black or brown so much as green. “I don’t think it’s racial at all,” he said. “It crosses racial lines. It’s just a matter of who has the political connections and what kind of donations you can make.”

Difficulties and delays caused by clearing the HCA hurdle can also increase costs, endanger business partnerships, and hurt efforts to secure financing.

“We had to turn away investors and, after we received the provisional license, more investors have contacted us,” Evans said. “Getting rid of the HCA requirement for economic empowerment applicants would attract more money.”

Improving the Process

Commissioner Title says the HCA winds are shifting. “As time goes by, we are seeing more of an emphasis on the fairness that voters wanted. I think everyone wants to see small and local businesses succeed,” she said. Two bills currently being considered by the state would strictly enforce the HCA limits and give the Cannabis Control Commission (CCC) oversight over the municipal approval process.

A separate proposal being considered by the Cannabis Control Commission would reserve all the state’s delivery licenses for equity applicants.

Evans applauds these efforts but suspects it will be hard for the CCC to re-engage entrepreneurs who’ve been discouraged by the process so far. Asked what measures he thought would help, he replied: “Unfortunately, I think it’s a moving target. It’s one of those things where you don’t know where the gaps are until someone exploits them.

“There is a national game plan by the bigger companies to dominate 100% of the American space, to monopolize as much as possible,” he continued. “They can exert political influence on a granular level, so city councils, mayors, local congressmen—everyone’s affected by the will of the bigger companies. The Massachusetts model is actually a boon for the industry. You don’t hear big companies complaining about Massachusetts. They love it.”

Evans is not all doom and gloom. He also recommended reforms, such as exempting equity applicants from the HCA requirements—a step he believes would create “a lot more parity” in licensing—and including provision that gives 80% of licenses to big companies and 20% to equity applicants for a certain number of years.

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