Page 33 - BusinessWest February 6, 2023

with Washington, to pioneer legal adult- use cannabis in 2012, experienced its own ‘green rush,’ with a quickly saturat- ed market causing prices to plummet. What Massachusetts cannabis busi- nesses need to do, she said, is to focus on differentiating themselves in the right ways (see story on page 35).
“I think it’s going to be a painful year, but a necessary year. Honestly, it’s important,” she said. “So many people think, ‘if I get a license, I’m going to
be a kajillionaire.’ Sorry, that’s not
the case. If you’re in it because of the money, it’s going to be a tough road for you. We believe money is a byproduct, not a goal. We believe in running a good business, a responsible business, serving customers thoughtfully and respectfully and providing an amazing experience with lots of options on the menu. A cannabis purchase should
be fun.”
Certainly more fun than selling the product at a time when economic realities in the industry are dramati- cally shifting.
Growth Potential
There’s no doubt that legal can- nabis has been a boon to not only sellers, growers, and manufacturers, but to state and local coffers. Massa- chusetts imposes a 10.75% excise tax on purchases, while recreational can- nabis purchases are also subject to the state’s 6.25% sales tax, and most municipalities levy 3% more.
David O’Brien, the president of the Massachusetts Cannabis Business Assoc., recently told the Boston Globe that the industry will remain strong despite its current challenges.
“Legalization has brought about change people can see. You can see it in the tax revenue, in the jobs that have been filled, in the dispensary storefronts that used to be empty, in the old warehouses that now host manufacturing companies — it’s all growth, it’s all progress, and the sky did not fall.”
As for those jobs, about 22,000 workers were authorized by the state to work at licensed cannabis facilities as of December, making it an attrac- tive field to enter, Kusek said. “Once they get a little experience under their belt, they’re infinitely more mar- ketable. Head growers are making $100,000 to $120,000 a year.”
The problem, he noted, is that players coming into the market now are dealing with product prices that are much different than when they established their first business plans. And the regulatory hoops remain challenging in many cases, as is the decision of where to locate: in a com- munity with limited licenses that are difficult to secure, or a community with a more laissez-faire approach, but also, as a result, much higher competition?
“I just talked to a couple of law- yers, and they’re not working as many licenses as they were two years ago,”
“Regular businesses still get normal deductions, but we can’t deduct anything except the cost of goods. That creates a real challenge for overall profitability and cash flow.”
ing to what Kusek calls “the shiny new object” — New York, where shops start- ed selling legal recreational cannabis just a few weeks ago. “That’s where the capital is going, which starves out the businesses we have here.”
And when capital dries up, it’s the mom-and-pop entrepreneurs that suffer, as well as social-equity candidates.
“The companies that operate in multiple states have more of a cush- ion; they can continue to roll forward,” Kusek said. “Who’s going to get hurt by this [competition]? People who have been trying to get a license for a long time. This just makes it harder for them if they didn’t get more of a leg up in the beginning.”
Kusek said, and there could be several reasons for this, foremost being access to capital, which is still limited because most banks won’t lend for cannabis enterprises.
“If they can’t access capital, they’re forced to shoulder the ups and downs of the industry by daily revenues,” he
added. “If you open a successful restau- rant and want to open a second loca- tion, you can go back and get a loan to do that. If you want to open a second cannabis location to sell all this product you have, you can’t easily do it.”
Meanwhile, cannabis investors in the Northeast are increasingly look-
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