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W W W. M A I N E B I Z . B I Z 17 J U N E 2 7 , 2 0 2 2 F O C U S B U S I N E S S O F C A N N A B I S Jacques Santucci, president of Portland-based Opus Consulting, which specializes in the cannabis industry, says he sees the adult-use recreational market in Maine hitting $300 million in sales by 2025. Several factors are driving the meteoric growth. Maine has the sec- ond highest consumption rate in the Northeast, behind Vermont, and close to 200,000 monthly consumers, Opus Consulting says. Maine comes second only after Oklahoma nationwide in terms of Google search interest per capita, the firm found. Medical marijuana continues growth at's just the recreational market. e medical marijuana market is its own beast. Maine first legalized medical marijuana by referendum in 1999. In 2009, Maine voters established a legal distribution mechanism and the medical marijuana program became operational in 2010, with the first of Maine's medical marijuana dispensa- ries opening in 2011. Since its establishment, the state's medical program has grown from a small industry consisting of eight dis- pensaries — one in each public health district of Maine — and nearly 600 caregivers to a fully commercialized operation consisting of 13 dispensaries and about 3,000 registered caregivers. e medical sector had $374.2 mil- lion in total sales in 2021, compared with $293.7 million in 2020 when it became the state's most valuable agri- cultural crop for the first time. Over time, Santucci says he expects the adult-use recreational market to command about 90% of the market, while the medical marijuana sector will shrink to 10% because of the lack of testing and oversight in the medi- cal sector and the hassles in getting a medical marijuana card. Of course, there's still an illegal mar- ket for cannabis that goes unreported. e state's Office of Cannabis Policy issued a report in June saying that the illicit market has decreased more than expected since the legal- ization of the adult-use recreational industry in Maine. e report says a significant major- ity (64%) of cannabis accessed for consumption among past-month cannabis users in Maine is estimated to come from a regulated or otherwise legal source. e presence of an adult- use store in a consumer's ZIP code may incentivize them to access some of their cannabis from the regulated market over the illicit market. Cannabis still a nascent industry Hannah King, a Portland lawyer and partner specializing in cannabis law with Dentons Bingham Greenebaum, says Maine's nascent cannabis industry is still in the startup phase. "You go from having no market to having a market overnight. ere's going to be a lot of volatility. All marijuana businesses are startups. And startups have attrition rates. About 80% of start- ups fail in the first five years," King says. "Maine's market is brand new. We don't know what the market is yet." "e industry 15 years ago was com- pletely illegal. And 10 years from now it's likely to be federally legal. at's a huge amount of change," King says. "ere are pockets of Maine that are oversaturated, but we are progressing well overall." King says she expects more regula- tion and oversight to come to the medical marijuana sector, and federal legalization of cannabis to occur at some point. Danger signs Experts are split on whether cannabis will be legalized on a federal level. But they agree legalization could spell major changes for Maine companies. "Federal legalization is coming. It would be smart for these companies to be thinking a few years down the line," King says. Santucci, meanwhile, says he does not expect federal legalization to happen — yet if it does, watch out. "Some think it will be five to 10 years from now. At the end, the business side of cannabis is already so far on its way that federal legalization is not going to happen," Santucci says. "If it does become legal, it would be a catastrophe for some Maine grow- ers," Santucci says. "If it becomes fed- erally legal, now you could get products from cheaper places. How would 3,000 caregivers keep up? ose 3,000 will shrink to less than 100 in Maine. Craft cannabis can still exist, but only the best can exist." Meanwhile, the retail adult-use sector will operate like coffee shops, Santucci says. e product will not likely come from Maine, but from states with lower operating costs or massive produc- tion houses. "Cannabis will be a commodity. It will be like coffee. You can brew cof- fee at home for 25 cents a cup or go to Starbucks and pay $6 a cup. Cannabis will be the same thing," Santucci says. "It will be just like the coffee mar- ket. You have Maine-based chains like Aroma Joe's. ey are not a coffee producer. ey sell us coffee. ere will be Maine-based cannabis brands, but the product will be made in the middle of the country," Santucci says. If cannabis is legal on a federal level, Maine growers wouldn't be able to compete against growers in New York, where they are building more than 1 mil- lion square feet of cannabis production, Santucci says. "If it becomes legal, the mass produc- ers will be everywhere. Most people look at price and customer experience," Santucci says. If federal legalization happened, some Maine retailers think they would still do well. AAA Pharmaceutical Alternatives says it sees federal legalization as an opportunity to create a national brand for its edible line of cannabis-infused cheesecake bites. "We've been wholesaling them to other locations in Maine. We could do that nationally," Burnham says. "Maine has an amazing history of producing craft industries, whether it's amazing local restaurants or beer or candy. If there's federal legalization, we will see mass suppliers. But Maine will have value-added products and will be able to survive. ere's Budweiser and one-kettle production breweries. ere's room for both. e same opportunities exist in cannabis," King says. "e winners and losers won't be dictated by size or location, but how well they attract and speak to custom- ers and develop a brand," King says. "In Portland, on Commercial or Congress Street, you have bar after bar after res- taurant after restaurant. ey all manage to survive. ey have to ask themselves 'What is our market and how do we drive customers?'" "Some people get worried that all this cannabis will come into Maine. But the market supports both Budweiser and Oxbow Brewing. We're not trying to be Michelob Light," says Origins' Vickers. "Support local, be local. at's my deal." Je ssic a Hal l, Mainebiz staff w r ite r, can be reached at jhall @ mainebiz.biz P H O T O / F R E D F I E L D Nate Bowers, assistant manager, mixes nutrients for 80 cannabis plants at AAA Pharmaceutical Alternatives in Manchester. Cannabis will be a commodity. It will be like coffee. You can brew coffee at home for 25 cents a cup or go to Starbucks and pay $6 a cup. Cannabis will be the same thing. — Jacques Santucci Opus Consulting

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