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Cannabis Special Coverage

Cannabis in Flux

Aaron Vega

Aaron Vega says cannabis has been a definite economic driver in Holyoke’s downtown and canal district.

 

According to the Cannabis Control Commission (CCC), legal marijuana is now an annual $3 billion business in Massachusetts.

The communities that have embraced it from the beginning, like Holyoke, can attest to cannabis as an economic driver in terms of commercial real estate, jobs, and other opportunities. The city now has four dispensaries, three grow facilities, and a testing lab up and running, with dozens of other applications at various stages of the permitting process — a process, city Planning & Economic Development Director Aaron Vega said, that was always intended to be easy to navigate.

“This community voted in favor. The mayor was in favor. As a state representative, I was in favor. And we didn’t want to make it more difficult. It was challenging enough with the regulations coming down from the state. We saw this as an industry that could take over some vacant and underutilized buildings, and that’s what informed how we went forward.”

That has indeed occurred. “We’re very excited about the investment that has happened — tens of millions invested in these downtown buildings because of cannabis, and 500 jobs that didn’t exist three years ago,” Vega said, noting that the cannabis enterprises themselves aren’t an endgame, but a way to spur even more investment.

“What do you do with 500 people? You make sure they’re going to your concerts, going to your restaurants and events, utilizing your local food trucks. And then there’s the ancillary businesses to the cannabis industry; how do we lure them to the city and make it even more beneficial for companies to do business in Holyoke?”

Other cities and towns have, to varying degrees, told similar stories. But the host-community agreements they’ve put forward have not always been well-received, and that was one of several issues addressed last month by a multi-faceted cannabis bill passed overwhelmingly by the state Senate and House of Representatives and signed into law by Gov. Charlie Baker.

“We saw this as an industry that could take over some vacant and underutilized buildings, and that’s what informed how we went forward.”

Among its main elements, the law clarifies the host-community agreement (HCA) process by authorizing the CCC to prioritize social-equity program businesses and economic-empowerment priority applicants for expedited review.

It also clarifies the scope of HCAs and adds new criteria, mandating that no host-community agreement can include a community impact fee that is beyond the business’s eighth year of operation, the community-impact fee must be reasonably related to the actual costs required to operate a cannabis business in a community, the CCC must review and approve each HCA as part of the license application and renewal process, and all host communities must establish procedures and policies to encourage full participation in the regulated marijuana industry by people from communities that have been disproportionately harmed by marijuana prohibition and enforcement.

“Communities of color across our country have historically been criminalized, prosecuted, and left out of the conversation in regards to cannabis legalization,” state Sen. Adam Gomez said. “When cannabis was legalized in Massachusetts, those same communities continued to be barred from the conversation table and left behind, with historic barriers preventing them from growing small businesses in meaningful ways. The legislation passed by the legislature will remove those barriers.”

The law also expedites the expungement process, Gomez noted. For individuals seeking to expunge a record for previous offenses that are now decriminalized, the law requires the court to order the expungement of the record within 30 days of the request and expunge records for possession or distribution of marijuana based on the now-legal amount.

“It is incomprehensible that anyone who was charged with a marijuana-related offense still has that on their record in our state, especially when you can drive down the street to a dispensary to buy the same product that that person was arrested for,” Gomez said. “I was proud to support this legislation and can’t wait to see cannabis businesses run by BIPOC owners flourish as a result.”

 

Growing Pains

The law makes other major changes as well, including a clarification of the local social-consumption approval process.

The advent of what’s known as cannabis cafés will give renters, public housing tenants, and tourists a legal place to use a legal substance. Under this legislation, a city or town may allow for social consumption sites through the passage of a bylaw or ordinance.

The legislation also creates a trust fund to make grants and loans to social-equity program participants and economic-empowerment priority applicants, which will give entrepreneurs from communities that have been disproportionately harmed by marijuana prohibition and enforcement better access to grants and loans to get their businesses off the ground.

In addition, 15% of the revenue collected from the sale of marijuana and marijuana products must be transferred to the Cannabis Social Equity Trust Fund, which will be administered by the Executive Office of Housing and Economic Development in consultation with a newly created Cannabis Social Equity Advisory Board.

“It is incomprehensible that anyone who was charged with a marijuana-related offense still has that on their record in our state, especially when you can drive down the street to a dispensary to buy the same product that that person was arrested for.”

“This legislation will create a more equitable cannabis industry in the Commonwealth,” said state Sen. Jo Comerford, noting that lawmakers “approached this issue with expertise and compassion, and the resulting bill will bring more diversity and equity to this industry.”

House Speaker Ronald Mariano added that “the passage of this legislation will help to ensure that those who have been historically impacted by marijuana prohibition can find new opportunity in the emerging industry. This legislation will help to support folks who have faced generations of inequality secure the needed capital to launch a cannabis business.”

The loan fund highlights one of the challenges of starting a business that’s technically illegal under federal law. Although there have been rumblings that the U.S. Congress could move to decriminalize cannabis and open up traditional financing to such businesses, nothing has been done so far.

“It’s still a hard-money business,” said Tim Sheehan, chief Development officer for the city of Springfield, and that affects both entrepreneurs and property owners. “That’s challenging from a real-estate standpoint. If that were to change, it would provide a more stabilized financial underpinning for the industry itself, and obviously, that would translate into folks that have space feeling far more comfortable in terms of the security they have relative to leasing and everything else. It would be accepted in the mainstream financial market.”

While Springfield didn’t embrace cannabis in the unfettered way Holyoke did — the city has put forward two rounds of retail applications and one for a grow facility, but that project, by Page Cultivate LLC in East Springfield, was derailed by the City Council in May over a site-plan change and other concerns — many of its leaders recognize the economic value of the burgeoning industry.

“Once it was legalized, there was clearly a focus on it becoming an economic benefit for the city,” Sheehan said. “Much like when gaming was legalized, we looked to see what the economic potential of the cannabis industry would be relative to both city finances and economic impact in terms of the marketplace.

“Much like when gaming was legalized, we looked to see what the economic potential of the cannabis industry would be relative to both city finances and economic impact in terms of the marketplace.”

“Obviously, the industry has had an impact on storefront and warehouse space, and I would quantify that as a positive impact,” he went on, adding that it remains to be seen what kind of impact the cannabis trade will have on the surrounding residential real-estate market.

“Caution is the watchword. As an industry, it remains to be seen what the saturation point is, and I really think that needs to be factored in through the process with regard to how many of these establishments you’re going to allow, whether it be a grow facility or how many retail establishments you’re going to allow. There is a limited market.”

 

In the Weeds

The cannabis industry’s potential is still unknown, though the early results in terms of new businesses, tax revenues to communities, and jobs have been positive.

But Sheehan is right that no one really knows what the saturation point is, if there is one. And the Legislature’s sprawling cannabis bill last month was an admission that plenty about the permitting process — especially for traditionally disenfranchised communities — needs to be addressed.

As Senate President Karen Spilka put it, “I am thrilled we were able to reach a deal on this bill, which will take meaningful steps toward ensuring communities who have historically been harmed by marijuana criminalization can access resources to enter this industry.”

 

Joseph Bednar can be reached at [email protected]

Cannabis

The State of the Industry

Michael Kusek

Michael Kusek says the cannabis industry is in what he calls “a first bout of growing pains.”

“Our first bout of growing pains.”

That’s the phrase Michael Kusek summoned after being asked to describe the state of the cannabis industry in the Bay State more than five and a half years after its start.

“We’re still very much in the early stages of this industry,” said Kusek, who launched the quarterly publication A Different Leaf, with the subtitle ‘A Journal of Cannabis Culture’ to essentially chronicle this business and tell the many stories that define it. “It took over a year to sell the first billion-dollars-worth of cannabis, and then it took eight months to sell the second billion. Those billions are going to come faster; the market isn’t shrinking, it’s just being spread out over more locations.”

Elaborating, he said the numbers of dispensaries and other kinds of businesses is growing rapidly and profoundly, and soon — how soon remains to be seen — there will come an answer to the question ‘how many of these is too many?’

“Competition has come to the market — quickly,” he explained. “In some places, dispensaries that were the only game in town — those that had first-mover advantage — are no longer the only game in town. That has come quickly as the Cannabis Control Commission has become faster and more efficient at licensing businesses.”

Meanwhile, there will soon be more competition from other states, including New York and New Jersey, which will likely have their first dispensaries by the end of this year, developments that will certainly impact regions like the Berkshires. And there will be companies based in other parts of the country that will want to enter this state and likely partner with existing ventures to do so, he said, adding that all these factors go into that phrase ‘growing pains.’

Overall, the state’s cannabis business continues to grow, evolve, and influence the regional economy in many different ways, said Kusek, listing everything from the profound impact on commercial real estate, with dozens of formerly vacant or underutilized properties finding new life as homes to different kinds of cannabis businesses, to the introduction of new kinds of ventures, such as home delivery (see related story, page 20) and social-consumption sites, to the infusion of tax revenue from these various ventures.

And the stories in the latest edition of the publication — the Spring 2022 ‘Cannabis and Culture’ issue — speak to all this. They punctuate how the industry is evolving and influencing the region, and how there are many subplots to the larger story. Indeed, there’s a piece about how the cannabis industry can help cities and towns like Holyoke revitalize their economy. There’s another piece, in the ‘how-to section’ where experts talk about communicating with children about cannabis use. And then, there’s a story about entrepreneurs Phillipe and Ashlan Cousteau about their new line of “ocean-infused” cannabis products.

The past several issues and the one coming next provide more insight: winter 2021 was the ‘medical issue,’ while fall 2021 was the ‘annual’ (the third) ‘Edibles Issue.’ The summer issue, meanwhile will be the first devoted to ‘cannabis travel and tourism,’ said Kusek, noting that he’s always wanted to do one of these, but couldn’t until COVID subsided sufficiently.

“This is the first summer we thought we could do travel and tourism,” he said, adding that the issue will include pieces on traveling with cannabis — what’s legal and what isn’t, according to the Transportation Safety Administration; cannabis spas; and a broad piece on just what is cannabis tourism.

“There’s two ways of looking at it,” he explained. “People are going to destinations where there is cannabis, and that’s why they’re going there, places like Jamaica, where they may be able to visit a cannabis farm. Or, if people are traveling in California, they may want to visit dispensaries — like a brewery tour; cannabis becomes the destination.”

While cannabis is certainly changing the local and national landscape — literally and also figuratively — the overarching questions are: ‘what’s next?’ and ‘how big can this industry become?’

In a candid interview, Kusek, whose magazine is now national in scope but still pays close attention to what’s happening in this region and the Commonwealth as a whole, provided some perspective on the state of this emerging sector and what we can expect in the months and years to come.

 

Where There’s Smoke …

Kusek said there has been considerable change in the landscape since the cannabis industry was born in 2016, and also since BusinessWest last spoke with him, just as he was launching A Different Leaf in the summer of 2019.

Perhaps the biggest change, and this has led to more competition, has been quicker action on the part of the CCC when it comes to issuing licenses.

“Early on, the commission was taking their first tentative steps toward licensing, and licensed very slowly, from 2018 on,” he explained. “They were not licensing dozens a week; it was in the single digits. And that created some tension within the pool of people waiting for licenses, and there were many kinds of businesses within that pool of applicants — locally grown companies, businesses coming into Massachusetts from other states — MSOs (multi-state operators), and a pool of applicants under the social-equity provisions of the law.
“The state was not speedy in granting licenses, and you had a fair number of businesses who burned through their capital waiting for licenses. It’s not like opening a restaurant, where you find a space, and you rent it, and you go to the town and you get your food permits and then you acquire a liquor license; it could take a while, but it’s not that long a process,” he went on. “With cannabis, early on, you had people who had to rent a storefront, because you needed a license to get the host-community agreement with your town. There are people I talked with who had their host-community agreements and had rented a building, and they never opened their doors til three years later.”

