Maryland’s medical cannabis operators launched the state’s first adult-use sales July 1 in what Rebecca Raphael, chief revenue officer for Curio Wellness, calls a “bustling open” to the market.
Curio operates a cultivation and processing facility, as well as two dispensaries, which both converted to serve adult-use customers by the July 1 deadline.
Curaleaf also made the switch from medical-only to adult-use sales July 1; the multistate operator has one cultivation facility and four dispensaries in Maryland, and has served the state’s medical patients since 2017.
“We had a fantastic week and an awesome start on launch day on Saturday,” says Dinesh Penugonda, Curaleaf’s senior vice president of retail operations.
Licensees with existing medical dispensaries had to pay a one-time conversion fee to make the jump to adult-use sales. Growers and processors were required to pay 10% of their 2022 total gross revenue, while retailers had to pay 8%. The fees could not exceed $2 million.
Even so, Wendy Bronfein, co-founder, chief brand officer and director of public policy for Curio, says the conversion fees were steep for operators who have been struggling due to tough economic conditions.
“Most operators have been operating at a deficit for the past 15 months due to the market decline,” she says. “With inflation and everything else, the cannabis industry was not immune to it. Then, we had operators dropping products and driving down prices. All these operators were thinking, ‘OK, July 1 is going to come, the market’s going to open, everything that’s been on the down swing will even itself out and maybe I’ll get back to being in a more profitable place.’ Now, they’ve got this huge fee, which was two months after the 280E tax bill.”
Dispensaries that used their available cash to pay the conversion fee are now at risk of potentially defaulting on payments to their vendors, Raphael says.
“It put the dispensaries in a precarious position because only a few have the cash or the balance sheet, frankly, to be able to handle that unforeseen demand [and] pay … this exorbitant amount at a moment’s notice,” she says.
Ninety-five dispensaries are currently licensed for adult-use sales, according to data from the Maryland Cannabis Administration (MCA).
Penugonda says Curaleaf has a “great relationship” with Maryland’s regulators and has been working with them to ensure a successful adult-use launch in the company’s stores while also protecting patient access.
“We really focused as we worked with the state in ensuring that we could preserve priority access for our medical guests and ensure that they would continue to have access and expedient service whenever they came to our facilities,” Penugonda says. “We made some enhancements and investments in our locations to make sure we could provide that, and [we have] separate lines and registers to do that.”
Curaleaf’s dispensaries had five to six times the usual traffic on opening day, and Penugonda says the company hired roughly 40 additional employees in Maryland ahead of the adult-use launch.
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“Then, we continued to look at our operational flow at every single location,” he says. “The goal was to ensure that we had fantastic service for our new recreational guests while protecting access to our current medical, loyal customers. … We have priority access. We have two lines outside of our dispensaries and then separate registers dedicated just for our medical guests. So, when they arrived, they were able to come straight into the facility, and we've been providing curbside service, as well.”
Curio also hired additional employees ahead of Maryland’s adult-use launch to bolster its team, which consisted of roughly 250 employees at the beginning of the year. The company has grown to a team of 320 and still has roughly 30 open positions to fill. Curio may end up hiring a total of 60 new employees by the end of the year, Raphael says.
On the wholesale side of its business, she says Curio started planning for the shift to adult use in the fourth quarter of 2022 due to the length of time it takes a cannabis crop to mature.
“That project started at the end of 2022, and in about March of 2023 is when our manufacturing production schedule increased by about three times,” Raphael says.
Curio based its business plans on how other major medical cannabis markets performed during their transition to adult-use sales.
“Looking at Missouri, for example, which has a gold standard in the space of medical to adult-use conversion, we looked at what happened in their market and applied those same trends to our Maryland production plan with the goal of not being prepared only for July 1, but more importantly, for after July 1,” Raphael says. “We expect that between word of mouth and people just generally learning that cannabis is available to them now, more people will come out to dispensaries in the weekends and weeks ahead than we even saw this past weekend. And we want to make sure that any product that they learn about, or they try for the first time, that it will still be available in the weeks and months ahead.”
Opening Weekend
Maryland’s dispensaries rang up $10.4 million in cannabis sales during opening weekend. Raphael describes Saturday, Sunday and Monday as “bustling” at Curio’s two dispensaries, and she says the stores did have some traffic on the July Fourth holiday.
“It was really neat to see people from all generations [and] people from different backgrounds coming out,” Raphael says.
Bronfein says the company’s successful transition to adult-use sales can be attributed, in part, to Curio’s focus on high-quality products and customer service, as well as its preparation to ensure enough product to meet demand.
“We can’t make the mistakes that we’ve seen in other states,”’ she says. “We have to be ready to support [adult-use consumers] as soon as they flip the switch, but, as soon as they flip the switch, the demand is going to continue. It can’t be that the first time people are buying [products], stuff is just already off the shelves, or somebody comes back for the repeat purchase and there’s this lag in restoring it. That’s really our focus, that consistent customer delight and being able to have these top-quality products always available for everyone.”
Penugonda says Curaleaf’s adult-use customers have been excited about having access to safe and legal cannabis products.
“We have an amazing line of Select oil goods, as well as our high-potency Grassroots products, and we're really excited about what we're able to provide,” he says.
That doesn’t mean that the transition to adult-use sales is without its challenges.
Raphael says Curio currently faces two main obstacles: hiring enough staff and navigating ever-changing state regulations.
