Six months before the adult marijuana market opens, supply issues loom

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A few times a day, someone from out of town will visit one of Paulson Palmer’s three dispensaries in Northwestern Montana to ask if he can buy marijuana. The answer is almost always no.

While Palmer’s Fruit Factory may sell cannabis to Montana residents with a medical marijuana card, it will not be legal to sell it for non-medical adult use until January 1, 2022 – a message that may not be clear to out of state. tourists who may have heard that weed has been legalized in the Big Sky Country but haven’t followed the new law closely.

For advocates of adult marijuana, the fact that customers are already trying to buy is a sign that their forecast of the legalization of cannabis becoming a multi-million dollar industry in the state was correct. But pent-up demand also raises another concern: Will dispensaries in Montana be able to meet that demand in January?

“I think we’re going to run out of weed in less than a week,” said Pepper Petersen, president and CEO of the Montana Cannabis Guild. “That’s what happened everywhere else when the leisure market opened up. We barely follow the demand [for medical marijuana] at present. ”

Days after recreational cannabis legalized in Illinois last year, some Chicago dispensaries ran out of supplies and shortages persisted for weeks and months. The same has happened in New York and New Jersey this year.

The Fruit Factory in Columbia Falls is one of several medical marijuana dispensaries preparing for the Adult Market to open on January 1, 2022. Credit Justin Franz / MTFP Credit: Justin Franz / MTFP

According to a 2020 study from the University of Montana’s Bureau of Business and Economic Research, adults in Montana consume between 30 and 33 tonnes of cannabis per year for both medical and recreational purposes (although recreational use remains illegal). In fiscal 2020, medical marijuana users consumed approximately 12 metric tonnes of cannabis. Petersen and others in the industry estimate that the adult cannabis market will be three to five times larger than the current medical market once it opens next year.

The UM study said legal cannabis will also attract tourists to Montana, as it does to other states. According to a 2019 Colorado Tourism Board study, 6% of tourists said legal marijuana was a top reason for their visit, and 15% of all tourists visited at least one dispensary. The UM study estimates that similar numbers will be seen in Montana.

But cannabis cannot be grown overnight, and there are limits to what a dispensary can grow. Growers can only grow a specific amount of cannabis at a time based on a tiered system, according to the Montana Code Annotated. A Level 1 producer can develop up to 1,000 square feet of product, and a Level 9 producer can develop up to 20,000 square feet in up to six locations. Only a few producers in the state are growing at this level, Petersen said.

Besides the legal limits, there are also financial limits. Growing so much cannabis takes a lot of capital, and not everyone has the resources to increase production to the legal maximum. Because cannabis is still illegal at the federal level, it is nearly impossible for producers to secure traditional financing, as banks are reluctant to work with dispensaries due to the federal ban. The federal ban also prohibits dispensaries from importing cannabis across states, even from states where marijuana is legal.

Shortages could persist for some time. House Bill 701, the legislation that established the framework for the recreational market, gave existing growers an 18-month lead over everyone else, meaning new growers for adult use will not be able to enter the market until July 2023. .

Michaela Schager, owner of Montana Medicinals in Missoula, said she was doing all she could to step up cultivation in the months leading up to the adult market opening. She said it takes at least seven to nine weeks for a cannabis plant to flower fully, and she worries there won’t be enough.

“It will be a whole different ball game. There is a ton of excitement in the community right now, but I would say most vendors are pretty stressed out.

Michaela Schager, owner of Montana Medicinals in Missoula

“I think we will see some disruption in the market in January and February, and it will probably take a few months for everything to calm down,” she said.

Schager said the leisure market would create a “completely different landscape” for her and other established medical providers. Perhaps the biggest change will be the transition from a vertical market – where dispensaries had to grow, produce and sell all of their own products – to a horizontal market where companies can wholesale and focus on niche markets. specific. The State Revenue Department – which runs the adult market and takes over the medical system from July 2 – will issue five different types of licenses to producers, including for cultivation, manufacturing (of edibles and other marijuana products), sale, laboratory testing and transportation. It will be possible for the same company to hold several types of licenses.

Montana Medicinals will initially apply for a number of different licenses, but Schager said she hopes her company can focus on one or two different products while sourcing other types of marijuana products from them. other dispensaries. She said Montana Medicinals currently specializes in edibles and wants to continue on that path.

Palmer, who runs Fruit Factory stores in Columbia Falls, Evergreen and Libby, echoed the hope the dispensaries will start working more together.

“I think dispensaries are really going to start focusing on the products that they are best for,” he said.

Supply shortages may be just one of the many challenges facing the state’s cannabis industry. Over the next few months, the Revenue Department will be drafting business rules and Schager said many details remain to be worked out. For example, Schager said it’s still unclear what exactly will be allowed on packaging for recreational marijuana (Bill 701 says it must include a white label with a logo, name of the product and its THC content, and Bill 249 requires that the packaging not attract children). Until the Department of Revenue offers more advice, she waits for the design and purchase of packaging materials.

Kristan Barbour, administrator of the Cannabis Control Division for the Department of Revenue, said the agency plans to launch the rule-making process in the coming weeks and will hold administrative hearings on advertising and other questions in August and October. Barbour encouraged the public to visit MTRvenue.gov/Cannabis to sign up for updates on the process.

Schager and other vendors will be watching it closely.

“It will be a whole different ball game,” she said. “There’s a ton of excitement in the community right now, but I would say most vendors are pretty stressed out. ”

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