The Growing State of Emergency in Oregon: Week in Review

JAR Cannabis Co. | jarcannabis.com

Team members at this JAR Cannabis Co. medical dispensary in Windham, Maine, will make the transition to serve adult-use customers in the near future. 

Editor’s note: This article explores the state of the adult-use cannabis industry in Maine from the perspectives of a long-time medical operator transitioning to the new market, an out-of-state investor who co-founded former MSO Grassroots, and a select board member from a small, conservative town where voters will help decide their opt-in fate in next week’s election.

 

The $9.7 million in adult-use cannabis sales Maine banked in September might come in the shadows of current retail behemoths like California, Michigan and Illinois.

Through the first half of 2021, California averaged more than $430 million per month in taxable cannabis sales, while Michigan recorded $124.9 million in adult-use sales in September and Illinois tallied $121.7 million last month. But those are the three most populated states currently up and running with adult-use sales.

Not only is Maine still finding its footing—its adult-use sales launched Oct. 9, 2020—but it’s the second-smallest state by population to roll out adult-use retail. Only Alaska has a smaller in-state customer base.

Furthermore, only 10% of municipalities in Maine have opted in and allowed licensed retailers to set up shop.

Overall, Maine’s adult-use sales from Oct. 9, 2020, through September 2021 surpassed $58.5 million, according to the state’s Office of Marijuana Policy (OMP). With sales figures from the first eight days of October 2021 yet to be tallied, Maine’s first-year sales figures are fixing to eclipse the $60-million benchmark.

An Inside Perspective

JAR Cannabis Co. | jarcannabis.com

JAR Cannabis co-founder Joel Pepin has operated in the Maine medical cannabis industry since 2012. 

But to fully understand the implications of Maine’s adult-use market, one must dive a little deeper than the monthly sales figures, said Joel Pepin, who co-founded JAR Cannabis Co., a vertically integrated company that has operated in Maine’s medical cannabis market since 2012.

RELATED: JAR Cannabis Co. Prepares to Launch Adult-Use in Maine with Optimism Despite State’s Setbacks

“Generally speaking, I’d say that the [Maine] industry continues to make great progress in sort of all phases of licensure,” he said. “I think every month, every week even, we’re seeing more stores, more cultivation licenses, more manufacturers coming online. And I think what it’s doing is obviously a lot. It’s increasing access to consumers. It’s lowering prices to consumers. Definitely the supply-and-demand economics have changed a lot from 11, 12 months ago.”

When adult-use sales first launched last October—nearly four years after Maine voters passed Question 1 in the 2016 general election—customers were regularly paying $55 or $60 for 1/8 ounce of cannabis while today’s norm is more in the $40-$50 range, or even special pricing at $30, Pepin said.

“You really wouldn’t even see ounces sold in stores [last year],” he said. “And I think here and there, you can find like $200 ounces of certain strains at some stores, which is more in line with the established medical pricing structure. So, just one year and it’s already a big difference for the end consumer.”

Overall sales figures have remained on an upward trajectory since launch, with a summer spike of $9.4 million in July representing a 46% increase from June, before topping out at $10.1 million in August sales and $9.7 million in September.

Less Than 10% Participation

Those figures are set against a statewide retail footprint that extends only to 47 towns, cities and plantations among the approximately 500 municipalities in the state, according to community opt-in data from the state’s OMP. Representing most of the state’s larger commerce hubs, those 47 communities account for 29% of Maine’s residents, Bangor Daily News reported.

That said, Maine’s adult-use retail industry is operational in less than 10% of state jurisdictions, where only 60 of 410 dispensary licenses are currently active, according to OMP. In Portland, Maine’s largest city of roughly 70,000 people, there are currently 16 active dispensary licenses with another 24 conditional licenses listed in the Department of Administration and Financial Services’ OMP database.

