Massachusetts cannabis industry faces new challenges

More than four years have passed since the first legal cannabis dispensary opened in Massachusetts, and in the 52 months since the first dispensary opened, 270 dispensaries have opened and another 200 are in various stages of the licensing process . There’s a new pharmacy here. Another cultivation facility there. Now Rhode Island, Connecticut, New York and New Jersey have legalized marijuana. Everyone is on the move. No one wants to be left behind. Competition is intensifying.

The state’s first dispensary closed in Northampton in December, while prices have hit record lows.

Since the first dispensary opened in November 2018, adult drug sales in Massachusetts have totaled nearly $4 billion. Prices hit $228.88 an ounce in November, the lowest since April 2020, when the economic fallout from the early stages of the COVID pandemic hit prices everywhere. Prices in November were down 39 percent from the previous year.

Meanwhile, more plants than ever were harvested across the state, peaking at 2.7 million in November. The state is awash with marijuana, with 117 growers in the state and another 249 applying for licenses.

Despite falling prices and increased competition, marijuana business officials across the state, especially in central Massachusetts, still see opportunity in the marijuana market and operators must get smarter about running their marijuana businesses.

Marijuana prices hit record lows in Massachusetts in November.

“More products and more dispensaries means more choices,” said Ulysses Youngblood, president of Worcester Pharmacy Major Bloom. “The market is correcting itself.”

Youngblood isn’t worried about falling prices.

Catering to people in low-income communities, Major Bloom has built his business on being cost-effective.

still new to people

David O’Brien, president and CEO of the Massachusetts Cannabis Business Association trade group, said the market is now mostly correcting itself because there is an oversupply of product and not enough stores to sell it. He still sees potential for growth.

“People are still making money,” O’Brien said. “But they’re tightening their belts.”

That squeeze is happening to investors, O’Brien said. Capital markets have slowed amid fears of an economic slowdown, with publications such as Bloomberg and Business Insider reporting that a recession is looming, meaning investors are holding onto their money because they fear they might not earn the returns they expected.

“Capital markets of all types are very tight [the place]’ said O’Brien.

For local marijuana operators, the slowdown in prices isn’t much of a problem at first, because if people have more choices and there are more cultivation facilities, a glut of product can eventually depress prices.

For Marc Rosenfeld, one of the co-owners of CommCan, Inc., which has factories in Medway and dispensaries in Millis and Southborough, he worries about the multi-state businesses taking Cash and investments into Massachusetts. Interstate has the product, funding, and team to build on to market itself into a crowded market. They can bully small businesses and drive down product prices without worrying about paying the large overhead costs required to open a facility or dispensary.

“They’re not here to run a business,” Rosenfeld said of the multistate marijuana business. “They just want market share.”

Photo | Courtesy of Commcan

Marc (left) and Ellen Rosenfeld are two of three siblings who own cannabis business CommCan, which operates three locations across the state.

For Rosenfeld, it’s important, especially with something like marijuana, that people have trust in the product they’re buying, including knowing how and where it was grown.

“It’s important for people to understand what they’re buying. Legal marijuana is still new to people,” Rosenfeld said.

Over-regulation

While legal marijuana may seem new, the business of buying marijuana is not. The illegal marijuana market is bubbling beneath the surface.

Robin Goldstein is an economist and author of Can Legal Cannabis Win? The Straightforward Reality of Cannabis Economics,” and argues that falling prices and the closure of a store in Northampton are not so much a matter of the viability of cannabis operations in Massachusetts as regulations and costs are holding it back.

The cannabis industry appears to be on the cusp of adding more players.

Goldstein, who grew up in Northampton and is director of the Cannabis Economics Group in the Department of Agriculture and Resource Economics at UC Davis, said that because of all the safety precautions, legal marijuana has to look like an Apple store and regulations, The market is too tight to reach everyone who needs it, which is why people still buy from the black market.

Take The Source in Northampton, the first pharmacy in the state to close on December 12. 16. It opened within a block of six other dispensaries, which means those stores are vying for the same customers. As Goldstein sees it, there aren’t many marijuana stores; there are just too many hoops to jump through and the community to come together.

Goldstein said Worcester had the same problem. Four of the city’s 13 pharmacies are located in the Canal District. Near Beaver Brook and Curtis Pond, three stores are within easy reach, while other parts of the city, such as Tatnuck, are not.

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