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Regarding staffing, Raphael says that the cannabis industry faces many of the same challenges as other industries when it comes to recruiting and retaining workers.
“The cannabis industry is not immune to the challenges of any other industry in terms of finding people who want to work, and we make products that are essentially made to order,” she says. “We need people to physically package, apply labels, drive trucks. It is very challenging to be able to staff up to meet the demand of our production schedule. We’re incredibly grateful for the folks who work for us and have been willing to put in overtime, spend time away from their families, because they’re all contributing to this goal of making sure we have consistent availability.”
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From a regulatory standpoint, Raphael says the industry gets “a lot of surprises from the regulators,” and operators must do their best to adapt.
“I unfortunately think that it’s going to be a slow grind for us, but we’re like other states where this is the emergency [rules] and then we’ll have final [rules],” Bronfein says. “We understand that there was a limited window to get [the regulations] out, but we have to get it right in the long term.”
Curaleaf has successfully expanded from medical-only to adult-use operations in several states beyond Maryland, including Arizona, Massachusetts and New Jersey, and Penugonda says the company leveraged that experience “to ensure a seamless process” in Maryland for both the company’s team and its customers.
Being able to provide that seamless experience—and the products that customers are looking for—is always a concern when transitioning from medical to adult-use sales, Penugonda says.
“We've been planning for this for quite a while, and we continued to increase our capacity through our cultivation to ensure that we have consistent supply of goods for all of our guests, both for medical and recreational guests that continue to stop by every day,” he says. “I think we're most excited to continue to provide our amazing products and brands to every guest that comes by and shops with us.
“We've been in the market since 2017, and our customers love the products that we provide with safe and legal access to cannabis, and that's why they continue to shop with us. I think we're excited to provide a really high level of service focused on education and our quality goods for people to continue to enjoy cannabis in their day-to-day lives, whether that's recreationally or for their medical needs. … We've been really excited to continue to grow our ability to share that with more guests in the adult-use markets.”
Long-Term Plans
As Maryland’s adult-use market grows, Curio plans to keep education at the forefront of its business to help customers have the best experience possible.
“That’s really at the center of who we are and what we’ve done,” Bronfein says. “We always want to create really informed consumers, and Maryland is not like all other states. The compliance labels that are on our packages give a lot of details on cannabinoids and terpenes, so it allows patients and consumers to become very knowledgeable in what they’re consuming and understand why that product is working for them and/or why they like it.”
Curio’s staff educates customers on cannabinoids and terpenes and how they determine, to a certain extent, how certain products will work for them.
“I think people are really intrigued to know that there’s a formula to figure it out, so to speak, not just, ‘Hey, I’m going to tell somebody what I want and they’re going to make a recommendation and I’m going to hope that I like it,’” Bronfein says.
Raphael says that increased access will allow those who have not wanted to participate in Maryland’s medical cannabis program to try products without going through the process of receiving a medical card, and then they can decide whether to get a card to gain access to additional products that are only available to medical patients under state law.
“Medical patients do not have to pay sales tax, and they also have the continuity of every product that they’ve ever been able to buy, they can still buy,” she says. “Adult-use customers are limited to edibles at or below 10 milligrams [of THC]. They cannot buy infused prerolls and they cannot buy concentrates. So, there’s this opportunity for people to get into the space if for whatever reason they didn’t want to join the medical program. … They can try the products and now, with an understanding of what they’re medicating with, they might be compelled to buy a card so that it opens up these additional products to their availability.”
Curio is a “science-based company,” Raphael says, and many of its products undergo studies before the company brings them to market.
“Good Night, our slow-release cannabis sleep aid, is the first cannabis sleep aid in the country to receive a U.S. patent,” she says. “When we developed it, we did what’s called an observational study, which is the closest thing we can do to a traditional clinical patient trial. We performed those activities to verify that there was statistically significant data that it helped you fall asleep, and it helped you stay asleep better. We’re coming out with an adult-use version of that product where the milligrams per container would meet the regulators’ cap, but in the meantime, we have a Good Night vape and a Good Night medicated chew, which also went through those trials.”
Now, by serving a broader population through adult-use sales, Curio will have access to more people to participate in these trials.
“Every time we release a new product, we used to have to work with anywhere from 30 to 100 people to sample their experience data,” Raphael says. “Now the group is so much larger that we can invite to participate because you don’t need a [medical] card anymore to participate in those trials. That is a huge benefit to the science and the research we do, and it’s all to make sure that we’re putting out valid and effective products that are safe and have integrity.”
Since Maryland’s regulations allow operators to have up to four retail locations, Curio plans to eventually open two more dispensaries in the state.
“We’ve been the market leader in Maryland for five years and we are excited about our continued growth because having reliable products is a hallmark of how we run our business,” Raphael says.
Curaleaf also continues to expand its product portfolio, Penugonda says, and the company takes customer feedback into account every step of the way.
“Generally, as we continue to expand both in our medical and adult-use markets, I think we're excited to bring safe, quality and consistent products and brands to every customer, … wherever they are in their cannabis journey, whether that's medical or recreational,” he says. “We're here to educate and to ensure that you're going to have a confident, great experience with our products and brands. … We've had great reception so far since we launched, … and we're excited to continue to deliver our quality goods and brands every single day with an experience that they can trust to the Maryland market. We're super excited that Maryland has embarked on their adult-use journey, and we're there to support. We look forward to meeting more Maryland customers in the future."
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