Josh Joseph, CEO, Big Plan Holdings

That does not mean all 24 conditional licenses will become active, said Josh Joseph, founder and CEO of Big Plan Holdings, a Nashville, Tenn.-based company focused on myriad cannabis- and CBD-related investments, as well as branding and licensing opportunities across all avenues in the respective industries. ​

“I think that you run the risk a little bit, with a program like Maine has implemented, where some of the municipalities that have opted in 
 have probably issued too many licenses,” Joseph said. “Portland doesn’t need to have 25 to 30 dispensary opportunities. It’s not a big enough city for that.

“So, that’s my one kind of issue with the program. But, other than that, I think the strong will survive. Even though a municipality will issue up to maybe 20 or 30 dispensary licenses, that doesn’t mean 
 all 20 are going to be given out. Because, No. 1, it takes experience, it takes capital, it takes the wherewithal and the work ethic to actually put it all together and then actually run a good operation.”

Maine’s Market Appeal

Joseph is one of four co-founders of GR Companies Inc. (“Grassroots”), which sold to fellow multistate operator (MSO) Curaleaf to the tune of approximately $850 million in July 2020. Founding Grassroots in 2014, Joseph and his partners built the company from three dispensary licenses to the largest privately held cannabis operation in the U.S. at the time of sale—including a footprint in 12 states with 1,100 employees

RELATED: Meet the New Curaleaf, the Largest Cannabis Company in the World, Following the Acquisition of Grassroots Cannabis

After stepping away for nearly a year to focus on his real estate business and solidifying his family office in Nashville, Joseph officially returned to the cannabis industry when he and his new partner, Michael Mook, principal and chief strategy officer at Big Plan, made an investment to Silver Therapeutics of Maine in June 2021.

Silver Therapeutics currently has three conditional dispensary licenses in Portland, South Portland and Berwick, as well as a conditional cultivation license, according to the OMP database. Silver Therapeutics, which also operates in Massachusetts, anticipates the opening of its three Maine dispensaries by the end of 2021 and is on the search for a state-allowed fourth dispensary location.

In addition, the company’s Maine grow facility is currently being built out and should be operational by the first quarter of 2022, Joseph said.

“I think that the investment that we made into Silver Therapeutics of Maine is one in which it was pretty strategic in thought that Maine is a state that is not just yet on the radar of a lot of the MSOs,” he said. “Our perspective here is that we have a great operating partner in Silver Therapeutics of Maine, and they’re boots on the ground, and they run a great operation in Massachusetts that’s going to carry over into Maine.”

The Tourism Factor

With a smaller population, Maine hasn’t yet become a “crazy competitive” hunting ground for some of the larger MSOs, Joseph said.

“What people don’t realize about Maine is that it definitely has a very high tourism base,” Joseph said. “And so, while it’s up there in sort of the never-never land so to speak, there’s a great deal of tourism that takes place in the state of Maine, certainly in a non-pandemic world.”

Even while COVID-19 restrictions took a toll on tourism throughout most of 2020, Maine still attracted 12.1 million visitors whose spending generated nearly $9 billion in economic impact to the state last year, according to the Maine Office of Tourism’s 2020 Economic Impact and Visitor Tracking report.

Pepin, whose JAR Cannabis Co. currently has two active adult-use cultivation licenses, four conditional manufacturing licenses and six adult-use conditional dispensary licenses—three of which have approved jurisdictions—said he speculates tourism had a major hand in the summer retail spikes.

Adobe Stock 

Fall foliage sunrise in Maine. 

“We also benefit with tourism here in Maine with fall foliage,” he said. “I think October, November, it’s a great time for tourism. And then we get into the ski season too. So, overall [the industry is] going to continue to grow. I don’t think you’re going to see month-over-month growth like we saw June to July. We’re not going to keep adding multiple millions of sales top line, but I would expect for it to continue to stay solid.”

Specifically, JAR has storefronts in Newry and Carrabassett Valley, where Maine’s two largest ski resorts, Sunday River and Sugarloaf Mountain, are located.

