MASS Market Cannabis

Massachusetts prep for the transition to adult-use

As the clock ticked down to the opening of adult-use cannabis sales in the commonwealth of Massachusetts on July 1, there were still major questions as to whether the state would issue licenses to get stores open.

It should be an exciting time, filled with the promise and potential seen in other states, but officials from some of the top cannabis companies in the state seemed calm, even as there was little hope for state officials to move fast enough to let them open their doors to the general public.

Instead, they focused on the long game — something they’d learned from watching the western states go recreational.

“Legalization is more of a process than an event,” says Norton Arbelaez, director of governmental affairs for NETA (formerly New England Treatment Access). “This is very much an industry in transition.”

NETA’s Brookline facility is located inside the historic Brookline Bank building

Before joining NETA, Arbelaez spent 10 years in Colorado watching the changes in that state’s medical market and its transition to an adult-use model. While he certainly sees the potential bubbling under the surface in Massachusetts, he also knows not to bank on the high prices projected at the market’s open and to keep an eye on what are usually ever-changing regulations.

“It’s very much a program in its infancy,” he says.

“It has enormous potential growth,” says Michael Dundas, CEO of Sira Naturals, adding that growth will bring about the “commoditization of the flower,” driving prices down from the inflated highs of a new market.

Dundas saw it happen firsthand as a law student and young professional in Oakland and he’s making sure to prepare for it in Massachusetts, where his company in late June received the state’s first Tier 3 cultivation license, enabling it to grow up to 20,000 square feet of cannabis at its Milford facility.

Nick Friedman, CFO of Theory Wellness, agrees.

“This is not a green rush, it’s a business that requires careful planning and if you do not anticipate where the market will be in a year or two, you may set yourself up for failure,” Friedman says, adding that a business needs a five-year plan that includes prices stabilizing. “We’re not trying to be the biggest from the start. We’re trying to build a brand.”

Theory Wellness’ location in Great Barrington.

 Base Building

While no one seemed to be concerned that the state would not be ready to go on July 1, each of the companies was quietly busy getting their operations in order so when the adult-use market opened, they would be ready.

“We’re expanding the footprint of our cultivation facility,” says Friedman of Theory Wellness.

“We’re literally building out new warehouse space from the foundations up,” echoed Arbelaez at NETA.

Dundas also said Sira has filed applications for additional cultivation and recreational licenses.

With a population of nearly 7 million and a potential billion-dollar market waiting to be tapped, it’s no wonder businesses are making preparations get their share, even as officials continue to dawdle in the issuance of licenses.

Massachusetts residents voted for a recreational program in 2016, building off support for the state’s medical program, which was approved by voters in 2012 and has grown to about 45,000 patients.

One of the first medical providers to open their doors was NETA, which opened its first dispensary in Northampton in late 2014.

A dispensary in Brookline, outside Boston, followed and the company built its cultivation facility in Franklin, southeast of the city. Today, NETA produces more than 150 SKUs and is the largest medical provider in the state, measured by ounces sold.

And while Arbelaez says the medical side of the industry is “deep in our DNA,” he views the emerging recreational market as a chance to expand the company’s footprint even further, while still keeping a focus on the medical side, which will be the priority for NETA products should supply problems arise.

“We see it as an opportunity to invest in physical infrastructure and people,” he says of plans to double the company’s production capacity in the near future. “This will take us north of 450 employees.”

An inside look at Theory Wellness’  Bridgewater location.

Medical Foundations

Theory Wellness was the first company to receive a medical license during the state’s second round of applications. The company opened its cultivation facility in early 2017 and its first dispensary in July 2017 in Bridgewater, about a half-hour south of Boston. Its second dispensary opened soon after in Great Barrington, on the western side of the state near the New York border.

According to Friedman, Theory takes a “slightly different approach” by focusing on small-batch cannabis.

“We want to emulate the craft brewery or craft connoisseur product lines and leverage the quality of our operations to reach that goal,” he says.

Theory produces about 50 distinct products, including flower, concentrates, edibles, topicals and tinctures, and Freidman says the company is looking to scale up its operations and will look to get a recreational license in Great Barrington, though Bridgewater has already banned recreational stores. The company will also look to expand into other areas of the state, though no decisions have been made yet as to where.

Currently, Friedman says the company regularly sells out of its product, which is why it is expanding to meet the needs of the recreational market. Theory Wellness has 6,000 square feet of grow canopy, which is expected to grow to 10,000 square feet by the end of the year. The company currently produces about 3,500 pounds of cannabis per year and Freidman sees potential to make a mark during the switch to adult use because of a lack of medical providers ready to put product on the market. He expects a short-term supply shortage as more users visit the stores.

“There’s not a huge amount of canopy to leverage in the move to a recreational market,” he says.

The company’s employee count is also expected to double, from about 50 today to 100 by year’s end.

Sira Naturals was the first cannabis company in Massachusetts to open three dispensaries, like this one in Needham.

Building the System

Sira Naturals was officially formed in June 2013. Although it did not begin cultivation until mid-2016, the company was still the first registered dispensary group to open all three of the retail outlets allowed by its license, beginning with Cambridge in March 2017, followed by Somerville in September and then Needham in February 2018.

Dundas, one of the company’s co-founders, says the mission is simple: provide premium, sustainably produced cannabis.

“We’ve always aspired to be the greatest cannabis company in the world,” Dundas says.

The company grows more than 60 strains of cannabis at its 30,000-square-foot production facility, which he says is the most advanced grow operation in the state. Sira’s facility uses a building management system to control environmental and lighting functions, as well as an automated fertigation system to control metered dosing of water, fertilizers and micro-nutrients.

Theory Wellness produces 50 different products for sale at its two dispensaries in Bridgewater and Great Barrington, near the New York border.

Like the others, Dundas sees the potential both in Massachusetts and throughout the region and he too expects prices to drop as more providers come online, as it did in other states.

Though he went to law school in San Francisco, Dundas grew up in Massachusetts. When his home state approved a medical program, he moved back to get in on the ground floor.

Dundas jokes that Sira was founded by “rubbing two sticks together.” He calls it a “Herculean effort” and says part of the company’s mission going forward will be to help other small companies get off the ground through the creation of the Sira Accelerator program, which targets holders of the state’s microbusiness licenses that already have a prototype but need help honing their product for distribution. The accelerator program launches this summer.

Regional Focus

Dundas, Arbelaez and Friedman are all excited about the switch to an adult-use market in Massachusetts and while each state’s system is different, all say they are keeping their eyes on other states to watch for trends and complications.

They also know that the rules can change at any time and trying to make sure the companies remain agile enough to adapt to any new laws or regulations the Legislature may put in place in the coming months.

Every year he was in Colorado, Arbelaez says the Legislature made tweaks to the laws. So far Massachusetts has been no different, with the Legislature making changes to the voter-approved ballot measures even before they go into place. NETA has remained focused on making sure to keep things on the up and up.

“This is a compliance-driven industry,” he says.

Additionally, each of the companies recognize that they need to be careful not to overextend their capabilities in the new market and not sacrifice the quality of the product getting to market.

“We want to provide the best possible product we can provide,” Dundas says.

There’s also a sense that other states will use Massachusetts as a bellwether so the companies involved know they have to get it right to ensure the industry not only gets a foothold on the East Coast, but thrives and spreads to other states.

“Regionally,” says Arbelaez, “all eyes are on Massachusetts.”


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