Massachusetts lawmakers met virtually May 5 to discuss a bill that could provide much-needed relief to the state’s medical and adult-use cannabis industry.
The hearing of the Joint Committee on Development and Small Businesses focused on a bill to establish a Paycheck Protection Program (PPP) at the state level for companies that don’t qualify for federal assistance, such as cannabis businesses, as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
The COVID-19 pandemic has been detrimental to cannabis companies licensed to cultivate or sell through Massachusetts’ adult-use program because, unlike most other states, Gov. Charlie Baker did not deem adult-use retailers essential like their medical counterparts. Dispensaries have been closed since the shutdown orders took effect March 24. At the end of April, Gov. Baker extended the nonessential business emergency order to May 18.
National cannabis law firm Vicente Sederberg represented a group of cannabis companies and a military veteran in a lawsuit in response to Gov. Baker’s emergency orders not declaring adult-use businesses “essential,” but a judge ultimately denied the plaintiff’s request, noting that the governor was acting within his constitutional authority but that there were avenues he could have explored to keep citizens safe. Brandon Kurtzman, one of the attorneys representing the cannabis companies, says there is no update on whether they will appeal the decision now that the shutdown orders have been extended.
If S. 2643 is approved, the goal is to implement specific guidance within 30 days.
Retailers aren't the only ones hurting. Cultivators with adult-use licenses can retain a reduced staff to maintain operations, but cannot start new crop cycles or produce products “unless operations are necessary to support the medical marijuana supply chain,” according to guidance from the Massachusetts Cannabis Control Commission (CCC).
Summer Business Uncertain
The adult-use restrictions have been particularly difficult for Nicole Campbell, who owns The Green Lady Dispensary, the only cannabis retailer on Nantucket, the island county about 30 miles from Massachusetts’ mainland. Because the business is surrounded by federal waters, the vertically integrated company licensed for adult-use does everything in-house, from cultivation to processing and even testing out of its 7,300 square-foot facility, as it is unable to ship or receive cannabis products.
“We’re not allowed to do any new plantings, so you can’t perpetuate and keep the cycle going,” Campbell told Cannabis Business Times. She owns the dispensary with her husband, Rupert and daughter, Corbet. “That was OK when we thought the lockdown was going to be two weeks.”
The Green Lady Dispensary located on Nantucket island, is vertically integrated and includes cultivation, processing, testing and a retail store. Photo courtesy of The Green Lady Dispensary
However, like other business owners who spoke to Cannabis Business Times, she is hopeful that the shutdown, which was initially set to expire April 7 before being extended to May 4, will actually end May 18.
“You always have this glimmer of hope, you don’t want to admit to yourself the fact that you’re going to be closed longer,” she says. “People who live here are staying put and have no access to safe, regulated, legal cannabis. … I get angry because I feel that we’ve been forgotten by the rest of the state and the fact we are in a unique situation.”
Memorial Day is a key holiday for Campbell, as it’s the start of the summer season when the island’s population expands from about 11,000 to about 50,000 or more. Like other seasonal businesses that rely on sales from summer residents and tourism, Campbell is concerned about what happens this year if travel is still restricted or if people decide to forgo their trips. She had to temporarily lay off more than two-thirds of her 27 year-round employees right as she was starting to interview for seasonal staff.
The Green Lady opened in August 2019, so it’s difficult to estimate what the seasonal versus year-round customer base will be or could have been without the pandemic, but she estimates that only about a fifth of her potential customer base are permanent residents.
“It is difficult and disappointing because we never got to experience Nantucket’s summer season to its fullest,” she says. The dispensary was asked by Nantucket officials to operate by appointment only during the first month to control potential crowds that were seen when other Massachusetts adult-use retailers first opened, she says. “If we can open by Memorial Day, I’m hopeful that this summer season can be salvaged.”
Momentum for New Businesses Thwarted
Kobie Evans, co-owner of Pure Oasis, had just opened the first adult-use dispensary in Boston with co-owner Kevin Hart on March 9, serving 700 customers that first day, when they were forced to shutter the store and lay off some team members just two weeks later.
“Unfortunately with the shutdown and initially not necessarily knowing when we were going to open back up, we had to make the very hard decision to lay off staff to give them the opportunity to file for unemployment,” Evans told CBT. “We tried to hold on as long as possible, but then we realized there was no clarity.”
To prepare for the eventual reopening, Evans has implemented a plan to adhere to federal and state social distancing guidelines and will offer contactless payment, where customers can order ahead online and pickup at the store.
Kobie Evans, center, and Kevin Hart, right, celebrate the grand opening of Pure Oasis in Boston. Just two weeks after opening, they were forced to close after emergency orders from the state shuttered nonessential businesses to prevent the spread of COVID-19. Photo by Sarah Hinzman
“We have had to reinvent our business, but lot of people have to reinvent their business,” Evans says.
His primary concern is access, as he has heard anecdotally from many customers that they purchase cannabis to manage various ailments, from post-traumatic stress disorder to anxiety. According to a recent article from The Boston Globe, medical marijuana registrations went up by 245% since the emergency shutdown order began, according to data from the CCC from March 24 through April 21, with more than 7,200 obtaining cards.
“A lot of our customers have undiagnosed medical issues such as anxiety, so it’s hard for them because they rely on us so much, and a lot of our customers don’t want to necessarily go back to the illicit market,” Evans says. “They like the fact we’re in the neighborhood, and we try to have good customer service.