“We love being outdoors in the wintertime,” Pepin said. “My business partner [Ryan Roy] and I are big skiers. So, having cannabis businesses at two of Maine’s best ski mountains, that’s like a dream come true for us.”

A Small, Rural Town

In addition to retail, Maine has 51 active cultivation licenses, 27 active manufacturing licenses and three active lab licenses in its adult-use market, according to OMP data.

Taking nearly four years to roll out adult-use sales, Maine was the slowest among four states where voters approved legalization measures during the November 2016 election: Nevada launched sales in July 2017; California launched in January 2018; and Massachusetts launched in November 2018.

Despite the extra time in Maine, 47 municipalities opting in means roughly 90% have yet to do so for adult-use retail. Meanwhile, 90 municipalities have opted-in for cultivation, 56 have opted in for manufacturing and 55 have opted in for testing.

But those opt-in rates could change following next week’s referendum election on Nov. 2.

Well, maybe.

Jon Bilouse | Adobe Stock

Center Theatre in Dover-Foxcroft, Maine. 

In Dover-Foxcroft, a 70-square-mile town of 4,200-some people in central Maine, about 30 miles northwest of Bangor, four ballot measures regarding opt-in preferences for adult-use cannabis retail, cultivation, manufacturing and testing facilities are going to the voters next Tuesday.

According to the ballot, a “yes” vote indicates voters are in favor of opt-in policy, and, if any of the articles pass, the town will proceed to develop land-use ordinance amendments for future consideration by the voters.

In short, the ballot measures regarding adult-use cannabis establishments are non-binding, said Steve Grammont, one of seven select board members who make up the town’s legislative body. The select board members added the measures to the ballot after a recommendation by the town’s 10-member Land Use Ordinance Committee.

“The best way to ask people what they think is to have a referendum question on the ballot,” Grammont said. “Effectively it is an official public opinion poll only. It has no legal status on its own because it isn’t an ordinance. Such ordinances must be approved of by the select board and put before the people at a future town meeting.”

Changing the Rules

Originally, Maine’s adult-use cannabis rules were written so that municipalities had to opt out of the new legal uses, but, before implementation, those rules were modified to an opt-in method.

“This was the right thing to do because otherwise every municipality would have [had] to either rush rules into place or rush to get a vote together for an opt-out determination,” Grammont said. “That was just a recipe for disaster for everybody, including cannabis proponents. So, thankfully the opt-in-method was adopted in the final rule.”

While the past few years have allowed elected officials from towns like Dover-Foxcroft time to put some thought into what adult-use cannabis operations would look like in their communities, various factors have played a role in their hesitancies to opt in.

Those indecisions could stem from a municipality’s majority vote when Question 1 was put before the state in 2016, from a lack of financial incentive with no local tax generated through opting in or even from some of the stigmas associated with legalization, Pepin said.

“I think it requires a lot of education at a municipal level to just help selectmen and town councilors understand the nuances of adult-use marijuana law, medical marijuana law, like the process and the different options that they could consider when it comes to opting in,” he said. “Like, what license types do you want to consider? Do you want to cap them? Do you want it to be a lottery? Do you want to have setbacks between stores? So yeah, it just requires a bunch of education.”

Expanding Community Participation

Pepin said he believes people in communities that have opted to participate in Maine’s adult-use market are starting to spread the word that their towns remain safe and have not experienced negative impacts “by and large” to inviting cannabis retailers to their jurisdictions.  

Two of JAR’s medical cannabis dispensaries were in towns that did not originally opt in for adult-use legalization participation, but, after working with elected officials, those towns eventually opted in, Pepin said. Specifically Auburn, where JAR had an extraction lab, Pepin said he and other industry stakeholders worked with councilors to help craft ordinances that eventually led to the city opting in for retail, cultivation, manufacturing and testing.

In Newry, which is governed by select board members, elected officials let the town’s residents vote on an ordinance to opt in for retail. Pepin and other advocates had similar success when it came to the town of Gorham opting in for cultivation and manufacturing.

