Will Established Medical Cannabis Operators Allow Small Producers to Establish in New Mexico? | Business
Matt Muñoz is eager to find a niche market in the recreational cannabis industry that will soon be legal in the state.
He has worked as a paralegal and lobbyist – an experience he says will come in handy as he begins to navigate industry rules and regulations still under development. He also has some experience with cannabis: a run-in with the law in high school that led to a possession charge and 10 days in jail. The old charge was withdrawn from his case a long time ago.
Muñoz, 38, sees a new state law legalizing recreational cannabis as a rare opportunity to gain a foothold in a whole new industry – and create a remarkable brand.
“This is a unique opportunity for many of us,” said Muñoz, a native New Mexican who lives in downtown Albuquerque.
He and his partners envision a microenterprise that tackles all aspects of small-scale cannabis production and sale, from growing plants to manufacturing products to opening retail stores.
When lawmakers crafted the Cannabis Regulation Act – which allows adults 21 and over to use cannabis recreationally and cultivate it for personal use starting Tuesday and calls for legal sales of ‘by April – many envisioned a program that would make it as painless as possible for small businesses. entrepreneurs like Muñoz to get started in the business. But he and other newcomers are expected to face stiff competition from established medical cannabis companies considering expanding into recreational sales.
These big deals are likely to dominate the field, at least initially.
The 34 licensed producers, manufacturers and retailers of the state’s 14-year-old medical cannabis program have one clear advantage: They’re not starting from scratch.
They have the necessary infrastructure, from buildings and security cameras to access to water and capital, giving them a huge head start in what some advocates see as a big, lucrative business.
Jefferson King, marketing director for Everest Cannabis Co., said existing medical marijuana companies that specialize in recreational sales are poised to gain a quick hold in the market.
“Being established certainly eases the transition to a recreational market,” he said.
Everest, a mid-sized medical cannabis company that plans to open a dispensary in Santa Fe by the end of the summer – its eighth store but its first in northern New Mexico – “is definitely venturing into the recreational side, ”King said.
King predicts that “a lot of small businesses are going to grow,” especially with the proposed regulations which he says are designed to support microenterprises.
“There will definitely be enough market share,” King said. “When you consider the population of New Mexico and the fact that anyone over the age of 21 will be able to buy cannabis, it looks like there will be enough business for everyone.”
But getting started will be difficult.
“It’s a very expensive industry to enter,” King said, adding that raising capital and finding a place to grow and sell cannabis are among the biggest hurdles.
Muñoz and his partners plan to start small, initially growing up to 200 plants.
They’ve created a business plan and a budget, and they’re researching a facility and developing a security plan – the criteria for applying for a production license – but they’re preparing for challenges.
The well-positioned medical cannabis industry occupies an important place among their concerns.
“This is a major concern for us,” Muñoz said. “They’re going to have a huge advantage, at least initially.”
Newcomers are also likely to face competition from growers established in the state’s burgeoning hemp industry who plan to convert at least some of their acreage to cannabis.
Manuel Otero, a fourth-generation farmer in Los Lunas who grows hemp – along with hay, alfalfa, and other produce – is eager to see the state’s final rules for recreational cannabis growers so that he can get started – maybe as soon as this year.
He said he was planning to get big.
The transition from hemp to cannabis should be “semi-easy,” Otero said.
He now grows 4 acres of hemp and plans to devote around 2-3 acres to cannabis.
Otero isn’t worried that medical cannabis companies dominate the industry. He believes they might end up contacting farmers like him looking for more cannabis to market or use in product manufacturing.
“As long as these buyers stay consistent and don’t get greedy, yes I can make a profit,” he said. “We’re going to outfit them all day.”
Willie Ford, managing director of Reynold Greenleaf & Associates, an Albuquerque-based consulting firm for cannabis companies, said the money “is really going to rule” over those who are successful in the new industry.