He said there are more than a few examples of entrepreneurs who burned through their money, with an emphasis on their money, because one cannot get bank financing for such businesses, because cannabis is still illegal federally. But the situation is improving, he noted, and this is leading to more ventures opening their doors, thus changing the competitive landscape, at least in some communities.

Indeed, there are several cities and towns where cannabis has a huge presence and large impact on the local economy — Holyoke, Northampton, and Easthampton are on that list — and others where it has little if any, such as West Springfield, where a moratorium on such businesses still exists. Many lie somewhere in the middle, he said, adding that their status depends largely on how ‘friendly’ these communities are to the industry.

The varying degrees of friendliness leave entrepreneurs with some choices, said Kusek, adding that they may choose to wage a more difficult campaign to locate in a community where there are few such businesses, or choose to join the growing number of players in communities like Northampton.

“Do you try your luck with the city of Springfield and burn through all of your money on rent, or do you go to Northampton, where you can get a host-community agreement and hopefully get through the state process much quicker, and at least get your doors open?” Kusek asked rhetorically. “You may not make a dollar, but you might make 50 cents.”

Another interesting dynamic was the state’s willingness to grant licenses to dispensaries, but not to the cultivators that would provide product to those facilities, said Kusek, adding that over the past few years, it has essentially caught up, meaning that there is now both more competition and more product.

“In the fall and winter of 2021, I had more than a half-dozen phone calls from people asking me if I knew where they could buy flower — if I knew anyone who had cannabis flower to sell wholesale,” he explained. “I don’t grow cannabis, I don’t sell cannabis, I write about cannabis. But the marketplace was so tight, and people were having such a hard time finding product, they were calling people like me looking for product. That has stopped happening.”

And that is just one of the many developments contributing to the growth and evolution of the industry, adding that as the sector emerges here, takes root in other states, and becomes more national in scope and reach, there will be many fronts to watch.

These include the ongoing debate about whether to make cannabis legal on a federal basis, what Kusek calls “the next big shoe to drop,” because of the huge implications of such a development — on everything from inter-state commerce to use of the banking system and all those ramifications — should it come to pass and how it might come to pass.

“There are lots of competing and complementary interests helping to develop legislation, and there are advocates for smaller businesses who don’t want this legislation to be dominated by MSOs or Big Tobacco, or InBev, or whoever else wants to get into the cannabis industry when it becomes federally legal,” he explained, adding that it will be a very complicated process to take the regulations put in place by the three dozen or so states that have legalized medical or adult-use cannabis, and overlay that with federal policy. “They don’t want the federal regulations to squash small business, and they don’t want federal regulations to squash social-equity provisions at the state level.”

Overall, he said this White House has not made legalizing cannabis a priority, and he does not expect that to change anytime soon, although he certainly leaves the door open to that eventuality.

 

Joint Ventures

In the meantime, the local landscape continues to change, with new businesses, new business types, such as delivery and social-consumption sites (which Kusek predicts will be the next ‘big thing’), brands developing their identities, businesses identifying customers, and much more.

Kusek said these are all contributing to growing pains, which, overall, are a good thing to have. They convey that a sector is expanding and evolving, so much so that the growth and evolution are creating issues, and, in his case, things to write about it.

There will be no shortage of such things for the foreseeable future, which is good for Kusek, and very good for an industry that is, in most all ways, very much in its infancy.

Cannabis Special Coverage

Delivering on Business Promise

partners in Budzee.

From left, Kevin Perrier, Volkan Polatol, and Erza Parzybok, partners in Budzee.

Volkan Polatol didn’t actually speak the words, but he strongly implied them: ‘If this was easy, then everyone would do it. Or at least try.’

The ‘it,’ in this case, is delivery of cannabis products — Amazon-style. Polatol, teaming with Kevin Perrier and Ezra Parzybok in a venture called Budzee, has created such a service, believed to be one of the very few in this region, and the country, for that matter.

As the partners talked about their business, they addressed that logical question about why they are the first and why there are not more ventures addressing what appears to be a logical need within the marketplace.

And the simple answer is that this isn’t as easy as it looks. And it doesn’t even look easy.

Indeed, there are complex licensing issues to overcome, software programs to develop, logistics, myriad expenses — from buying dedicated, unmarked vehicles to outfitting them with special equipment, to staffing each vehicle with two people (one of many requirements to be followed). And now, gas costs more than $5 a gallon.

“All of this is incredibly expensive, and it’s very difficult; we had to create the model,” said Polatol, who summed it all up by saying that a roadmap had to be in place for such a unique venture.

Parzybok agreed, and elaborated — on the many challenges facing this venture and all businesses in the cannabis sector.

“There’s a strain put on these businesses when the state invents all these rules that make it difficult to run a smooth, profitable business,” he explained. “The rules for cannabis are more strict than for pharmacies that sell opioids; they’re more strict than those for the delivery trucks that deliver alcohol. All that costs money.”

The partners who created Budzee, all veterans of this industry in one capacity or another, have chosen to take on all these challenges — they opened their doors this past spring. And that’s because, despite all these hurdles and expenses, they see real need for what they’re doing. They also see a path to profitability — not right away, but certainly some day, and perhaps soon as word of their venture grows and more people decide that it’s easier to have cannabis products delivered to their door than it is to travel to an area dispensary.

“There are people who can’t drive to a dispensary,” said Polatol. “Meanwhile, even though cannabis is legal in this state, there is still a stigma out there; some people don’t want to be seen in dispensaries. There’s still a great many people who want to be home, and they like the convenience of things being delivered to them.”

“There’s a strain put on these businesses when the state invents all these rules that make it difficult to run a smooth, profitable business. The rules for cannabis are more strict than for pharmacies that sell opioids; they’re more strict than those for the delivery trucks that deliver alcohol. All that costs money.”

And that brings the partners, who have invested more than $1.2 million to move Budzee off the drawing board, to the major challenge that remains for them — educating the public about this service and the convenience it brings.

“There’s considerable work to do to educate the public about this,” said Polatol, adding these efforts are ongoing. “Once we get established, people will understand; there are so many non-cannabis models out there — from Domino’s Pizza to Amazon. Once they understand it, it clicks. To get it out there, though, will require marketing, marketing, and more marketing.”

Parzybok agreed, and said that in time, consumers will come to understand, appreciate, and embrace the convenience just as they have in many other industries where home delivery has become an important part of the business model.

“It’s a new industry, so you assume that most licensed categories are going to be profitable,” he said. “You can look at the numbers for retail establishments or see the lines coming out the door when retail was opening, so you just assume that people will also embrace delivery. But when Amazon first came out, people were like ‘why should I buy something on the Internet when I can just go get it at the grocery store?’ But now they realize that they never have to bring it in from their car again.”

ideally situated off I-91

Budzee’s location in Easthampton is ideally situated off I-91

Getting the word out, and creating a comfort level with home delivery of cannabis products is essential, because with this model — where Budzee is charging the same price for products as one would pay if they went to a dispensary (there is a $100 minimum) — relies on volume. And creating it will be the primary assignment moving forward.

“It’s all about scaling up,” said Polatol, adding the goal is to eventually serve the entire state and build a large portfolio of new and repeat clients.

For this issue and its focus on the region’s emerging cannabis industry, BusinessWest talked with the partners at Budzee about the venture, what it took to get it off the ground, and how they anticipate that it will continue to gain altitude in the months and years to come.

 

Creating a Buzz

As they offered BusinessWest a quick tour of their facilities — dominated by signs that read ‘authorized personnel only’ or ‘Do Not Enter — Limited Access Area’ — on just about every door — the partners stopped in the large vault area where the various cannabis products are stored and then gathered for delivery.

There are literally hundreds of different products on the shelves — a selection larger than what is to be found at most dispensaries, said Polatol — with names ranging from Rootbeer Float to Blue Sunshine; Purple Pineapple Express to Sundae Driver.

Putting such a portfolio of products together has actually been one of the easier aspects of this enterprise, they noted, adding quickly that just about everything else — from the software to the business model; from the licensing to the logistics — is difficult and, in many ways, pioneering.

Turning back the clock roughly two years, Polatol said the three partners came together behind the idea that the region needed a service that would ‘bring cannabis to your house like a pizza,” as he put it, and conviction that this team had the expertise, determination, and patience (a key ingredient to be sure) to make this happen.

There were some courier-like businesses working on a DoorDash model, said Polatol, but the concept they had, for a warehouse, Amazon-like model, was totally unique for this region, and the country, as far as they knew.

The vault at Budzee

The vault at Budzee holds a wide variety of products for delivery to customers.

The partners already knew each other well. Polatol and Perrier are the owners of the dispensaries Dreamer Cannabis in Southampton, and Honey in Northampton, and Parzybok served as a licensing consultant on those ventures. United in their vision for this new kind of business, what they put together a checklist of everything that was needed, and then a roadmap for taking the concept from the drawing board to the marketplace.

The first item on the list was a license, which was somewhat problematic, because the state was, and still is, awarding cannabis-delivery licenses exclusively to those who qualify for the state’s social equity program — meaning they were previously harmed by the nation’s war on drugs.

Enter Parzybok, who was arrested in 2015 after federal agents raided his home in Northampton and eventually seized dozens of marijuana plants; he received probation for the offenses.

The license-application process was lengthy and complex, mostly because of the new ground being broken, but also because the Cannabis Control Commission has historically been methodical when issuing licenses, said Perrier, adding that this bridge would eventually be crossed.

The partners also needed a location, and realized that they actually had one in property that Perrier owned in Easthampton that was ideally situated less than a minute from an exit onto I-91, positioning the company to deliver to the four counties of Western Mass. and beyond.

They also needed software for taking orders, vehicles, specialized equipment, drivers (a challenge when all companies are looking for help), and a system for safely getting products into those vehicles and then into the hands of customers.

All those hurdles were cleared early this year, and the company commenced deliveries in early April.

Most of these have been in and around Springfield, but there have been some farther east; the territory attached to the license is essentially everything west of Worcester. And the two-person teams (one drives, the other brings the items to the door) are delivering the full spectrum of products, from flowers to edibles to accessories.

Deliveries come on three levels: ‘express’ (within two hours, but usually less than that); ‘same day,’ where the customer picks a time slot, and ‘scheduled,’ where the customer picks the day and time.

Thus far, business has been good, but the venture is still very much in the ramping-up phase as awareness of the service builds, the public becomes more comfortable with the notion of having cannabis delivered to their doorstep, and it understands (at least with this company) that delivery is not more expensive than going to the dispensary.

And there are obstacles to building this awareness, they said, adding that state and federal laws limit where and how such a venture can advertise its products and services. For example, cannabis companies can only advertise on vehicles that can prove that 85% of their audience is 21 or older, said Perrier. Meanwhile, because cannabis is still illegal federally, such platforms as Google, Instagram, and Facebook “won’t take our money,” he noted, adding that television stations will not take it, either. They can’t even advertise on the vehicles delivering the products — those must be unmarked for, presumably, security reasons; this is a cash-only business.

“You’re really handicapped in how you can advertise,” said Polatol, adding that the company is using some billboards and a digital campaign to draw people to the Budzee website. But that’s just half the battle. Once there, consumers need to become comfortable with the products and procedures, and place orders.

