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Cannabis Business Is Riding High

Back in November — only two years after adult-use marijuana became legal in the Commonwealth — the Massachusetts Cannabis Control Commission reported sales had surpassed $1 billion, and the state had collected some $200 million in taxes from the adult-use windfall. At the time, employment in the adult-use cannabis field in Massachusetts was approaching 6,000. It’s likely significantly higher now.

The COVID-19 impact? Not much, really. Except during those weeks from March through early May 2020, when most businesses of all kinds were closed to the public, dispensaries have reported steady revenues right through the pandemic. While the supply-chain issues and other economic impacts that followed in the wake of COVID did slow the pace of progress at some projects in various stages of development, customers are still lining up to get into the shops currently open.

In short, some industries are more resilient amid shifting economic tides — and public-health emergencies, it turns out — than others, and cannabis has proven, so far, to be one of them.

One lingering question, however, is how the rapid proliferation of dispensaries and other cannabis businesses will impact sales at each individual shop — in other words, will supply begin to outstrip demand and make this a riskier or less desirable industry to enter than it was a year ago?

To hear the business owners themselves tell it, the answer is no. Take Northampton, for example. Both Noho-based business owners we spoke with for this issue’s cannabis focus say that city has become such a destination for cannabis that each new enterprise just adds a little more texture to a robust ecosystem — and draws in even more customers from outside.

After all, if a city is known for its restaurants, no one ever says there are too many, or that it’s a bad idea to open another.

The heightened competition has, of course, forced new business owners to think critically about how to best stand out from the crowd, and the stories starting on page 29 are good examples of how they’re doing exactly that.

Cannabis has been a boon for the state’s coffers, no doubt about it. But it continues to be a strong driver of employment as well, one with a still-undefined ceiling. And it’s begun to add real vibrancy to the economy and lifestyle of communities that have been welcoming hosts.

In short, this is still fertile soil. After a year of economic news that hasn’t always been bright, that’s something to celebrate.

Construction Special Coverage

Space Jam

By Mark Morris

Nick Riley

Nick Riley says he had to reschedule in-home jobs at the start of the pandemic until he could figure out how to do them safely.

For home builders in Western Mass., 2020 brought opportunity and challenge in equal measure.

For example, Nick Riley, owner of N. Riley Construction, said 2020 was his best year based on the number of projects, but COVID-19 posed obstacles to nearly all facets of the job. In fact, when the pandemic first arrived, he rescheduled all his in-home projects until he could learn how to safely do those jobs.

“We were fortunate that we had several new construction projects that kept us working until we could figure out the right way to get our in-home jobs done,” Riley said.

Other home builders shared similar stories of adjusting to a new reality on the fly.

When many industries were mandated to stop working back in March, home builders were deemed an essential business by Gov. Charlie Baker’s administration. That was the right call, said Bill Laplante, president of Laplante Construction. “We had projects with critical work that needed to be completed so people, in some cases, could get back into their homes.”

“We had to postpone jobs like kitchen renovations where people were still trying to live in the space we were working on.”

The builders who spoke with BusinessWest all construct new houses as well as additions and renovations to existing homes. On balance, they say, renovations and additions account for more business than new home construction.

“Most of the calls we get are from people who want to stay where they are, so many of them are looking to build additions or do a renovation,” said A.J. Crane, partner at A. Crane Construction.

Of course, staying put became nearly universal as COVID-19 mandates resulted in many people working from home. Even those who continued to work at their place of business found themselves at home more often because so many recreational activities and destinations had been curtailed or shut down.

And that posed opportunity for builders. As Laplante observed, the more time people spend at home, the more looking around they do. “They start thinking about adding a room or renovating part of the house to make their space more comfortable.”

In the age of COVID, that means builders must approach job sites differently than in the past. For starters, more people — both adults and children — are likely to be at home while the work is getting done. While workers follow screening protocols before going into the home and wear PPE once there, Laplante instructs his crews to isolate the work area from the residents as much as possible. That’s easy to do for additions and outside renovations, but some work is just more intrusive.