“Those who have access to capital, like companies outside of the state, are going to be able to really do things that little guys can’t,” said Ford. “My great fear is that some of these [microbusinesses] are going to come and invest their savings in an industry that may not even be possible for them to be successful. You know, it’s almost like the state is giving them false hope.
Ford denounced what he called a “rushed legislative effort”, saying the state government is promoting the idea that small operators will be able to enter the industry but has “not put anything in place [in the law] To protect them.
“We are New Mexican citizens who run these medical programs because that is how the law was established, and we are now going to see a large influx of MSO – multi-state operators – who are interested in coming in and out. draining a lot of capital and resources to dominate the New Mexico market and get that money out of New Mexico, ”he said. “It breaks my heart. “
David White, founder of Organitica, which has been in the medical cannabis business since 2009, said his business would likely wait a year and then reassess whether to expand into the recreational industry. For him, ensuring that patients have access to their medication is essential.
“We really try to make sure that our patients are not in pain [during] this period of transition, ”he said. “We think it’s going to be very chaotic.”
Trends in other states that have legalized recreational cannabis, such as Colorado, indicate that state supply may become “pretty tight,” White said, “and we want to make sure patients are able to get what they need during this time ”.
For the more than 117,000 New Mexico patients, “this is not a fad,” White said. “It’s not a hobby. It is their medicine.
White said he hopes medical cannabis companies don’t dominate the industry and that micro-businesses thrive, as the new law provides.
“We really encourage microenterprise, so much so that we are working with a few potential candidates and will do everything possible to help them get a permit,” he said, adding that Organitica does not charge entrepreneurs for these services. .
“We really believe that microenterprises can consolidate the market so that we are not dominated by one, two or three very big producers, because we do not think that it does good for the factory, nor for the community,” he said.
Muñoz and others with plans for small businesses believe they’ll be able to offer something customers can’t find elsewhere: a taste of New Mexico.
“People love the boutique, the intimate experience of something local,” said Erica Rowland, farmer and medical cannabis user in Bernalillo County.
Although she only plans to grow cannabis initially, Rowland, whose family has been a farmer for at least 60 years, has a long-term view of what small businesses like hers can offer customers.
“I see a new lifestyle, a consumer salon lifestyle, a removal of the stigma associated with cannabis. This is the ultimate goal for me, ”she said.
Muñoz said he believes cannabis microenterprises will be the ones that give the state’s new recreational industry a prominent identity.
“Microenterprises should be treated like microbreweries,” he said. “It’s our business model: quality rather than quantity. We want to focus on customers who want a local IPA rather than a national brand beer. I think people will pay a bit more for that local touch. This will be our niche. “
Muñoz and his partners, Andrew Brown and Erika Hartwick Brown, are working to raise $ 500,000 to start the business. They’ve got $ 300,000 in pledges so far.
Every new obstacle they face seems to increase the price.
He is also studying commercial water rights, a requirement for cannabis producers. He said he was planning $ 10,000 a year for water.
Microenterprises like theirs, which integrate production and sales, can only market their own products, thus reducing their potential profit margin. And they must reserve 25% of their products for medical cannabis companies in the event of a shortage.
Muñoz wonders why he can’t sell these products directly to patients with medical cannabis.
Rowland said holding 25% for medical cannabis companies “is a service to those who built this program”
Her biggest concern is that state regulations for production may not be finalized until September, when most of the cannabis growing season is over.
How, she wonders, should growers of 200 plants like her produce a crop for next year, when legal sales begin?
The new law gives local governments oversight over the locations and operating hours of cannabis businesses, which she says could lead to changes affecting her farm.
“How can we increase inventory without over-investing in infrastructure while dealing with uncertainty over county zoning?” she asked.
Rowland already has water rights on her farm, where she grows alfalfa and flowers. It pays the Middle Rio Grande Conservancy District about $ 175 per year for these rights, a minor cost. But she estimates she will pay at least $ 100,000 to build a security fence and install cameras on the 5-acre property her family has operated for at least 60 years.
This, she said, will be a heavy financial burden.