Despite these challenges, the partners believe they have the right concept at the right time, and as awareness and comfortability grow, they will achieve the volume they need to be profitable.

“Once Budzee becomes known as a household delivery option for cannabis, things will snowball and we’ll get bigger numbers,” said Polatol. “And we’re seeing that right now; the numbers are going up every week, and we’re getting a lot of regulars.

“There are some people who can’t leave their house for health reasons, and they’re ordering from us three times a week,” he went on. “They love it, and it’s rewarding for us; it’s a model that’s working.”

At present, the company is making maybe 20 to 30 deliveries a day on average, he said, with the goal being to take that number past 100. Other goals are to go statewide (more licenses will be needed for that) and then perhaps to other states, he told BusinessWest.

 

Budding Proposition

None of that will be easy, of course. But as these partners have shown, they are willing to assume challenges and clear some high hurdles to get where they want to be.

And right now, they are where they want to be — the first to be out the door (and to your door) with delivery of cannabis products.

They know that it will take some time to scale up, as Polatol noted, and reach the volume level they need to be successful, but they believe they have a model that works and a foundation to build on.

 

 

George O’Brien can be reached at [email protected]

Cannabis Daily News Events Luxury Living News Sports & Leisure The Cannabis Industry

NORTHAMPTON — HONEY, a recreational cannabis dispensary, located in the former home of Sierra Grille, will stage its grand opening on July 9 at 1 p.m.

Visitors can enjoy all day music, fresh popped kettle corn, and performances by the local hula hoopers, wing dancers, stilt walkers, and aerialists. There will be a fire performance at 8:30 p.m.

HONEY is owned and operated by Volkan Polatol and Kevin Perrier. In opening HONEY Northampton, Polatol and Perrier have teamed up with HONEY Brands, originally founded in California, which produces full spectrum, distilled cannabis oil in vape cartridges.

“We are thrilled to partner with the HONEY brand,” Perrier said. “It’s telltale black-and-gold packaging has become synonymous with the best cannabis hash oil on the market today. And now, consumers on the East Coast can try it for themselves. We’re also proud to be able to make the HONEY hash oils from our own facility at Wemelco Industries in Easthampton.”

In addition to HONEY vapes, the dispensary also carries the highest-testing flower and a huge selection of brands from across the state. The location’s innovative LED tunnel, color-changing displays, and chill playlist all create a relaxed, club vibe, and budtenders are on hand to give expert advice on all products.

Cannabis

Extracting a Workforce

Susanne Swanker

Susanne Swanker says cannabis programs at AIC are being constantly reviewed and updated to remain current and relevant

 

The cannabis industry — and workforce — has come a long way in just a few years, Jeff Hayden says.

“What I think is really crucial, and what we’re trying to emphasize to job seekers, is that this is a business. This is not like going to somebody’s basement and growing a couple of plants. We’re talking about a multi-million-dollar investment for some of these companies,” said Hayden, vice president of Business and Community Services at Holyoke Community College (HCC).

In that city alone, for instance, entire mill buildings have been renovated and brought back to life, bringing jobs to the community and tax dollars to city coffers, he noted.

“This is a business where they’re generating private investment, creating new jobs, and they’re also generating tax revenue. It’s been a win for Holyoke in terms of the amount of growth that’s been stimulated.”

To keep the momentum going, these new companies need employees, which is why HCC launched its Cannabis Education Center in 2020, a series of non-credit courses, in conjunction with the Cannabis Community Care and Research Network, that provide skilled workforce training to prepare participants for a career in the cannabis industry. By this spring, 120 people will have completed the core program, and many will have begun or completed another career-specific track (more on that later).

The conversation about a cannabis training program at HCC began when legal adult-use cannabis was still being debated in the Bay State. If that came to pass, Hayden and others expected, significant workforce needs would follow. And that has proven to be true.

“This is not like going to somebody’s basement and growing a couple of plants. We’re talking about a multi-million-dollar investment for some of these companies.”

Similar discussions were happening at American International College (AIC) when adult-use cannabis was legalized, which is why it launched, also in 2020, a graduate-level program in cannabis science and commerce, the first of its kind in Western Mass.

The 30-credit program is designed for individuals interested in a career in the cannabis industry and provides students with an understanding of the science, business, and legal issues associated with the cannabis industry. The program offers education in the areas of basic science, including chemistry, horticulture, cultivation, uses, and delivery systems; business management, marketing, and operations; and federal and state laws and policies.

The first cohort of the program graduated in August, said Susanne Swanker, dean of the School of Business, Arts and Sciences at AIC, and they are now being surveyed to get a sense of where they are working in the cannabis industry.

“We’ll use that information to help us make changes as necessary to the curriculum,” she told BusinessWest. “We’re only in our second year now, but over the next few months, we’ll be reviewing the program for fresh content, updating materials, and ensuring currency and relevancy in the field, making sure we’re covering the topics and content needed.”

Jeff Hayden

Jeff Hayden says that, to continue growing, the cannabis industry in the region will need a solid pipeline of qualified workers.

Last fall, AIC introduced another cannabis-education track, an undergraduate certificate program called Micro Emerging Markets: Cannabis, which offers three business courses in rotation: “Cannabis Entrepreneurship,” “Cannabis Business Operations,” and “Law and Ethics of Cannabis” — again, with the goal of channeling a pipeline of skilled workers into a fast-growing industry at a time when all sectors are struggling to secure and retain employees.

“We’re in the process of adding some additional courses,” Swanker said, including a broad overview of the history and culture of cannabis, which could be a popular general-education course. “I think we have a lot of interest from our students in that. So that’s an option.”

Five-plus years after legalization in Massachusetts, the popularity of the cannabis industry is no longer in doubt, more than justifying the decisions by HCC and AIC to add some educational fuel to the workforce.

 

Knowledge Blooms

Hayden explained the thinking behind the Cannabis Education Center and its multiple tracks.

“Essentially, because this was new to Massachusetts, we tried to design a process to inform people about some of the fundamentals in relation to the industry itself, so we developed a module called the core program, and we ask every participant to go through the core program,” he said.

“We’re finding many of the students enrolled in the program are already in the field working, and they’re coming to us with information and knowledge. The discussion in the classroom is that much more enriching because of the prior experience they’re bringing.”

That program requires two eight-hour Saturday sessions. Beyond that are four separate, occupation-specific tracks, typically three all-day Saturday sessions, to train for a specific area of the cannabis workforce: patient services associate (what’s commonly known as a ‘budtender’), who works directly with customers on both adult and medical use; cultivation assistant, who helps in all areas of the grow operation and requires knowledge of plant biology, soils, hydroponics, plant health, nutrition, harvesting, trimming, inventory tracking, and managing plant waste; extraction technician, who learns how to safely extract useful molecular components from cannabis and hemp; and culinary assistant, who is responsible for cooking, baking, and infusing cannabis- or hemp-based products with extracts.

“We’re in the process of creating a fifth track designed for entrepreneurs,” added Hayden, who noted that the center focuses on five key pillars: community education; social-equity training; occupational training; custom contract training to cannabis businesses, including communication, leadership, and mentorship skills; and developing different trainings that would be useful for the industry.

Scholarships are available, and each job-training program is followed immediately by an internship period with a licensed cannabis industry employer. The center has helped place graduates in full-time jobs as well, at companies like GTI, Trulieve, and Analytic Labs, and some companies have engaged directly with HCC about the kinds of skills they need.

AIC relies on industry professionals as well, as adjunct instructors to complement the college’s own business professors.

“From the onset, the program has been a collaboration of full-time faculty in business working with individuals in the field, people who own their own business as well as individuals that are working in larger operations in different parts of the country,” Swanker said. “They work together to inform the current content, what needs to be covered, and develop the curriculum.”

This professional input from outside AIC is key, she added. “They’re the ones who are experts in the cannabis field, and the ones constantly helping us update materials and discussions. Also, we’re finding many of the students enrolled in the program are already in the field working, and they’re coming to us with information and knowledge. The discussion in the classroom is that much more enriching because of the prior experience they’re bringing.”

AIC leaders were quick to recognize the coming workforce needs in cannabis when the college developed its programs, Swanker said, and also found the Cannabis Control Commission’s focus on diversity and social equity to be appealing as well. “That’s something that speaks to us as an institution and fits our mission. That was just another attractive part of it.”

 

High Hopes

Swanker said interest in AIC’s cannabis programs remains strong. “When we launched it, we had a tremendous number of inquiries, and that remains at a very high level, which is very encouraging.”

And why not? According to a February 2021 jobs report issued by Leafly, the world’s largest cannabis website, legal cannabis supported 321,000 full-time jobs in the U.S. at the time, and since then, tens of thousands more jobs have been created in states like Massachusetts, Florida, Michigan, Missouri, New Jersey, Ohio, Oklahoma, and Pennsylvania, making cannabis one of the most robust job-creation engines nationally. In Massachusetts, adult-use cannabis sales crossed the $2 billion threshold last year.

In short, both nationally and regionally, this fast-growing market offers plenty of employment and entrepreneurial opportunities for years to come, and for a wide range of skill sets, Hayden said.

“We’re really at the start of it. This is a new industry with new opportunities for people looking to get into a new career area or take the skills they already have and use it in this new sector. If you’re an accountant or bookkeeper or human-resources specialist, then there are job opportunties within this industry for you.”

Which is why programs to educate the next wave of the cannabis workforce are expected to multiply and expand.

“The industry has a need for high levels of sophistication in terms of business management, marketing, and the like. I think we’re going to continue to see it grow,” Hayden added. “At some point, there might be too many companies trying to start up, but not yet; right now, they’re all trying to take advantage of opportunities to get in and grow.”

 

Joseph Bednar can be reached at [email protected]

Cannabis

A Real “Game-changer”

By Mark Morris

Kevin Perrier, left, and Volkan Polatol

Kevin Perrier, left, and Volkan Polatol, partners at Dreamer Cannabis, are now able to offer credit card transactions at their dispensary. 

Since cannabis became legal in Massachusetts consumers have had to pay for their purchases with cash or a debit card. At a dispensary in Southampton, that has changed in a big way.

Beginning Feb. 14, customers at Dreamer Cannabis have been able to use their credit cards to purchase cannabis products.

“The term ‘game-changer’ gets thrown around a lot, but for this industry that’s pretty huge,” said Kevin Perrier, a partner with Dreamer Cannabis.

Because cannabis is legal in only 18 states, federal law prohibits credit card companies such as Visa, MasterCard, and American Express from accepting cannabis transactions in their systems.

Perrier and Volkan Polatol, his partner at Dreamer Cannabis, were exploring the idea of a cannabis delivery business when their research revealed an innovative way several cannabis companies in California were accepting payments by credit card.

“The method is similar to the way Venmo works,” Polatol said. Venmo is the peer-to-peer payment app that allows individuals to quickly exchange money with each other.

While credit card companies will not process cannabis transactions, accepting payments from third-party platforms is legal and compliant. When a Dreamer customer uses a credit card, the transaction is processed by a third-party platform which uses blockchain technology through the InterPlanetary File System (IPFS) to process the purchase. According to its website, IPFS is a peer-to-peer network that uses blockchain to make the web faster, safer, and more open. Blockchain is known for keeping data secure and for providing a permanent record of the data. For this reason, a growing number of banks support blockchain transactions.

“California has a more-developed cannabis market as they’ve been working with it much longer than any other state. Trends in cannabis seem to start there and migrate east.”

Credit card companies recognize blockchain transactions as legal and compliant, so they receive the data of the purchase through the blockchain and the consumer receives the charge on their bill.