“We had to postpone jobs like kitchen renovations where people were still trying to live in the space we were working on,” he said, adding that other projects were pushed off because customers were simply not yet comfortable with outside workers in their homes during the pandemic.

But enough homeowners were OK with their presence to generate a successful, if unusual, year for the home-building and renovation industry.

 

Slow-building Issues

Keeping work crews and homeowners safe was only one challenge builders faced due to COVID-19. In a normal year, the process of getting a permit for a new home or addition is fairly straightforward. Builders bring plans to the appropriate municipal office and pick up the permit a week or two later. As COVID-19 shifted city and town business to e-mails and Zoom calls, it delayed the permitting process — in some cases, for months.

“When you go down the street to the local lumber yard to pick up a pressure-treated two-by-four and they don’t have any, it throws you for a loop.”

Meanwhile, supply-chain shortages of common consumer goods such as toilet paper and cleaning products marked the early days of the pandemic. The manufacturing supply chain around the world was disrupted for many building products as well. Riley said appliances and electrical components such as circuit breakers were often delayed by as much as three or four months. As another example, Crane learned that window companies were having trouble getting glass.

“As a result, we were only getting three-fourths of the windows we ordered for a job,” he said. “This created a delay that frustrates the homeowner and puts a big dent into our profit margin.”

In short, COVID-19 kept people at home, they wanted to improve their space, creating high demand for building materials at a time when many manufacturers were already experiencing delays due to the coronavirus, resulting in shortages. And in the wake of those delays, price increases followed.

Andy Crane

Andy Crane says he wants to present a home show this year, but only if he can do so safely.

“We saw a 45% spike in the cost of building materials,” Laplante said. “That was difficult to deal with because we had jobs that were already under contract.”

Shortages of special-order or custom materials were no surprise to the builders, but everyday items were affected, too.

“When you go down the street to the local lumber yard to pick up a pressure-treated two-by-four and they don’t have any, it throws you for a loop,” Crane said.

While they acknowledge that delays, shortages, and price hikes will be here for the near term, all three builders are optimistic about 2021. Because mortgage interest rates remain at historic lows, Riley does not expect a slowdown anytime soon. “For 2021, our company is operating full steam ahead for both new construction and remodeling projects.”

“I know a lot of folks who switched to remote work, and they are not going back into the office. I believe people working from home or their vacation home will continue into the foreseeable future.”

One challenge going forward, he noted, is finding property in Western Mass. to purchase at a reasonable price where he can make a profit on new construction.

For 2021, Laplante has plenty of new construction and renovation projects in the pipeline both in Western Mass. and on Cape Cod, where he recently opened a satellite office.

“We’ve always done work on the Cape, but this is the first year we made it official with an office,” he told BusinessWest. “We’re seeing a tremendous amount of activity and opportunity there.”

Expanding to Cape Cod is a bet Laplante is willing to make because he believes that the pandemic has severely shifted consumer trends. As he sees it, the people who would have sought out exotic travel to places like Europe are now spending their money on their home or investing in a vacation home close to where they live.

 

On with the Show?

For 66 years, hundreds of home projects started with a tour of the Western Mass Home and Garden Show held in late March on the Big E fairgrounds. In 2020, the show was canceled for the first time in its history as the initial wave of COVID-19 swept across Massachusetts just before the event.

Will there be a show in 2021? Andrew Crane, executive director of the Home Builders and Remodelers Assoc. of Western Massachusetts, faces a common dilemma in this time of COVID-19: there is plenty of interest in holding the show, but no one knows if conditions will allow it to take place.

“When things clear up and people can safely go out and stay healthy, we will run a home show, and not until then,” he said. At the same time, his organization, which runs the home show, has nearly sold out all available booths.

“We don’t even have dates for when the home show will happen, but I sold two booths this week,” Crane said, noting that his members are involved in nearly all areas of home improvements. As most of them had success in 2020, they would like to keep the momentum going this year.

