Alaska adult-use cannabis market on track, despite supply hiccups

By John Schroyer

Alaska, the nation’s newest adult-use marijuana market, is slowly but steadily getting up and running, although many shops are running short on product because demand exceeds supply.

As of Nov. 29, 61 cannabis business licenses had been issued in the state, including 29 that are currently operational.

More businesses are expected to open soon, including growers, and that should help ease the supply situation. Customer demand, meanwhile, has been brisk. That has meant many retailers – although not all – are for now struggling to meet demand.

“We’re the first cannabis store to open in the last frontier,” crowed Derek Morris, the general manager of Herbal Outfitters, which became the first marijuana retailer in Alaska when it opened Oct. 29 in the small, port town of Valdez.

“We’re still the only store that’s been open seven days a week since then, and we have not run out of product. A lot of other stores have been having trouble with that.”

Inventory issues

Nick Neade, who co-owns Frozen Budz retail shop in Fairbanks with his wife, Destiny, said the couple has had constant supply problems since their store began serving customers on Halloween.

“We’ve been open kind of off and on. The demand is way higher than the supply right now. That’s the problem we’ve been having,” Neade said, adding that at one point in November Frozen Budz’s doors were closed for nearly two weeks because he lacked the inventory to sell.

“It looks like there won’t be any flower available until the middle of December, after we sell out, and I’m assuming we’re going to sell out in a couple days,” Neade said.

Still, he said, many cannabis businesses in Alaska have yet to become fully operational, which means the supply chain – and other industry issues – will likely get ironed out in the coming months.

For example, Neade said, a large-scale cultivator is expected to come online within the next month, “right down the street from us.” That will alleviate most, if not all, of Frozen Budz’s supply issues.

Shops proving popular

There has been no lack of demand from customers.

Neade estimated that at least 150 customers per day visit Frozen Budz when it’s open, and Morris said Herbal Outfitters – roughly a six-hour drive from Anchorage – has been getting about 1,000 customers a week.

Morris and Neade both said their primary customer base has been Alaskans, but they’ve both seen a good number of cannabis enthusiasts from outside the state.

“There’s all ages, all types of customers and tourists,” Neade said. “A lot of Asians come here in winter because they want to see the northern lights. So we’re seeing a little bit of everybody.”

Morris added that he’s encountered customers from California to Europe in his shop, though most are from Alaska.

More to come

Despite the supply shortages, Cynthia Franklin, executive director of Alaska’s Alcohol and Marijuana Control Office, said the industry rollout is going smoothly, with many more businesses getting ready to open in coming months.

“A lot of these places are going to open before Christmas,” Franklin said. “Everybody’s going to be shooting for the holidays.”

Franklin added that the number of currently operating cannabis businesses, at 29,”could easily double in December,” as more retailers, product manufacturers, testing labs and growers begin full operations.

So far, only one testing lab, CannTest, serves the entire state, but that’s likely to change soon. At least two labs are expected to be operational this month, and two more are expected to open after that and likely will begin accepting marijuana samples in 2017.

There are also 343 more businesses waiting to receive business licenses, including 203 that are still in the “Initiated” phase, meaning they haven’t filed any paperwork or paid any fees.

That could become an issue over the next year, Franklin warned, since her office is understaffed and turnaround time between when a business finishes its paperwork and actually receives its license is already several weeks long. Franklin noted that one company received its license Dec. 1 after paying its fees in early October.

Franklin is also concerned with the coming interplay between the federal and state governments on marijuana policy, given that there are a number of localities in Alaska where rec was overwhelmingly approved by voters but aren’t connected to the mainland.

That could make transportation and business issues a much bigger deal, because it could invite scrutiny from the Federal Aviation Administration or Coast Guard.

“They really want licensed, regulated marijuana in those communities, but the only way you can get things in or out is by plane or boat,” Franklin said. “My concern about the transportation is dovetailing with my concern over the new administration in Washington, and particularly the disconnect.”

There are not yet any answers to be had on that front, since President-elect Donald Trump has not outlined a cannabis policy, and neither has his pick for attorney general, Sen. Jeff Sessions, R-Ala.

That uncertainty is at the top of Franklin’s list when it comes to big questions for the future of Alaska’s cannabis industry.

“Colorado, Oregon, Washington, they all started with medical programs and then moved to adult use, so theoretically, they could dial it back to just medical if they had to,” Franklin said. “But we never had medical stores. We went straight to adult use. So I have a healthy concern about it.”

John Schroyer can be reached at [email protected]

Daily News | Alaska Medical Cannabis Business & Marijuana Legal News | Featured | Legal & Regulatory News for Marijuana Businesses | Recreational Marijuana News

Leave a Reply

Your email address will not be published. Required fields are marked *

Please note: Comments are moderated by our editors who do their best to approve comments ASAP. As Marijuana Business Daily is focused on business, we approve comments that are specifically relevant to industry professionals. General opinions and questions about cannabis may not be posted.