While blockchain is often associated with Bitcoin and other cryptocurrencies, Perrier said the system use by Dreamer Cannabis is not involved in any cryptocurrency.

“Most people are not familiar with crypto, it’s complicated to use and it’s not stable,” he said. “The system we use runs on blockchain, but does not use crypto.”

Perrier said he and Polatol dug deep in their research and spoke with dispensaries in California who use this platform, eventually selecting a company from the Golden State.

“California has a more-developed cannabis market as they’ve been working with it much longer than any other state,” Perrier said. “Trends in cannabis seem to start there and migrate east.”

After looking into the viability of the payment system, the partners wanted to make sure it was legitimate.

“I was the first skeptic,” Polatol admits. “Obviously we didn’t want to introduce something that was going to turn people off.”      

Said Perrier, “I know the people who created this platform and their history. They are involved in many other reputable platforms and businesses.”

Another factor in offering credit card use involves keeping the consumer experience quick and simple.

“The ability to use a credit card makes purchasing cannabis more accessible to consumers,” Perrier said noting that using a debit card to buy cannabis is different than other debit card purchases.

For example, if a customer wants to use their debit card to make a purchase of $95.17, they take the equivalent of an ATM withdrawal through the dispensary’s system. Because it is an ATM withdrawal, they would round up to $100 to pay for their purchase and then receive the difference in cash. The customer must also pay a $3.50 transaction fee for using their debit card.

“We see a lot of head-scratching from first time customers,” Perrier said. “We’re hoping that using credit cards will make it a more straightforward and quick transaction.”    

To make the same $95.17 purchase with a credit card, the clerk will ask for the person’s mobile phone number and send them a link. The purchaser inputs their credit card information and receives acknowledgement of the purchase along with the dispensary. Added to the purchase is a 6% transaction fee to cover fees charged by the credit card company and the third-party platform. Customers can open an account with Dreamer to simplify the process. Using Apple Pay or Google Pay also requires fewer clicks to make a purchase.

“The transaction gets processed on a parallel channel and stays off the credit card networks,” Polatol said. “The purchase data is then forwarded to the credit card company from the third party, which keeps it all legal.”

Dreamer is the first cannabis dispensary in Massachusetts to accept payment by credit card. Perrier said there are a few similar efforts at other ventures across the state, but they are simply downloadable apps that tie into the person’s bank account and function like a debit card.

“All those apps really do is help the person avoid the $3.50 transaction fee,” Perrier said, adding that a debit account is only as viable as the funds that are available in it. “If you try to buy something on Wednesday and your paycheck doesn’t land in your account until Thursday, that money is not available to you until then.”

Offering the option of charging a purchase on a credit card brings huge potential for increasing business. Allowable limits of purchase still apply, of course. In Massachusetts, consumers may purchase up to one ounce of “flower,” which is the plant form of cannabis, or five grams of concentrate per day.

“We’re hoping it’s a win-win,” Perrier said. “Obviously it can boost our sales and we hope it makes purchasing cannabis easier for people.”

Ultimately, Perrier said, credit cards are part of evolving their business and staying ahead of the curve.

Meanwhile, he and Polatol have several projects on the horizon that promise to bring more innovation to the cannabis industry in Western Mass.

The first project involves the partners opening a dispensary at the former Sierra Grill restaurant in Northampton featuring products from the Honey Brand, a California-based company that makes cannabis oils that can be vaped or consumed as edibles.

Perrier and Polatol have also purchased a former Western Mass Electric Company building in Easthampton that they are converting into a canning facility for cannabis seltzer.

Finally, the two are close to unveiling a cannabis-delivery business that would allow customers to order cannabis from an app, pay for it online and have the purchase delivered to their door.

Perrier summed up their activity by joking, “If you don’t innovate, you die.”

Right now, the partners are educating the skeptics and naysayers who come into Dreamer and can’t believe credit card transactions are both safe and legal.

Perrier expects people to have questions, because it’s such a different concept for the cannabis business.

“As the first ones to offer credit cards, we have to educate the consumer,” Perrier said. “I think credit cards will be widely accepted in the coming years, but for now we just want to make it available for our customers as another way to pay for their purchases.”

In the long-term Perrier would like to see cannabis purchases become as routine as a trip to the liquor store.

“No one thinks twice about charging a liquor store purchase on a credit card,” he said adding that credit card acceptance makes it possible for cannabis purchases to eventually become more normalized and mainstream.

Cannabis Special Coverage

Joint Concerns

Julie Steiner

As a law professor, Julie Steiner saw the thorny issues raised by cannabis legalization in Massachusetts — and the way it conflicted with federal law — very early in the process and turned it into a passion of sorts, not only educating students at Western New England University School of Law, but bringing other educational resources to the region and becoming a go-to resource on the topic of cannabis law. Yet, it’s not just legal nuts and bolts she’s interested in, but the real people impacted by a drug-regulation history in the U.S. that’s problematic at best — and still evolving.

 

 

Julie Steiner has been interested in the connections — and, often, the contradictions — between the fields of law and cannabis for a long time.

And when momentum was building in Massachusetts to legalize adult-use cannabis, just a few years after medical marijuana was given the green light, she really started thinking about the implications.

“Lawyers raise their hand and swear to uphold the law of the United States,” said Steiner, professor of Law at Western New England University (WNE) School of Law. “But cannabis is federally illegal, even though it’s technically legal in Massachusetts. How are lawyers to navigate this whole murky system?”

Based on informal conversations with her colleagues, plenty of law professionals were fascinated by this topic — and unsure how the practice of law could deal with the emerging business of cannabis.

“Cannabis is federally illegal, even though it’s technically legal in Massachusetts. How are lawyers to navigate this whole murky system?”

“It was getting off the ground in Colorado and Washington recreationally, so we had those two states to look at,” Steiner told BusinessWest. “But there was a dearth of scholarship. It was such an interesting time, really. Back then, support for legalization wasn’t as strong as it is now. In law, there was concern about clients and lawyers being prosecuted under RICO statutes.

“I called it the Wild West,” she went on. “The state bar association in Colorado had taken the stance that you can advise on the law, but since it’s federally illegal, if you actually started advising clients through the process of licensure, you risked bar sanction. That ultimately went away because courts reversed the bar stance on that, but it was a risky time. It was really, really interesting.”

That’s one reason why she applauds her university and its administration for being forward-thinking in establishing curriculum around this rapidly evolving topic, specifically a course called Cannabis Law and Policy. She proposed the course in 2015 and, after a year of legwork, and study, started teaching it in 2016, just a couple months before voters made adult-use cannabis legal in Massachusetts — but long before businesses actually started to open.

“Our primary mission was, and still is, lawyer competency,” Steiner explained. “I try to touch upon every facet that I can of the industry, teaching aspiring lawyers but also the practicing bar about how to counsel clients.

“I call the most risky the ‘plant touchers’ — cultivators, manufacturers, and retailers. They’re the most highly regulated and most vulnerable to prosecution if they do anything wrong,” she went on. “That requires a lot of competence, legal advice, knowledge about regulatory regimes, and ability to keep abreast of the ever-changing landscape.”

Julie Steiner welcomes Cannabis Control Commissioner Steven Hoffman

Julie Steiner welcomes Cannabis Control Commissioner Steven Hoffman as a guest lecturer in one of her Cannabis Law and Policy classes.

And changing it is, she emphasized. “I find I can’t rely on anything I said last month without updating it.”

Beyond the plant touchers, plenty of other types of businesses have been involved in the world of cannabis, from lightbulb suppliers for growers to drivers who transport money; from property landlords to IT and security firms. And the list goes on.

Sensing that this new industry would need legal guidance, Steiner not only created the course, but was involved in bringing Cannabis Control Commission (CCC) regulatory public hearings to the law school starting in 2018. The following year, the city of Springfield retained her to serve as a consultant to develop a process to solicit and select marijuana shops.

And she’s become a sought-after resource on cannabis law, having been been interviewed by regional and national media; published scholarly articles in many legal journals; advised educational institutions on the topic of drug policy; and lectured on the topic in WNE’s Mini Law School and Road Show programs.

It’s a field, she notes, that has already crept into numerous law niches, from banking and finance to taxation; from real estate to employment law; from intellectual-property law to prosecution and defense, just to name a few. “Cannabis law touches on all of it. It’s a serious and evolving subject field in the law.”

 

Legal, Yet Illegal

The Cannabis Law and Policy course, WNE’s website explains, “focuses on how society has historically, and is currently, regulating cannabis,” also touching on legal, professional, and business ethics; enforcement policy; and much more.

Prohibition, Steiner noted, began at the state level early in the 20th century and eventually crept into the federal code. Over the past decade or so, individual states have again led the change to decriminalization, then legalization, but federal law has not followed suit … yet.

As a result, if it wanted to, the U.S. government technically could enforce the federal Controlled Substances Act, which pre-empts all the conflicting state laws, she explained.

“I call the most risky the ‘plant touchers’ — cultivators, manufacturers, and retailers. They’re the most highly regulated and most vulnerable to prosecution if they do anything wrong.”

“Now, they can’t force states to enforce federal laws. The real conflict happens when participants, pursuant to those state regimes, start touching the plant. Once you get there, you have a conflict with the Controlled Substances Act. You have cultivation, which is prohibited. That’s where the federal government could technically come in and enforce. But that’s not happening because the federal government is exercising enforcement restraint.”

Changing public opinion is a factor as well, she noted. “When I started teaching this, public support was hovering just above 50% in the Gallup poll. Support is now about 68%. There’s much stronger public opinion for legalization than there was back then.”

Along with the history of cannabis regulation and enforcement, Steiner discusses civil rights, mass incarceration (using Michelle Alexander’s popular tome The New Jim Crow), and social equity.

“We have a robust dialogue about this. It’s very eye-opening to students,” she said, noting that drug laws regarding cannabis possession in the U.S. have historically had a fourfold disproportionate impact on people of color and those of lower socioeconomic means.

“Then we start thinking about what it means to be a lawyer representing the cannabis business. We talk about what that business looks like,” she went on, noting that she previously used Colorado and Washington as templates, but now draws on Massachusetts, since the cannabis industry has taken such deep roots here.

She also talks about banking challenges and Section 280E of the federal tax code, which requires even illegal enterprises to pay taxes. These tend to be more onerous for cannabis businesses, which can deduct the cost of goods, but not payroll.

“They get hammered. So lawyers work to structure these plant-touching businesses to maximize the taxation system, often creating two separate companies.”

The Cannabis Control Commission

The Cannabis Control Commission has often used the WNE Law School as an outpost for holding public hearings and listening sessions, like this one, attended by (from left) then-commissioners Britte McBride, Shaleen Title, Chairman Steven Hoffman, and Kay Doyle.

Steiner will bring in guest speakers from different areas of the law, including CCC members, to provide real-world perspectives, and students are also required to write and present their own independent scholarly papers on cannabis-law topics.

Speaking of the CCC, the law school’s seminars with commissioners and other experts in various areas of the law proved to be a valuable resource for locals, including potential business owners, who wanted information on topics ranging from licensing to operational requirements to municipal controls, without having to go to Boston.

“We thought early on we had the ability to align with the Cannabis Control Commission to help educate the practicing bar across the state,” she noted. “Lawyers, consultants, and people who wanted to be stakeholders would show up, and we’d talk about regulations and what businesses looked like. When they amended the regulations, we educated people again. We were, pre-COVID, the physical presence in Western Mass. for the Cannabis Control Commission.”

 

Changing the Narrative

Cannabis law is a passion project for Steiner, who also teaches Environmental and Land Use Law, Torts, and Introduction to Law.