Bill Laplante

Bill Laplante says the more time people spend at home, the more they think about how to improve their homes.

When BusinessWest spoke with vendors in preparation for last year’s event, several said a key strength of the home show was the opportunity for people and contractors to speak with each other, as well as the ability to see and touch the latest products in home improvements.

Plexiglass dividers, one-way aisles, and mandatory mask wearing are among the different ways Crane and his staff are looking to configure this year’s show. He doesn’t want a situation, however, in which a member pays for an expensive booth only to allow one person at a time to visit.

“That’s not fair to the vendor or the people attending the show,” he said. “It’s not even fair to the folks who just drop by a booth to take the candy.”

Because planning events is so difficult these days, Crane continues to move forward in planning the home show, but understands that nothing is certain. “There’s a light at the end of the tunnel, but we don’t know if it’s a freight train or if it’s the vaccine coming to solve our problems.”

Even with an effective vaccination rollout, Laplante predicts the home-building industry will continue to thrive locally. In addition to new construction, he has several whole-house renovations in the works — projects in which an existing house is torn down and a new one is built on the same lot. With many projects in the pipeline, Laplante believes people have changed their behavior long-term, and the home will continue to be a focal point long after COVID-19 is under control.

“I know a lot of folks who switched to remote work, and they are not going back into the office,” he said. “I believe people working from home or their vacation home will continue into the foreseeable future.”

Features Special Coverage

On the Right Track

Jeremy Levine

Jeremy Levine says Pioneer Valley Railroad and Railroad Distribution Services have a unique business model that has led to decades of success and steady growth.

When it comes to moving freight, Jeremy Levine says, many business owners believe it comes down to a choice between rail — if it’s available — or trucks.

But in many cases, he believes, the best answer might be rail and trucks.

And this is the answer that has enabled Westfield-based sister businesses Pioneer Valley Railroad (PVRR) and its wholly owned subsidiary Railroad Distribution Services (RDS) — both Pinsly Railroad companies — to thrive for the past 35 years and remain on a steady growth trajectory.

“Railroads and trucking … they have their lobbyists in D.C. on opposite sides of the aisle trying to argue against one another,” said Levine, who is awaiting new business cards that will identify him as the company’s business-development coordinator. “But the truth is, for a short-line railroad like us, we use trucking all the time — we’re sending out hundreds of trucks a year to do the last-mile transit for our customers, either here in Westfield or all across the Northeast.”

As a short-line railroad, PVRR, as it’s known to many in this area, moves on 17 miles of operable track running north from Westfield, said Levine, the fourth-generation administrator of the company started by his great-grandfather, Samuel Pinsly. There is a branch running roughly four miles in Westfield and another branch running 13 miles into Holyoke.

The company interchanges with two class-1 railroads — Norfolk Southern and CSX — and takes freight that last mile, as Levine put it, referring to the last leg of a journey that might begin several states away or even on the other end of the country.

“The number you’ll hear is that four trucks equals one rail car. So if you looking to ship a distance or something that’s very heavy, that’s where we provide economies of scale.”

“If you want to get lumber from Louisiana, a large class-1 railroad such as CSX will bring that up, interchange with us at our yard in Westfield, and we’ll take it the last mile or miles to our customers, if they’re located directly on our line,” he explained, adding that, for customers not on the line — those without a rail siding — RDS will take it the last leg by truck via two warehouses it operates in Westfield.

And in some cases, that last leg might be dozens or even hundreds of miles, he noted, adding that rail is a less expensive, more effective way to move material, and RDS enables customers to take advantage of it, at least for part of the journey.

“The number you’ll hear is that four trucks equals one rail car’s worth of capacity,” he explained. “So if you looking to ship a distance or something that’s very heavy, that’s where we provide economies of scale.”

