Maryland cannabis businesses bracing for growth

The recent decision by Maryland voters to legalize recreational cannabis marked a new day for businesses that are preparing for a new way to operate  and the owners of Remedy Columbia moved into this new environment by getting a leg up in the race to a newly-laid finish line.

Remedy Co-CEOs Brandon Barksdale and Mitch Trellis moved the business from its former location, a 5,000-square-foot store on Dobbin Road, to what they’ve dubbed a “superstore,” its 10,000-square-foot address in the Lakeside Shopping Center on Stanford Boulevard. 

“We were doing huge pre-order and call ahead service after our industry was declared essential after the shutdown,” said Barksdale,” and that’s close to three years ago. We’ve already had great community support and momentum from just marketing the medical patient sector.”

With more than 150,000 registered medical users in Maryland according to Maryland Medical Cannabis Commission, businesses like Remedy and others are also bracing for a boom  that is expected to reach $1.2 billion in revenues when the new law kicks in later this year.

Two issues

As the pandemic dissipated and the world crept back toward normalcy, Barksdale said customers’ purchases “became more split between online orders and in-store pickup, and the Dobbin Road location proved too small. Also, the new store allows us to offer more space to offer the biggest brands in the industry, like Cookies, Holistic and GTI, and to introduce new products.”

What’s happening in the cannabis industry is “the natural business evolution from the current medical-only market,” said Shad Ewart, professor of business management at Anne Arundel Community College. “We’re also seeing growers build out their facilities to accommodate the anticipated future demand once the state agrees on regulations and launches the adult/recreational market, which could happen as early on July 1.”

Moving forward, Ewart said two issues are at play.

“The regulations have to be in place before anything starts,” he said. “The Maryland legislature keeps kicking the can down the road, which they’ve been doing for years. They’re still dictating how many growers and stores can operate in the state, which limits the opportunities for Marylanders to take advantage of this entrepreneurial opportunity.”

The next conundrum concerns license holders. “They all want to maintain the status quo,” said Ewart, “because they don’t want any more competition.”

While he doesn’t think this puzzle will be solved by July 1, he does think that “since people growing their own will be legal, there will be growth in the hydroponic sales, as well as in the industry’s ancillary businesses.”

Speaking of ancillary businesses, Ewart said that stores “are not making money on the flower because there is so much competition at the wholesale level. Margins are lower, so they sell merchandise, including everything from pipes to T-shirts.

“And good for them,” he said, “because retail space is available and less expensive due to COVID-19.”

In the end, Ewart thinks there will be more stores and significant expansion in Maryland, “as has been the case in every other state that has gone this route,” Ewart said. “Finding the middle ground is the key.”

I.D., please

While the new legal template is worked out in Annapolis, Jason Klein, principal at Rimon Law in Washington, D.C., is also anticipating an increase in investment in the industry. “With Maryland’s population at about 6.2 million, there should be a jump of 50-100% in the market,” he said. “Also know that there were people who didn’t hassle with the signup process for medical or didn’t qualify that are now able to buy what they want.”

One way to anticipate heightened sales figures is to compare the MMCC’s total patient registrations (150,000) to what’s happened in other states with recreational programs,” said Klein. “We can expect that about 7-10% of the adult population may partake.”

There will also be “some undetermined additional taxes that will be worked out in the upcoming legislative session,” he said, “but now, it’s going to be like going to a liquor store. All a customer has to do is show an I.D. to buy what they want.”

And the new law will, of course, take a big bite out of the black market, even with expensive legal retail products and taxes. “Most people would rather buy product from a neighborhood dispensary that is well lit, pays taxes, etc. “as opposed to meeting someone in a park or on a street corner.”

Boom times

Echoing Klein’s observations was Gina Dubbé, a co-founder with Ellicott City-based Greenhouse Wellness, who said her company is also expanding; it has purchased a larger building to double its space as it braces for the boom.

“Adult use will double or triple the market and there will be a differentiation of products. It is likely that medical products will carry the higher THCs (with recreational options lower),” Dubbé said. “Hopefully at the end of the upcoming session, we’ll have a clearer picture.”

And like Ewart, she noted that product is overstocked in anticipation of recreational use. 

“Cultivators are shutting down grow rooms because of the surplus and will be restarted when we get a timeframe for adult use,” Dubbé said. “The prices of cannabis are down by half in many cases.”

That’s part of what makes the expansions so interesting. Margins on products have been shrinking, but the new law and the demand for ancillary services are fueling upward movement.

In the end, it’s all been good at Remedy.

“We knew we had to gauge the market before expanding,” said Barksdale, “but we needed a larger space even before the new Maryland law was passed.”