“I’ve been involved in the history of how it has gone from its infancy through decriminalization through medical legalization, watching the birth of the adult, recreational-use industry, and now we have a viable and developed phenomenon. We have to keep pace with this, and that’s a fun challenge, educating lawyers and would-be lawyers. It’s truly a mission of mine in life.”

She prides herself on teaching law students how to be not only competent, but ethical practitioners in the field, who can counsel clients who often have plenty of misimpressions about legalization and what that means, since state and federal laws are currently so far apart.

As for federal legalization, “I welcome it because it’s sensible policy,” Steiner said. “We simply shouldn’t have a robust, viable workforce and an industry that is a real economic player that is forced to confront all-cash situations, which is dangerous and poor policy for everyone involved.”

Her public talks have addressed colleges grappling with the issue of legal medical marijuana, employers wondering if they can drug test for something that’s now legal in Massachusetts, and other audiences, ranging from public-health professionals to drug task forces, and even legislators. “Early on, policy influencers needed to think through policy changes. We tried to be on the cutting edge, helping them think through that lens.”

Steiner is also passionate about social justice in the realm of drug policy. “Or, should I say, social injustice,” she quickly added. “We have become part of the sealing and expungement movement and have partnered to provide sealing and expungement clinics.”

But even that effort is problematic, she wrote in a scholarly article last summer.

“While expungement is a laudable and necessary remedy to mitigate individual cannabis criminal record-based harm,” she wrote, “expungement also yields an outcome paradox: to further justice by expunging criminal records, society is erasing evidence of historic enforcement injustice.”

Because of the need to balance relief for the convicted with the need to maintain an historical account of the cannabis enforcement era, she suggests expunging entities maintain a record — one that eliminates sensitive, personally identifying information, while maintaining other important information of historic and legal value.

And that expungement process needs to continue, she told BusinessWest.

“We’ve gotten involved in helping those with prior drug convictions clear their records. This helps mitigate the profound effect of the War on Drugs, which we now understand overly penalized people given the severity of what was going on. And that criminal conviction follows them for life, with all those collateral consequences,” she added, making it harder for convicted drug users to access a job or housing. “It’s hampering people in their ability to move forward in life. We’re part of that social-justice movement to mitigate the effects of the War on Drugs.”

Again, cannabis law — and how it impacts not only future lawyers, but users as well, past and present — is one of Steiner’s passions, and it’s a satisfying challenge to stay atop the latest developments.

“We have a body of law now. When I jumped in, there was hardly any case law,” she said. “Learning about it, compiling it, and providing it to students is something I continually do.”

Joseph Bednar can be reached at [email protected]

Cannabis Cover Story

Rolling Along

Matt Yee and Mark Cutting of Enlite in Northampton

Matt Yee and Mark Cutting of Enlite in Northampton

Massachusetts had already legalized medical marijuana when voters were faced with another question in late 2016: whether to legalize cannabis for recreational use. The vote wasn’t close, sailing through on talk of jobs, tax revenue, and, well, people wanting to light up legally. Reality doesn’t always live up to promise, but in this case, it has. Yes, the industry is still facing growing pains, particularly when it comes to creating a level playing field for entrepreneurs. But when it comes to this new industry’s impact on jobs, real-estate investment, municipal tax revenue, and more, these are truly high times.

 

David Narkewicz wasn’t just a supporter of cannabis coming to Northampton. He was the first customer.

That was three years ago, when NETA opened on Conz Street and became the state’s very first dispensary for legal, recreational cannabis. Today, with cannabis businesses proliferating in the city and across Massachusetts, the outgoing mayor believes his initial enthusiasm was justified.

“We saw the experience of other states, and a lot of the Massachusetts law, when they were trying to put together the regulatory framework, was based on looking at laws in other states,” Narkewicz said. “First and foremost, I supported legalization just as a public-policy meaure, but I also saw an opportunity for investment in the community.”

Elaborating, he said the city is known as a destination with a vibrant retail sector, arts and culture establishments, and plenty of restaurants and bars. “So my sense, and my hope, was that this would be a new investment in the community and a new source of jobs and revenue, and another reason to come to Northampton. I think we took a pretty forward-looking approach to this.”

Today, Northampton is home to eight retail dispensaries for adult-use cannabis, seven manufacturers, four cultivation facilities, and a testing lab. Those numbers grow seemingly by the month.

Meanwhile, three years of excise taxes on adult-use cannabis have brought in more than $4.3 million. “That helps us continue funding schools, police, fire, DPW, all the services we provide as a city.”

Mark Cutting and Matt Yee certainly saw potential, not only in the state’s legalization of cannabis, but Northampton’s embrace of it. Just last week, they opened the city’s eighth adult-use dispensary, Enlite, just off the Coolidge Bridge rotary — and they have a long-term vision for it based on the idea that this is a still-evolving industry.

“Our getting into cannabis was really just another attempt on our part to find jobs that people can get into at the entry level, or get a better job. It’s imperative that we find people who are unemployed, underemployed, those with limited education, limited work history, and get them into employment and on a career track.”

“We thought that, with our background in business and the Yee family’s background in restaurants and entertainment, there may be potential beyond even the retail space,” Cutting said. “There may be opportunities to have some type of dining or some type of entertainment along with cannabis partaking at some point in time — though that’s not legal here yet.”

Yee noted that the sheer number of cannabis businesses in Massachusetts — almost 190 and counting, not just in retail, but in cultivation, manufacturing, and wholesaling — is making it easier for all players to succeed, because of the cross-pollination. It’s why Enlite has adopted the model of many area dispensaries of partnering with boutique makers of cannabis products.

“Early on, it was difficult because [product] availability was so low, you had to be vertically integrated to supply yourself,” he noted. “But Western Mass. has been really kind to small-scale producers, and we’re really happy to showcase them here at this location.”

Cutting added that “a lot of the multi-state operators don’t necessarily like companies like that to sit on their shelves. But we’re basically an open market for some of these producers to share shelf space and advertise their product here locally.”

With each business open, total sales in Massachusetts increase — crossing the $2 billion mark, in fact, earlier this month, a number even proponents might not have expected so soon after voters approved legalizing recreational cannabis in November 2016, four years after giving a similar go-ahead to medical marijuana.

Jeff Hayden

Jeff Hayden says cannabis has created fertile ground for hundreds of new jobs in Holyoke — and an impressive diversity of them.

And those businesses mean jobs, said Jeffrey Hayden, vice president of Business and Community Services at Holyoke Community College (HCC).

“We’ve experienced high levels of unemployment during the pandemic; both Springfield and Holyoke unemployment have been ahead of the federal and state average. In both communities, we see a strong need to connect people to the workforce,” Hayden told BusinessWest.

That’s one reason HCC became a lead partner in the creation of the Cannabis Career Center in late 2019. If HCC exists to give people the skills they need to get into jobs, he reasoned, then the potential of cannabis couldn’t be ignored — especially in a city rivaled only, perhaps, by Northampton in its full-on embrace of this new industry.

“Our getting into cannabis was really just another attempt on our part to find jobs that people can get into at the entry level, or get a better job,” he explained. “It’s imperative that we find people who are unemployed, underemployed, those with limited education, limited work history, and get them into employment and on a career track.”

But cannabis is changing Holyoke in other ways, too, notably in its canal district, where long-neglected mill buildings are springing to life with cannabis cultivation, manufacturing, and sales.

David Narkewicz

David Narkewicz

“We put in place zoning regulations that were not onerous; we’re essentially allowing retail cannabis anywhere we allowed retail, and it was generally the same for manufacturing.”

“The private investment in Holyoke as a result of this industry coming to Massachusetts has been extremely significant,” Hayden said. “Cannabis companies are buying properties that have been long underutilized — and it’s not like acquiring a building and leaving it as is; they’re investing significant dollars to improve it and create new jobs in the city, literally hundreds of jobs already. And, obviously, the tax revenue generated for the city is significant. This is a growing industry in Massachusetts.”

That’s true — literally and figuratively. Five years after that critical vote and three years after businesses started opening, cannabis has proven to be a hardy economic driver, one that not only survived the pandemic, but thrived throughout it. And no one really knows what the ceiling may be.

 

Ironing Out the Issues

Not everything has been smooth in what is becoming a hyper-competitive market. Enlite is the state’s first Minority Business Enterprise (MBE) applicant to open its doors, and Yee concedes that the Cannabis Control Commission’s stated commitment to MBE and social-equity opportunities — with the goal of helping communities and demographics negatively impacted by the war on drugs to access entrepreneurship opportunities in cannabis — has met with inconsistent results.

“It’s a really big topic in the industry. We’ve had a lot of commissioners change out in the last year or so, and a lot of people in the program saw CCC failing them as far as getting those applicants to the finish line,” Yee explained. “It’s a combination of things: operators with not a lot of resources can be an issue. Obviously you’ve got your multi-state operators with a million dollars allocated to their lawyers and legal teams, so they’re able to have the resources to get them pushed through a little bit faster. Those are big issues.”

Holyoke’s mill district

Holyoke’s mill district has become a promising location for cannabis cultivation for companies like GTI.

But things are changing, he added, with new commissioners “really focusing on those applicants and assisting them, figuring out where the pain points are and getting them to the finish line and open. We’ve been seeing some traction on that.”

The process can be a tricky one (see related story on page 22).

“The biggest issue — because it’s not federally legal — is access to capital,” Cutting said. “It’s a journey getting through the CCC, and if you do make a mistake and don’t dot your I’s and cross your T’s, it gets rejected, and you have to start all over again, and you don’t necessarily go back to the same queue you were in — you may go to the bottom of the pile. And it can be a long, painful process to get back to the top of the pile. And God forbid you make a mistake again.”

It helped, he said, to deal with a city that didn’t limit the number of application approvals. “We sat down with the mayor, and it was the most seamless, easiest process you can ever imagine, versus other cities that either opted out, or there’s a lottery, or they really capped the number of cultivators or retailers they’re allowing.”

In Narkewicz’s eyes, Northampton’s voters approved cannabis — first medical, then recreational — at a much higher percentage than the state average, and the city’s leaders took their cue from that.

“We put in place zoning regulations that were not onerous; we’re essentially allowing retail cannabis anywhere we allowed retail, and it was generally the same for manufacturing,” the mayor said. “And I think we saw a pretty strong response — lots of people wanting to locate here in Northampton.”

He does hear questions from people wondering if the market is too saturated, and has a quick response. “Northampton has 17 liquor stores. I have yet to hear anyone complain that we have too many liquor stores. To me, this is a legal industry, and it’s the free market, which is why I opposed caps on liquor licenses for years, because they hold back economic development in a city like Northampton and only drive up the cost of those licenses and make it harder for entrepreneurs.

“There’s opportunity to get in on the ground floor and also opportunity to grow in these occupations. It’s not like we’ve got 100 people in Holyoke who are cultivators, or 50 people who have strong customer-service experience in retail dispensaries. No one has 10 years of experience in this area. So in Massachusetts, for the job seeker, it’s all about what they bring to the occupation.”

“In an industry like cannabis, which is trying to focus on equity and economic empowerment, particularly for populations that were disproportionately impacted by the criminalization of cannabis and the war on drugs,” he went on, “putting up barriers like that defeats the purpose and works against the goals of this new industry.”

Narkewicz also noted that each new business may be 20 or 25 new local jobs as well.

In Holyoke, cannabis means hundreds of new jobs in a short period of time. And the variety of jobs is appealing to us,” Hayden added, noting that someone with strong customer-service skills could become an effective patient advocate, while someone with an agricultural background could work in cultivation, and someone with a knack for science could work in extraction and infusion.