This has been a successful business model since 1982, and the company continues to look for growth opportunities in this region, he noted, adding that such growth can come organically, from more existing companies using this unique model, or from new companies moving into the region to take advantage of its many amenities — including infrastructure. And Pinsley Railroad owns several tracts of land along its tracks that are suitable for development, he noted.

For this issue and its focus on transportation, BusinessWest takes an in-depth look at PVRR and RDS, and how those letters can add up to growth potential — for the company and the region itself.

Train of Thought

Levine told BusinessWest that, while he didn’t work at what he called the “family business” in his youth, he was around it at times, well aware of it, and always intrigued by it.

“When my grandmother was running the business, that’s when they moved the headquarters from Boston to Westfield,” said Levine, who grew up in nearby Granby. “You grow up going to the rail yard, and you’re around these people; you’re definitely going to be inclined to the business.”

But he didn’t take a direct route, as they might say in this industry, to PVRR’s headquarters on Lockhouse Road. Indeed, after graduating from George Washington University in 2015, he stayed in D.C. and worked on Capitol Hill, specifically on transportation policy. He later moved to the private sector and worked at a firm advocating for railroads.

Eventually, he decided he wanted to be a part of the family’s business and relocated to Western Mass. “It’s been quite a ride,” he said while borrowing more language from the industry, noting that he started at PVRR and RDS roughly a year ago.

He came to a company that had a small, steady, and diverse group of rail customers, some that receive thousands of rail cars of material a year and others merely a handful of cars, and more than three dozen RDS customers.

He said his new job description is essentially to generate new business, and he believes there is enormous potential to do just that — again, because of the unique business model these companies have developed and the benefits that rail (or a combination of rail and trucks known as ‘transloading’) brings to potential customers.

As Levine talked about the sister companies and how they operate together, one could hear the drone of forklifts operating in the warehouse outside his office, which led to an explanation of how it all works.

“We have some rail cars here this morning,” he explained. “They got dropped off by CSX late last night; early morning, or 3 a.m. crew [at PVRR] dropped them off here. The crews have been unloading them, staging them, and placing them outbound on trucks to head off to our various customers.”

There are other operations like this, or somewhat like this, in the Northeast, he explained, but what sets this operation apart, beyond the interchange with the two class-1 railroads, is the fact that the company owns both its railroad and distribution services.

“There are companies like our Railroad Distribution Services that are directly on CSX’s line,” he noted. “But the difference there is they don’t control the trains; I can pick up the phone and call the train operator and ask him when he’s going to be here with my rail cars, and with that comes a lot of security that your stuff is not going to backlogged or jammed up and that your deliveries are going to come on time.”

It is this security — and these benefits — that Levine is selling to potential customers. And as he goes about that task, he has the Pinsly team, if you will, focused solely on the Westfield operation and its future. Indeed, the company, which operated short-line railroads in Florida and Arkansas, has divested itself of those operations, with PVRR and RDS being the only holdings in the portfolio.

“What that has allowed us to do is reinvest and recalibrate,” he explained. “We had a very large team throughout the years and a lot of focus on Florida, where we had 250 miles of track; we can now take that talent and focus on our operations here.

“My go-to line is that ‘even you don’t have rail siding, that doesn’t mean you can’t benefit from railroading,’” he continued, adding that he can back up those words with numbers, and he intends to use them to build the company’s portfolio of customers.

PVRR owns a 1930s-era passenger rail car that it calls the ‘dinner train.’ As that name suggests, it’s used for fundraising events, a customer-appreciation gathering, and even as a means to transport Santa Claus to Holyoke Heritage State Park for annual festivities there.

It hasn’t been out of the yard much in the era of COVID-19, but U.S. Rep. Richard Neal recently used it as a backdrop for an event, said Levine, adding that the dinner train has become a highly visible part of this company for decades now.

But the bottom line — in virtually every respect — is that PVRR and RDS are about getting freight, not people, from one place to another.

It’s a moving story, and one that could well add a number of new chapters in the years to come as the company tries to get customers on the right track when it comes to freight — literally and figuratively.

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

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