Worcester Business Journal

10 Worcester Business Journal | May 13, 2019 | wbjournal.com e slower than expected rollout of the legal Massachusetts cannabis market helps the black market and hinders smaller would-be operators Behind schedule T H E B U S I N E S S O F M A R I J U A N A F OC U S BY ZACHARY COMEAU Worcester Business Journal Staff Writer M assachusetts con- sumers have already spent more than $112 million on recreational marijuana products since two retailers opened in November, kicking off an industry predicted to be worth billions. at may seem like a good start for the first and only state to roll out the legal cannabis industry on the Eastern seaboard, but the state is far behind its tax revenue estimates and in some cases has failed to live up to the hype over the first six months, despite sky-high projections. When compared to other legal mari- juana states, Massachusetts is far behind. e Massachusetts Department of Revenue's tax revenue forecasted $63 million of marijuana tax revenue this fis- cal year ending in June. With a tax rate of 17%, the state has seen $17.7 million collected through the start of May. In March, state officials told lawmak- ers the lagging numbers are primarily due to the slow pace of the indus- try's rollout. A total of 94 completed applications are awaiting review by the Massachusetts Cannabis Control Commission, but only 38 retailers have received either provisional or final approval, which are the first two steps needed for approval to open. An autho- rization to com- mence operations can typically take several weeks aer the final approval. Of those 38 stores, 17 have opened. In an interview with WBJ, CCC Chairman Steven Hoffman maintains the commission didn't set any goals for number of stores to get open for any period of time, but in December said he expected four to eight new retail stores opening each month. Two, Cultivate in Leicester and New England Treatment Access in Northampton, opened to kick off the state's industry in November, and 15 have opened since then. "We're in the very early stages of it, but I'm pleased with how its gone so far," Hoffman said. He called the state's rollout a deliber- ate attempt to limit the impact to public health and safety of Massachusetts resi- dents while enacting the will of voters. "We're committed to doing this right for the state," he said. "It's not a competition." Despite the slower-than-anticipated rollout, Massachusetts is expected to be home to one of the largest cannabis markets, according to Colorado-based cannabis market research firm BDS Analytics. Legal pot spending is forecast to reach $292 million in calendar year 2019 and Steven Hoffman, chairman, Cannabis Control Commission The first day of recreational marijuana sales in Worcester, at the retailer Good Chemistry, was by appointment only. PHOTO/COURTESY Sales through Per capita sales State six months through six months Sources: BDS Analytics, Nevada Department of Revenue, Colorado Department of Revenue, Oregon Liquor Control Commission, Massachusetts Cannabis Control Commission, Washington State Liquor and Cannabis Board Slow rollout Among states with legal adult-use marijuana industries, Massachusetts ranks second lowest in sales per capita in the first six months after the industry launch. Nevada $194M $64 California $1.1B $28 Colorado $114M $20 Oregon $80M $19 Massachusetts (six months on May 20) $112M $16 Washington $65M $9 $918 million in 2022, lagging behind only Canada, California, Colorado, Washington and New York, the last of which is expected to roll its program out in 2020. Behind other legal states In Washington state, where the industry was launched in July 2014, 25 stores opened on the same day. In a state with a similar population to Massachusetts, there weren't enough stores to meet demand. Within six months about 40 total stores had opened. "It wasn't enough for us," said Brian Smith, a spokesman for Washington's Liquor and Cannabis Board. What made it more difficult for that state, Smith said, was the lack of an established medical marijuana market. Other states like Colorado and California already had robust medical industries. Converting those operators to the recreational market was like flipping a switch, Smith said. According to the Colorado Department of Revenue, nearly 150 retail marijuana stores opened in early January to kick off the industry and all of those were previously medical marijuana dispensaries. In Massachusetts, 47 medical marijuana dispensaries existed in November when recreational sales started at two stores. In California – a state with 40 million people vs. 7 million in Massachusetts – more than 400 retailers, cultivators, distributors, microbusinesses and test- ing labs began operating shortly aer legalization in early January 2018. According to Hoffman, Massachusetts' slow pace of approvals isn't the fault of regulators or state officials. When com- panies apply for provisional licenses, the CCC asks when the company will begin operating a facility or open a store. "We get answers that go from a month to a year-and- a-half," he said. "It's impossible to know what that's going to look like." e CCC is bound by law to process appli- cations within 90 days once regulators deem those packets complete. ose applications are being processed thoroughly, carefully and promptly, Hoffman said. "at's what I care more about than how many licenses we give out," Hoffman said. "It's, 'Are we doing our job the right way?'"

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