The appealing thing, he noted, is that companies are looking for workers with broad skills who just need, and want, to be trained in the intricacies of this field and their specific roles.

“There’s opportunity to get in on the ground floor and also opportunity to grow in these occupations,” Hayden said. “It’s not like we’ve got 100 people in Holyoke who are cultivators, or 50 people who have strong customer-service experience in retail dispensaries. No one has 10 years of experience in this area. So in Massachusetts, for the job seeker, it’s all about what they bring to the occupation.”

Kathleen Proper, chief Human Resources officer at Canna Provisions in Holyoke, said as much at a panel discussion that preceded a recent Cannabis Career Fair at HCC, titled “Cultivating an Industry.”

“Our biggest thing is providing outstanding customer service,” she noted. “So if you’ve got experience doing customer service, whether you’ve worked retail, worked in a restaurant, waited tables, tended bar, all of those skills work out really well. Even though cannabis retail is a different animal than other retail … we tend to do really well with people who have waited tables or tended bar.”

 

Word on the Street

Yee isn’t worried about the ninth dispensary that will open in Northampton, or the 10th or 11th. Like Narkewicz, he believes the legal cannabis industry is thriving, with the saturation point well in the distance.

“I always say our biggest competitor is the black market. Many consumers are still shopping on the black market because the pricing is far better,” he said, noting that an eighth-ounce of cannabis may cost $50 in a store and $30 on the street, with no tax.

“A lot of folks who are stuck in their ways, they know the brands they like on that market, they know the cultivators they want to work with … the black market is still very, very strong,” he went on. “As we see more interesting products hit the shelves here at a commercial dispensary and prices begin to drop — and we are seeing a little more of that — we’ll see folks moving over from the black market to the commercial market. So there’s still a massive untapped customer base out there.”

Cutting agreed that, as the legal cannabis industry matures and deepens, the sheer volume of product will lower prices, and that — as well as the aesthetic and educational experience that many cannabis shops tout — will draw more people in.

“Additionally, all the product on our shelves has been tested; you know what’s in the product. On the black market, you don’t have test results and don’t know what metals or pesticides or mold or yeast are in their product. They don’t have to test — they just roll and sell their product from whatever location they’re growing in.

“Here, it’s a safe, friendly environment,” Cutting went on. “You’re not looking over your shoulder buying something off the black market. And I think that market will eventually snuff itself out. Not entirely, but I think, over time, you’ll see it. The question some will ask is, ‘hey, do I want to be safe, or roll with this and take the risk of an untested product?’ I think most people will want to be on the safe side.”

As for public safety, Narkewicz said concerns from cannabis opponents — regarding surging crime and diversion problems — simply haven’t come to pass. And looking back, he’s proud to have been the first customer in the city’s newest growth industry.

“Obviously, in the early going, we had a little traffic crunch and parking crunch, but I don’t know many mayors worried about too many people wanting to visit their city,” he told BusinessWest. “It’s a good problem to have.”

 

Joseph Bednar can be reached at [email protected]

Cannabis

Aiming High

The executive team at 6 Brick’s

The executive team at 6 Brick’s includes, from left, Taylor Shubrick, Payton Shubrick, and their parents, Dawn and Fred Shubrick.

Payton Shubrick always wanted to effect change in the world.

She never thought it would be through a product that was, for most of her life, illegal.

Specifically, when she graduated from the College of the Holy Cross in 2015 with a degree in political science — and concentrations in Africana studies and peace and conflict studies — the goal was to enroll in law school, she explained.

“Our speaker for our class talked heavily about moving mountains — ‘how do you leave this college on a hill and move mountains the rest of your life?’” she recalled. “So my idea was, I was going to have this landmark case that would change the trajectory of my career and rewrite some type of law.”

But she found herself working full-time at MassMutual instead — and missing her college days filled with extracurricular activities. “It was work, work out, and go home. There was nothing in between.”

So, with the help of her father, Fred, she secured an internship with the Springfield City Council. Meetings became more interesting after Massachusetts voters approved the legalization of adult-use cannabis in late 2016, with out-of-state operators hanging around and officials trying to hash out what the rules would be for zoning and other aspects of legalization. And Shubrick was intrigued — so much that, when the councilor she was interning for lost a re-election bid, she kept attending meetings anyway.

“I was hearing so much conversation about how these businesses were going to make millions. Honestly speaking, they made it sound so easy.”

“I was hearing so much conversation about how these businesses were going to make millions,” she recalled. “Honestly speaking, they made it sound so easy.”

But as Shubrick thought about her own potential in this new industry, she had something else in mind besides dollar signs. She’d read Michelle Alexander’s book The New Jim Crow and gained an understanding of how the failed war on drugs had impacted urban communities like Springfield. And she saw the cannabis industry as a way to engage with that community, succeed in business there, and pay it forward.

“I went to a Springfield public high school, where, if somebody dropped a dime bag, they were going to in-house suspension or being arrested in the middle of the school day because you had police officers present in the building with you. So, when you start to peel back the layers and realize this is going to be a billion-dollar industry, how can you get people in your community to benefit from that?”

The answer is 6 Brick’s, an adult-use retail cannabis shop expected to open early in 2022 on Main Street in Springfield, in the Republican complex.

“We are what most would describe as a mom-and-pop shop, which I tend to agree with since both my parents are on the executive team,” she told BusinessWest.

The Shubrick family hopes to have 6 Brick’s open by early 2022.

The Shubrick family hopes to have 6 Brick’s open by early 2022.

She thought her biggest hurdle would be getting her father on board. “Saying I wanted to be a lawyer has a certain level of prestige around it. Saying I wanted to be a legal drug dealer and own a cannabis dispensary … not so much. How do you make that business case and get Dad to switch gears?”

But not only has Fred become her biggest supporter, he’s also chief procurement officer at 6 Brick’s — a name that echoes the family name, Shubrick. Payton is CEO, while her mother, Dawn, is executive secretary, and her sister, Taylor, is head of community responsibility and quality assurance. Two younger siblings — who aren’t currently old enough to work in cannabis — round out the ‘6’ in the company name.

Once she decided to wade into this burgeoning industry, Payton knew she wanted to do it in Springfield.

“There’s this idea that, to be a star, you have to leave the area and go to Boston or New York. I heard, ‘you have so much potential; go somewhere.’ That was frustrating because I’ve always seen the potential Springfield has, and this industry, in many ways, allows me to prove people wrong; I can stay here, and I can be successful in my own right, and I don’t have to move out of the city of Springfield to do that.”

“Saying I wanted to be a lawyer has a certain level of prestige around it. Saying I wanted to be a legal drug dealer and own a cannabis dispensary … not so much.”

Furthermore, she said, “I can participate in an industry that previously caused so many people’s lives to be disrupted and negatively impacted, and I can try my hand at something I had always been interested in, which is entrepreneurship.”

It hasn’t been easy, and the journey is far from over — and the cannabis landscape in Massachusetts is still a difficult one for minority entrepreneurs, despite the state’s establishment of a social-equity program (more on that later). In a wide-ranging interview, Shubrick talked about why that’s the case, and what can be done to improve the prospects of business owners who lack the resources of large, established companies and, ultimately, create a more level playing field.

 

No Easy Road

Shubrick and her family officially launched 6 Brick’s in 2019, and the road since has been a thornier one than she had imagined.

Back in 2017, “I thought if I did my homework and put together a really strong application, I would get the license. I didn’t expect an RFP, 27 groups applying, only four being selected. That’s when your heart starts to do many palpitations — what if we don’t get picked? What happens next? I didn’t have a plan B.”

Payton Shubrick and Marcus Williams, president of the Block

Payton Shubrick and Marcus Williams, president of the Block, which seeks opportunity for minority-owned cannabis businesses, share a few words at a recent mixer.

But she did fight through to become one of the four entities chosen in Springfield’s first round of permits.

“The running joke in the industry is they never ask when are you going to open, they say where are you in the process,” Shubrick said, noting that it’s a two-pronged process. At the city level, it involves a special permit and a host-community agreement, while the state’s Cannabis Control Commission (CCC) requires a provisional license, post-provisional-license inspections, and other steps, including a certificate of occupancy (back to the city for that), which is required by the state for the final license.

Shubrick described it all as a long sequence of queues, of getting on meeting agenda after meeting agenda. “It’s a very layered process with two entities that don’t talk to each other, and you need a series of documents from each. It’s a series of waiting rooms in some capacities.”

On top of that, 6 Brick’s has had to deal with supply-chain issues during the pandemic to get its space — now 90% built out — up and running. It even had to wait for doors that were stuck in shipping containers. “There’s not a lot in your control as you think about moving through this process. So patience is key.”

All along, a Springfield-based business was the only goal, she noted, as opposed to, say, Northampton, which never capped the number of cannabis permits.

“I didn’t look to start as a business model that was going to be rinse and repeat in any city,” she explained. “I looked at it as, ‘I can be the hometown hero because, when I hire people, I’m going to hire them from the community, and I’m going to hire those who were impacted by cannabis prohibition.’ And that doesn’t just mean who did jail time — it could be their daughter, their niece, their nephew, because, let’s be honest, when someone is removed from the home and incarcerated, that whole family is impacted.”

In short, “for me, this was aligned to social-justice elements of my hometown and less aligned to me becoming a millionaire overnight.”

She found tht the road to being profitable at all begins with a lot of money up front — between $1 million and $2.5 million, typically, depending on the state of the building, its HVAC requirements, and other costs.

“I didn’t look to start as a business model that was going to be rinse and repeat in any city.”

That has been a roadblock for many applicants that have gone through the state’s social-equity program aimed at creating an entrepreneurial path for communities that were particularly hard hit by the war on drugs — most of them minority-dominated communities. Today, only 8% of cannabis companies currently open in Massachusetts are run by those who emerged from the social-equity program.

“Some go through the process but have no funding at the end of the program,” Shubrick said. “So now you’re well-versed in the process and know how to get through it, and you’re looking around, and there’s no banks giving you money. If you don’t know people with deep pockets, how do you get the right investors? I’ve seen horror stories of people who have the best of intentions and got so far in the process, but you have the wrong investor, and then it becomes a nightmare. And now you’re selling for pennies, and you’ve lost time, energy, and money.

“That’s the heartbreak people don’t talk about,” she went on. “And I wouldn’t categorize it as those people failing; I would categorize it as not having have a holistic structure in place that supports people from start to finish. It’s almost a tease in order to say, ‘hey, I’m going to show you how to make a pizza, but I’m never going to give you the ingredients so you can make your own.’ Many people simply can’t raise the money to do what they’ve gone through a program to learn how to do.”

In an editorial last week, the Boston Globe agreed, noting that the state has ignored calls to create a loan program to help equity applicants, adding that, “as if the barriers to entry weren’t high enough already, getting financing for a marijuana business is difficult because of its murky legal status.”

But the Globe cites other barriers to social-equity applicants as well, particularly the power of municipalities — which are not required to consider equity when awarding licenses — over the approval process, not to mention the head start large medical-marijuana businesses have had in the recreational license-approval process, which has paved the way for bigger medical companies to dominate the market.

“So the state has to double down on its social-equity program and prioritize licensing for minority applicants,” the Globe argues.

It’s also a hyper-competitive industry in general, Shubrick said, one where players are fiercely protecting their piece of the pie, and new retailers are often offered unfair deals to partner with growers, manufacturers, and wholesalers, and vice versa.