“We had a medical cultivation facility for many years that’s been in the town of Gorham, and the town of Gorham was not interested in opting in for adult-use retail, but they did hear the industry, the cultivators and manufacturers in town, about the importance of being able to switch over,” Pepin said. “And so, Gorham was good to work with and ultimately understood whether we’re growing plants for medical use or adult use, we’re pretty much doing the exact same thing in the buildings that we’re already approved in.”

Dover-Foxcroft by the Numbers

But many towns that are still playing the wait-and-see game are located in some of the more rural and conservative parts of the state. Dover-Foxcroft, for example, is the largest town in Piscataquis County—historically one of the most conservative counties in Maine with a population density of 4.2 people per square mile. Trump carried Dover-Foxcroft by 19 points in the 2020 election, while he carried Piscataquis County as a whole by 26.5 points.

In the 2016 election, 59.2% of Dover-Foxcroft voters opposed legalizing adult-use cannabis with a “no” vote on Question 1, according results from Maine’s Bureau of Corporations, Elections and Commissions.

As a state, Maine passed Question 1 by 50.26% to 49.74%, a margin of fewer than 4,000 “yes” votes among 771,661 voters. As of 2021, Question 1’s results remain the narrowest margin of victory for any successful cannabis legalization measure in U.S. history.

“The past few years have allowed our town, and others, to put some thought into the what, when [and] where that go along with something that has the potential to have a significant impact on our citizens,” Grammont said of Dover-Foxcroft. “Nothing is ever going to be perfect so it’s really important to think things through before doing anything.”

Since Question 1 was “so broad,” it’s difficult to gauge how Dover-Foxcroft citizens feel about adult-use cannabis, Grammont said. Maybe some citizens are OK with a portion of the state referendum but not all of it, and that’s why Dover-Foxcroft’s Nov. 2, 2021, ballot puts four opt-in articles to the voters—retail, cultivation, manufacturing and testing—he said.

“If [an article] passes, the select board will likely task its standing Ordinance Committee, which is a mix of two select board members and citizens, to draft ordinance, complete with rigorous public input, for the people to consider at a later town meeting,” Grammont said. “Zoning will be at the heart of whatever is produced, that’s a certainty.”

If the people vote in favor of the ordinance, then it becomes law. If the people vote it down, then the select board members will decide what to do next, whether that be get more public input and try again or put the opt-in decision back on the shelf for a later date.

Medical’s Sour Taste

That said, Grammont said there was considerable legal ambiguity in local zoning control resulting from previous medical cannabis laws in Dover-Foxcroft.

“Even after some court cases, the leading legal theory is that municipalities can’t do much, if anything, to control usage,” he said. “This has caused a significant amount of frustration in the downtown area. We have two situations where someone is growing significant amounts of ‘skunk weed’ in densely packed residential areas. 
 That is wrong.”

Grammont said that while Dover-Foxcroft has thousands of acres of undeveloped rural land that could support larger growing operations, he has his doubts that there’s enough support to pass a referendum. Whatever the outcome next Tuesday, it will be influenced by the “negative” experience with medical cannabis rulemaking, he said.

For many other elected officials whose municipalities have yet to opt in, Maine’s tax structure doesn’t offer them much motivation, Pepin said.

Maine’s adult-use tax structure is set up so that both the cannabis excise tax at the point of sale from a cultivator and a 10% sales tax at retail both flow directly to the state, without the option for municipalities to impose a local tax that often ranges from 1% to 3% in other states.

“A lot of these towns might not be against the idea, but I think one of the more difficult parts as an industry participant is, for example, we hear councilors say, ‘Well, what’s in it for us? What’s in it for my town in terms of revenue sharing?’” Pepin said. “And the way the industry in Maine is set up right now, there is no mechanism for municipal revenue sharing.”

While industry advocates have stated too high of taxes can burden participation—essentially feeding the illicit market—providing no financial upside to municipalities could be stinting growth in Maine.

Be the first to comment

Leave a Reply

Your email address will not be published.


*