“I think customers take it personal that we are not deemed essential because in their eyes we are very essential, even without COVID-19.”
However, Evans remains optimistic about the May 18 date and is doing everything he can to prepare.
“Everything happens for a purpose, and we’re anxiously looking forward to the opportunity for things to be safer and for the opportunity to open up and be there for our community,” he says. “It’s a challenge because in other states, companies like ours are deemed essential, but Massachusetts, in this instance we were not. That’s the hand we were dealt, so we’re just preparing for the opportunity to reopen again … and it’s just a matter of what safeguards need to be in place for workers and customers.”
According to an article from Mass Live, Angela Brown, CEO of T. Bear. Inc., testified during the May 5 hearing that she had only been open one day before the shutdown order took effect and had to lay off her entire team. She said local cannabis companies “face extinction.”
“All I can do now is wait, with no income and no revenue,” she said during the hearing, according to the article. “And while I wait, I still pay my rent, my lenders, my utilities and my health insurance for my furloughed employees.”
Evans did not participate in the hearing but said the contributions of the cannabis industry have been significant, and it’s important to have protections in place.
“It’s one of the sectors that is hiring the most and growing the most and also producing the most cash revenue,” he says. “So, consequently, we have to be recognized on a state level or a federal level as a viable business sector that potentially needs relief in instances like this.”
Though “Essential,” Medical Segment Struggles
Ellen Rosenfeld, who owns the vertically integrated CommCan with her brothers, operating two dispensaries and a cultivation and processing facility, is licensed to sell both medical and adult-use products at a dispensary the company runs in Millis. She has been able to continue selling under the medical program there and at the medical-only Southborough dispensary. However, with about 80% of her sales being from the adult-use side, the shutdown has still had a significant impact on the bottom line, and she told CBT she worries about adult-use only businesses without the solid financial footing CommCan has developed.
CommCan's Millis dispensary on opening day in November 2019. Ellen Rosenfeld testified at a virtual hearing May 5 that the store generated $1.1 million in tax revenue within the first five months of operation from adult-use sales. Photo courtesy of CommCan.
During the hearing for the state-level relief bill, she noted in a prepared statement the tax revenue the cannabis industry generates for the state and federal government, and the losses not just for customers and the businesses, but also the cities in which they operate.
“CommCan contributed $350,000 in sales tax to the state, 3% of which, $52,000, went to Millis [from when the dispensary opened Nov. 5, 2019],” Rosenfeld said in the prepared statement. “Being open for less than two months in 2019, I’m including the 2020 payment as well to illustrate the potential of this revenue stream. Before adult-use was shut down on March 24, $765,000 dollars was collected in sales tax, of which 3%, $115,000, went to Millis.” She noted that in five months, the company generated $1.1 million in tax revenue.
Should the state-level relief bill be approved, Rosenfeld said the provisions outlined in the bill would mean that the PPP would provide $400,000 to CommCan.
“We cannot borrow money. We pay our employees more than minimum wage and we provide benefits,” Rosenfeld said during the hearing. “We have implemented every safety protocol that has been suggested, mandated and warranted. We have allowed our employees to self-quarantine for any reason. They have told us that they feel protected and have expressed their gratitude for being employed during this time.
“We will continue to do all of these things regardless of what happens today. But it would be a lot easier with a little help.”
Employees at CommCan in Massachusetts wear gloves, masks and are behind glass partitions to protect them and prevent the spread of COVID-19. Photo Courtesy of CommCan
CommCan’s safety measures include screens at the dispensary registers, face shields and masks for staff, Rosenfeld says. They also are hoping to implement delivery as soon as possible, have pivoted to curbside pickup and also have a waiting system for patients who want to shop in-store using a radio transmitter that allows customers to wait in their cars until their ticket number is called using the FM station 90.1. “CommCan Radio” was launched in the days before the shutdown took effect to help maintain social distancing, when customer demand surged and CommCan saw more than 1,000 customers a day at the Millis location, Rosenfeld says.
She says it’s just one example of how the cannabis industry, both medical and adult-use, was poised to implement the sanitation and safety guidelines to prevent the spread of COVID-19 better than most, especially on the cultivation side, where PPE and sanitation practices are common SOPs.
“We are overseen by the CCC, and they were on top of this right at the get go. They implemented guidelines that we needed to do, social distancing, sanitizing, the masks the gloves, way before the governor did any of this,” she says. “So they were on top of it. And our product is tested.”
Ryan Crandall, senior vice president of sales and chief product officer for MariMed, a vertically integrated cannabis MSO that operates cultivation and dispensary facilities in the state, says that it is estimated that 90% of sales in the state’s cannabis program are from the adult-use market. Cultivators and processors selling wholesale to that segment are still feeling the economic fallout, too.
And, even though patient registrations have increased since the adult-use shutdown orders first took effect, medical dispensaries are seeing less customer traffic and fewer sales due to social distancing restrictions, Crandall says. Many were scaling up to prepare for a demand spike in 2020, he says.
2020 adult-use sales in the state hit $157 million before the shutdown orders took place at the end of March, according to data from the CCC.
Although the average ticket has gone up at Panacea Wellness, a dispensary MariMed operates in Middleborough, Mass., Crandall says the potential growth was curtailed by COVID-19.
“We have seen an increase at our dispensary of medical patients and new patients, but the reality there is a little cloudy because we had just opened, so we had naturally hoped to see organic growth,” Crandall says. “Without COVID and without what has happened, we would be doing better than we are.”
However, Crandall noted a silver lining.