“It’s key to have a team of lawyers and accountants help you stay away from the sharks in the water because people are so hyper-focused on trying to extract as much money as possible, they’re not thinking through long-term impacts like ‘how can I be a decent businessperson to this other individual so maybe down the line we can do business together?’ Instead, it’s ‘how can I squeeze as much equity as possible? How can I give them terms that maybe aren’t favorable because I’ll benefit in the short term?’

“Other states around us are legalizing, so the captive audience in Massachusetts won’t be the same,” she went on, “and that doesn’t bring out the best in people when they don’t view competition as healthy and an opportunity to get better.”

 

Seeking Solutions

Proponents of true social equity in cannabis are working toward a more equitable industry, however. Earlier this month, the Block — an organization that aims to support black and Latino cannabis professionals in Massachusetts — held the last of three networking mixers at White Lion Brewery in downtown Springfield. About 80 people attended, including a CCC commissioner.

In addition to efforts around business development, resources, and connections for its members, the Block is also developing options for members to gain capital, such as minority-owned investment firms, crowdsourcing, and more traditional, institutional backing.

“Plenty was discussed. It was a really good evening overall,” Shubrick said. “Social equity here in Massachusetts is well-intentioned, but logistically, it has opportunities to become more meaningful so we see more people opening doors who have gone through the program.”

She stressed that she’s fortunate to be entering this business backed by people — her family foremost — with her best interest at heart, and she’s passionate about using her business to lift up the only city she considered for this business.

“I want to hire folks from the community who can benefit from this industry, not just because they were impacted by the war on drugs, but also because Springfield should be benefiting from these jobs.”

That passion, she noted, will be shared by ‘budtenders’ who understand the plant and can educate customers on the store’s products, many of them created by local manufacturers that are also smaller companies, many owned by women, veterans, and people of color.

“We’re being intentional about our partnerships and helping customers understand why we’re partnering with them,” she said. “So it’s more of an experience and less of a transaction.”

Certainly, opening a cannabis retail shop — and, again, it’s a long process, one that’s not over yet — has been quite the experience for the Shubrick family.

“Not everything that is faced can be changed, but nothing can be changed until it is faced,” wrote James Baldwin, a quotation Payton calls her favorite. Indeed, she’s facing the challenging realities of cannabis entrepreneurship — with a mind to change things for the better for those who come after.

 

Joseph Bednar can be reached at [email protected]

Cannabis Special Coverage

Growing Concerns

Meg Sanders says the state’s onerous regulatory hurdles have made the cannabis space an unfair playing field

Meg Sanders says the state’s onerous regulatory hurdles have made the cannabis space an unfair playing field, especially for smaller shops and social-equity applicants.

Everyone has seen the dispensaries and other cannabis businesses sprouting up in communities across Massachusetts — and the long lines of customers often stretching out the door. And they might think this business is easy money. But that’s far from the truth, thanks to an onerous tax situation, the illegal nature of the product on the federal level making it tough to enlist financial and other partners, and the slow march from stigma to acceptance of this still-new industry. All of that, however, could be changing, although it will take federal action to loosen some of those shackles.

Meg Sanders is a cannabis-industry veteran, most notably in Colorado, the nation’s first regulated market for legal cannabis. So she’s no stranger to the growing pains the industry is now dealing with in Massachusetts.

But as a local business owner — as CEO of Canna Provisions in Holyoke and Lee — she’s frustrated by them, too.

“We’re limited on what we can do with advertising, and the amount of product we can sell to a customer at a time,” she said, citing just two examples of regulations set forth by the state’s Cannabis Control Commission (CCC).

“The whole idea was to regulate cannabis like we regulate alcohol, and we’re not doing that. Actually, they’re going way above and way over the top, and I don’t think that’s helpful to the industry. I don’t think it’s helpful to individual businesses, and it’s definitely, in my opinion, not in the spirit of the CCC, which is supposed to promote social-equity and economic-empowerment applicants. But the bar for entry is really high, and the bar to stay out of trouble with the CCC is really high.”

“The whole idea was to regulate cannabis like we regulate alcohol, and we’re not doing that. Actually, they’re going way above and way over the top, and I don’t think that’s helpful to the industry.”

In other words, despite the number of cannabis businesses currently operating across Massachusetts — 267 and rising every week — this is a tough field to enter and a tougher one to succeed at, Sanders told BusinessWest.

“I think of people who are bootstrapping, mom-and-pop stores, teams that are working with a limited amount of cash, and it’s not a level playing field,” she went on. “And a lot of things we worry about in this industry are things that really do not matter. The amount of money this industry spends on packaging alone, that just goes in a landfill, is awful, and it’s driven by these rules and regs — it has to be childproof, it’s got to have 57 warning labels on it. I feel ethically horrible about the mounds of packaging in landfills. And the burden it puts on mom-and-pop manufacturers who are trying to make a really cool chocolate bar and the expense that’s going into that packaging … it’s really tricky.”

It doesn’t help, she added, that many state regulations can be challenging to interpret, mainly because the CCC is going through the same growing pains businesses are.

Scott Foster says federal decriminalization of cannabis has gained momentum

Scott Foster says federal decriminalization of cannabis has gained momentum, but the timeline is still uncertain.

“I’ve seen this in other states — the agency tasked with regulating and monitoring the industry has a very steep learning curve,” Sanders said. “One investigator will tell you one thing, and another investigator will tell you another thing. So they’re not always on the same page for specific rules.”

Many of those regulations address diversion of product, she noted. “We’ve spent millions of dollars building this business. The last thing we’re going to do is flush it down the toilet trying to sneak a pound out the back door. It’s just absurd.”

So are onerous background checks to get into the industry, keeping out some of the individuals — from communities that have been inordinately affected by the Drug War — who should be able to enter and prosper, she added. “Regulators and business owners should be partners to build a better business and correct things that need correcting, understanding everyone is doing their best.”

Those challenges are strictly state-level, but others on the federal level are just as burdensome, and boil down to the fact that the U.S. government still classifies cannabis as an illegal controlled substance. That means most banks and credit unions have avoided doing business with cannabis operators, though that’s slowly changing.

“In the early days, there weren’t a lot of professionals willing to take the career risk to enter the industry, so it was hard to find talent to come in and help grow the business. But, again, you’re starting to see that shift as more states legalize and you see the social proofs play out.”

“The federal illegality is a big challenge, and it doesn’t stop with the banking issue,” said Patrick Gottschlicht, chief operating officer of Insa. “That’s been extremely detrimental to us, but that carries across to other companies that we can work with — payroll processors, ERP [enterprise resource planning] companies, any big national or international software companies, accounting firms, security vendors … they can’t work with us because of that federal illegality.”

That has started to shift as more professional services and banks are opening up to this industry, though many still won’t, and many that do are startups themselves, with less at stake, said Peter Gallagher, Insa’s CEO.

“There’s no playbook for this industry,” he added. “There’s been a lot of trial and error to get to where we are. In the early days, there weren’t a lot of professionals willing to take the career risk to enter the industry, so it was hard to find talent to come in and help grow the business. But, again, you’re starting to see that shift as more states legalize and you see the social proofs play out. People’s friends are getting into it, talking positively about it, and they see the success of the industry, and you’re seeing more willingness to work with cannabis.”

Some bills have been introduced in Washington to, if not legalize cannabis, at least decriminalize it.

“Those bills would make it easier for us, and also de-risk the industry around the margins for a lot of partners,” Gallagher said. “The trend is definitely there, but in what time frame will that happen? From our perspective, it’s been happening a lot faster than we ever expected. When we got into this, we thought the legal conversation would take 20 or 30 years to play out.”

 

Taking No Credit

Sanders is hopeful, too. “At the federal level, we have big challenges. We can’t even take credit cards. That’s so silly. We can take a debit card and cash, and that’s it. That alone would be a really big help.”

Scott Foster, a partner at Bulkley Richardson and one of the attorneys in that firm’s cannabis practice group, believes sentiment is growing that Congress will act sooner rather than later on some degree of allowing banks into the cannabis space or remove the threat of federal enforcement against entities that partner with cannabis operators.

“That will help create some stability. And the biggest thing it’ll do is allow people to use credit cards at the facilities; it’s largely cash right now. If Congress changes that law, boom — you can use your Visa card, you can use your Mastercard. And the reason that you can’t now is not because Visa and Mastercard have a particular ethical or moral problem with it — they’ve just got a legal problem.”

Patrick Gottschlicht (left) and Peter Gallagher say cannabis is a much more challenging business than it seems — but it’s a rewarding one.

Patrick Gottschlicht (left) and Peter Gallagher say cannabis is a much more challenging business than it seems — but it’s a rewarding one.

Some federal bills have bipartisan support, he added, “but Congress has a lot of other things going on.” Still, with almost 40 states and territories having legalized medical cannabis and more than 20 giving the OK to adult-use cannabis, “I think the tide is definitely turning on this; it’s just a matter of how far it goes, and how quickly.”

Even without a change in the law, Foster explained, “the banking situation is getting better. We’re seeing some banks and some credit unions more willing to lend into the cannabis space now — much more than a couple years ago. They’re becoming more comfortable with lending for real-estate purposes — not for buying things, necessarily, but for buildout and for creating a space, including cultivation spaces. So that’s a change. A very small change, but the fact that it’s happening at all is a big deal.”

The other federal law cannabis operators want to see changed is Internal Revenue Code Section 280E, which severely limits tax deductions for business that deal in controlled substances prohibited by federal law. In short, businesses can deduct the cost of goods sold, but are not allowed any other deductions or credits on their return, including for wages.

“The taxes are crushing — you can’t deduct wages, rent, or other ordinary deductions. Most of these companies are looking at an effective tax rate of 70% to 90% in that, of their profit at the end of the day, 70% of it goes to pay federal taxes.”

“The taxes are crushing — you can’t deduct wages, rent, or other ordinary deductions,” Foster said. “Most of these companies are looking at an effective tax rate of 70% to 90% in that, of their profit at the end of the day, 70% of it goes to pay federal taxes. And this is after they pay state and local taxes. So the federal government is making a lot of tax money off of cannabis companies across the U.S.

“It’s been challenged multiple times in multiple states,” he went on, “and every tax court and every appellate court has said, ‘Congress can change it, but they were unequivocal in what they said.’ It’s a completely constitutionally valid statute.”

Decriminalizing cannabis federally would neuter the impact of 280E on the industry, which would be massive news for cannabis businesses that are already paying higher-than-average state taxes, while their host communities get a cut of between 3% and 6% as well.

But decriminalization would open many other doors as well, like broadening the market for insuring these businesses.

“There’s a risk that your insurance company could, almost at any point, say, ‘well, what you’re doing is a violation of federal law; therefore, we’re not going to insure you,’” Foster said. “The companies are getting insurance — they’re required to get insurance by the CCC — but they’re not the traditional companies; they’re not the Allstates or the companies you see advertising. They’re smaller, specialty, boutique insurance companies that have figured out it’s worth the risk to them to get into that space because the premiums are appreciably higher than they would be for a comparable business.”

So, again, the lack of federal legislation to decriminalize cannabis is increasing the cost of doing business, he went on. “If that happened, I think the cost of insurance would go down because you’d have more competition overnight in the space.”

Another barrier to continued growth that is slowly coming down is stigma surrounding the products themselves.

“For decades, it was drilled into people’s heads that this was a bad thing,” Gallagher said. “It’s going to take time to change that, and the most powerful tool is social proof and people seeing their friends and relatives using it to either treat various ailments or enhance their lifestyle; they see they’re successful, healthy individuals, and this is just a way to improve their lives. But I think it’s going to take time.”

For example, Gottschlicht added, “we have a bedtime edible to help you sleep, and we’ve seen people who were non-cannabis users start using that and come into the space because of that. It’s incredible how many people have gotten off standard pharmaceuticals and gone to half a gummy every night. The feedback has been, ‘it doesn’t make me groggy; it doesn’t give me the melatonin hangover I’ve gotten in the past. I feel normal in the morning, and it helps me sleep through the night.’”

Hearing those testimonies from friends and family is often how the stigma barrier falls for people who have been nervous about stopping by, he noted. “They think, ‘hey, there’s some good benefit to this.’ Or as an alternative to opioids after surgery — we’ve had a lot of people come in who just don’t want to take opioids for pain after surgery; they want to try cannabis because it’s not as addictive as some of the opioids out there.”

Sanders agreed. “I personally think the biggest move you can make to convert non-cannabis users to cannabis is this one-on-one experience, people telling people, or people coming in and finding relief from something — maybe sleep issues or aches and pains. And when you convert one person, they tell someone, and then they tell someone.”

 

Business Is Blooming

It’s been fulfilling to see the industry grow, Foster said — not to mention a boost to his own professional practice.

“The big uncertainty now is what consolidation in this industry is going to look like, and when is it going to happen. Everyone knows big players are going to come in and buy up companies and create brands that stretch across the nation; it’s already occurring, though not a lot … yet.”

But as more investors become comfortable with industry — there’s that idea of breaking through stigma again — that consolidation will happen, he went on. Drawing on the beer industry, he noted there’s no Anheuser-Busch in cannabis yet — it’s all microbreweries, so to speak. But even when large, national companies spread across the space, there will always be room for the boutique experience, for small companies that continue to research and promote the effects of new and different strains.

Research that is not currently happening to the degree it could because much research, especially clinical research at universities, is dependent on … wait for it … federal funding.

But once that research takes off and the cannabis industry escapes the shackles of federal illegality — a development that industry players generally agree will happen at some point — the products will continue to become more legitimized in the public eye, and the potential customer base will expand.

“People are asking, is the industry tapped out? No, I’m not seeing that,” Foster said. “Every business that opens up has a line out the door, and every facility that opens up can sell everything it makes. So, we have not reached a point of saturation by any means.”

That ever-expanding competition is another challenge, Sanders said, but one that should benefit all players because it further legitimizes the products in more people’s minds. But it also means individual businesses need to work harder to stand out. Canna does that with a strong focus on the individual experience and locally sourced products — including its own brand, Smash — with interesting, local stories behind them.

“There’s more good people than not in this space, and we owe it to consumers who are cannabis-curious to put our best foot forward and make sure they have as much information about our products as possible, so they don’t have any unexpected reactions,” she said. “Our commitment is to great products we can tell a story about, that we understand and respect and can get behind and provide the best experience we can possibly provide, and educate our customers.”

Insa, which has a production facility in Easthampton and four dispensaries across the region, including a flagship store in Springfield, has also expanded nationally, with a production facility in Pennsylvania selling to about 100 dispensaries and a Florida license to build a production site and medical dispensaries. And Gallagher embraces the growing competition in all those regions.

“The way we look at it, this is a much bigger industry than exists today,” he said. “If we all do a good job and operate responsibly and create good quality products, it will encourage more people to enter the industry and experiment and try it, and this will get much, much bigger. A rising tide lifts all boats, and as long as you have good, responsible players in the market, it’s going to be a benefit to everyone.”

Still, he added, “it’s a tough business. One of the common misperceptions is, people think it’s going to be easy. But it’s probably the hardest thing I’ve had to do. You have to be on it every day. And when you’re dealing with any biological product, the number of variables to control are immense. So it’s extremely challenging.

“But it’s been great,” he added. “The relationships we’ve built along the way have been fantastic. I wouldn’t change it for anything.”

Except, of course, for some pesky federal laws.

 

Joseph Bednar can be reached at [email protected]

Cannabis

A Front-row Seat

Bruce Stebbins remembers the time during his tenure on the Massachusetts Gaming Commission when that body was essentially subleasing some of its space on Federal Street in Boston to the recently formed Cannabis Control Commission (CCC), charged with overseeing an industry then — and in most all ways still — in its infancy.

While the two entities had separate quarters, the commissions and their staffs would cross paths often, he said, adding that there were lively discussions and some sharing of ideas between the two very different worlds.

“I was regularly running into my counterparts on their commission and staff while waiting for the elevator,” he recalled. “We actually had a lot of staff from our team having a lot of conversations with staff from their team, in part out of convenience — they were on the same floor. There was a lot of information going back and forth on the staff level … and it was the introduction of that new industry that was really exciting for me.”

Little could he have known at that time, but Stebbins, a former Western Mass. resident known to many in this region for his work with a host of economic-development-related agencies, would soon be on the front lines of that new industry.

Bruce Stebbins

Bruce Stebbins

“We have 267 cannabis establishments open in Massachusetts, most of them on the retail side. Unlike gaming, which had a limited number of licenses, there are no limits on the number of cannabis licenses; it’s an interesting structure because there’s been an effort to create opportunities for a local entrepreneur as well as larger operators who have significant experience in other states.”

Indeed, he would eventually trade his seat on the gaming board for one on the Cannabis Control Commission. And that puts him in a unique position.

Indeed, he’s able to talk firsthand (as no one else can, because no one else has sat on both commissions) about these two huge additions to the state’s landscape — and its business community. And he did just that in a lengthy interview with BusinessWest, during which he did a little comparing and contrasting of the two industries. But mostly he talked about his latest assignment, how it came about, and what he projects for a cannabis industry that is already having a profound impact on the state — nearly $2 billion in sales since the first retail establishments opened in 2018 — and, especially, individual cities and towns.

He said the industries are similar in that they are bringing millions of dollars in tax revenue to the state and adding thousands of jobs as well, but also different in some ways. There are only three casinos, obviously, while there are now nearly 300 cannabis-related operations doing business in the state. The casinos are owned and operated by huge international corporations, while the cannabis ventures come in all sizes, from huge, multi-state operations to smaller entrepreneurial enterprises.

And while the resort casinos have changed the landscape in Springfield, Everett, and Plainfield, the cannabis industry is reshaping dozens of smaller communities and bringing new life to idle real estate across the state (more on that later).

Named to the board in January, Stebbins said he’s still learning about the burgeoning cannabis industry in Massachusetts, and there is much to learn.

His education involves venturing out and seeing various operations in person, he said, and also listening to a large and intriguing mix of activists, stakeholders, physicians, parents, and those who have been in the industry, including some who have come to Massachusetts from other states that had legalized cannabis earlier, such as Colorado and Washington.

Overall, while it’s difficult to say how large and impactful the cannabis industry can become in the Bay State, he said there are essentially “no limits” on either the number of licenses or the bearing of this sector on the economy or individual cities and towns.

“We have 267 cannabis establishments open in Massachusetts, most of them on the retail side,” he noted. “Unlike gaming, which had a limited number of licenses, there are no limits on the number of cannabis licenses; it’s an interesting structure because there’s been an effort to create opportunities for a local entrepreneur as well as larger operators who have significant experience in other states.”

For this issue and its focus on the cannabis industry, BusinessWest talked with Stebbins about what he can see from his front-row seat, what he’s learning, and what he projects for an industry that is off to a fast start and shows no signs of slowing down.

 

On a Roll

When asked about how he wound up trading his seat on one commission for the other, Stebbins started by talking about the positions that became available on the CCC and his decision to apply for one of them.

Key to that decision is the why. As with the Gaming Commission, he was drawn to this board — and the cannabis industry — because of its broad implications for economic development within the Commonwealth.

“Part of my passion has been fueled by the opportunity to work with this new industry coming into Massachusetts,” he noted. “Similar to my interest in the gaming work that I did, I was looking for the economic-development aspects of this [cannabis] industry, whether it’s investment, jobs, small-business opportunity … I certainly saw that both gaming and the introduction of the cannabis industry was going to offer those opportunities. That’s where my passion lay with gaming, and it’s where it lies with cannabis as well.”

Surveying the scene in the Commonwealth, he said cannabis has come a long way in a short time in Massachusetts.

“I was impressed with the work of the commission and the staff … from the time the ballot question passed to the statute to opening the first retail, it was about two years; that’s very aggressive,” he said, adding that the industry is still ascending, with no real indication of just how high it can go.

“Right now, a big part of the agenda of our meetings is looking at renewals, final licenses for applicants, and also a healthy number of provisional-license applications that are coming through the door,” he said. “There doesn’t seem to be a slowing down of activity when it comes to people pursuing a license and people taking the final steps to opening their doors.”

Elaborating, he said there are a number of ways to measure the impact of this industry, with the number of licenses and the volume of sales being only a few of them.

Others include the positive impact on the real-estate market, with cannabis operations bringing a number of idle or underutilized properties — from retail storefronts to former paper and textile mills — back to productive life, with the promise of more at venues that include the massive former JCPenney property at the Eastfield Mall.

“Being from Western Mass., being from Springfield, and knowing Holyoke, I think one of the obvious returns has been investment in brick and mortar, whether it’s been an old mill building as a cultivation-and-grow facility to some of the new retail facilities that you see popping up,” Stebbins said. “There have been many healthy examples of how this has led to increased investment in communities that might have been struggling with underutilized properties that weren’t helping out the tax rolls.”

He cited examples of such dynamic reuse in Holyoke, Sturbridge, Southbridge, and several other communities, while noting that behind each of those walls are jobs that didn’t exist three years ago.

One of the industry’s best qualities, he went on, is the opportunities it offers to different constituencies, when it comes to both jobs and entrepreneurship — within the industry and supporting it as well.

“The cannabis statute obviously wanted to a heavy emphasis on hiring those who were disproportionately impacted by the war on drugs,” he explained. “We are in the middle of our application phase for our social-equity program, which gives individuals from those neighborhoods an opportunity to explore being an entrepreneur in this industry, looking at a management track, looking at an entry-level job track, as well as ancillary business; maybe you don’t want to actually be a cannabis retailer, but you might be an electrician, and what job opportunities and business opportunities are out there because of this industry?”

Stebbins acknowledged there are certainly some barriers to entering this industry, especially when it comes to capital and access to it, and he lauded the CCC and the Legislature for efforts to create loan funds — some of them from revenues generated by the industry — and other programs to ease access and remove some of those barriers.

“Some great work has been done, and we’re not taking our eye off the focus of making sure those opportunities are available for social-equity applicants,” he said.

These qualities separate the cannabis industry from gaming in some respects, he went on, adding that, while both have created jobs, the cannabis sector has created more opportunities in more regions and in more cities and towns — and also more types of opportunities.

“Cannabis has created a wide variety of jobs — testing jobs, cultivation jobs, retail jobs, product-manufacturing jobs,” he said. “And there’s also the fact that the industry has the ability to take root across the Commonwealth and not just in specific regions or specific, identified communities.”

 

Joint Ventures

Reflecting on the past several years, Stebbins said he’s had a remarkable opportunity — one that has placed him on the front lines in the development and maturation of not just one new industry within the Commonwealth, but two of them.

It’s been a rewarding experience — and a learning experience — on many levels, he said, adding quickly that he has a great deal of energy and passion when it comes to finding solutions and helping new businesses grow, reach their full potential, and be successful.

That’s true of both sectors, but especially his latest assignment — a cannabis sector that has certainly taken root, both literally and figuratively, but will inevitably suffer growing pains. u

 

George O’Brien can be reached at [email protected]

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