By John Schroyer
Insiders in the United States’ latest recreational cannabis market – Alaska, which has been up and running since October – say the rollout has been hindered by bureaucratic issues and continued supply shortages.
Those problems are expected to be resolved in the months ahead.
But for now, the regulatory hurdles are slowing the opening of shops and the supply squeeze is forcing up wholesale cannabis prices for retail shop owners.
So far, Alaska has just 14 retailers statewide because many license applicants have been dealing with enormous amounts of red tape at the local level, especially in Anchorage, said Leah Levinton. She’s a co-owner of Enlighten Alaska, a rec shop that’s slated to open this week in Anchorage, which has only three retailers despite being the state’s largest city by far.
It’s taken her family two years to get everything in order to open this week, Levinton said, and they’ve faced issues with the municipality that range from parking spaces for the shop to zoning problems. She said it’s no wonder the city has so few MJ businesses to date.
“Because of what’s going on in Anchorage, it’s taking longer for shops to open,” Levinton said, adding that her family has spent nearly $350,000 on the shop over the past 24 months.
“Thousands and thousands and thousands of those dollars have been to navigate through our municipal process,” Levinton said.
Still, she’s delighted to be part of a rec MJ market she believes has a bright future.
“I’m working 14 to 16 hours a day, and I couldn’t be happier,” Levinton said. “We are so excited. There has never been legal commercial cannabis in Alaska, and we are literally paving the way. We’re pioneers.”
As of Jan. 31, the state had issued 86 rec business licenses, and 49 of those companies were operational, according to the Alaska Alcohol and Marijuana Control Office (AMCO). Of the 49 operating businesses, there are 31 growers, 14 retail stores, two testing labs, one edibles maker (listed as a “product manufacturing facility”) and one concentrates producer.
But many more are wading through the approval process, said Sara Chambers, AMCO’s acting director. She said the number of licensed cannabis companies in Alaska – which has no cap on the number of businesses allowed – will “absolutely” continue to grow.
She noted that about 20 licenses are on the agenda for Thursday’s AMCO board meeting, and she has personally signed off on recommendations for a number of those license applicants.
And there are literally hundreds more applicants that have at least begun the process of obtaining a permit, meaning the Alaskan cannabis industry could get quite crowded before year’s end.
For now, however, at the top of most Alaska marijuana executives’ minds is the ongoing supply problem.
“We need more cultivators in order to get supply to the retail stores, and part of that is going to resolve itself when the existing licensed cultivators have their first real season,” Chambers said.
What many in Alaska’s rec industry have found is that demand is simply outstripping the current legal supply.
“I think things are going as well as expected, for the amount of product that’s available,” said Lance Wells, an Anchorage attorney who runs the Alaska Cannabis Law Group. Wells also co-owns Denali 420 Recreationals, a retail shop about an hour’s drive north of Anchorage.
Wells’ shop, which opened Jan. 28, is stocked and ready to serve customers six days a week, but on a limited scale.
“We can fill our store with product right now, but the prices I have to pay, and the quality of product, I genuinely can’t sell that to people,” Wells said, adding that much of the wholesale cannabis currently available in Alaska is subpar.
Add to that the limited amount that’s even offered by growers, and Wells “can’t sell ounces at this time. I’ve been selling 2 1/2-gram bags at this point.”
Another problem, he added, is the sheer price stemming from the scarcity of legal wholesale cannabis.
Wells said he’s seen a pound of cannabis selling for $3,000 to $4,700 on the wholesale market, and those prices often translate to about $22-$24 per gram on average in Anchorage shops. (His store retails cannabis for about $19 a gram, he said.)
Levinton of Enlighten Alaska is facing similar issues in Anchorage, where she heard that a “retailer recently purchased multiple pounds at $8,500 a pound.”
She didn’t pay nearly that much, but she noted that Enlighten will be opening only Friday through Sunday each week at the start because of limited inventory.
“We will be opening with 11 pounds of bud from a few cultivators. We’ll have some pre-rolls. We’ll have some tinctures and vape oil and a CBD pet line, and edibles – a whole stock of edibles,” Levinton said. “We are limiting our hours because of this supply issue.”
“I’m hoping we’ll last two weekends” before running out of product, she added.
Levinton, Wells and Chambers all share a belief the market will mature and wholesale prices will drop as more cultivators come online and get into more of a regular growing cycle.
Wells suggested the lack of supply will be resolved within four or five months; Levinton said she’s hoping more product will be available by the end of March.
Issues still facing businesses
There are other unresolved industry issues, said Cary Carrigan, executive director of the Alaska Marijuana Industry Association.
“We still have some things we need to tackle,” Carrigan said. “We still haven’t gotten on-site consumption dealt with.”
That’s on the AMCO board’s agenda Thursday, and Carrigan said it’ll become more of a pressing matter as summer approaches, because that’s when tourism season begins.
He cited port towns like Haines and Sitka in southern Alaska.
“Ten thousand people get off of cruise ships every day. It’s unbelievable,” Carrigan said. “When these people start coming in and wanting to buy marijuana, and (cruise line officials) don’t want you to bring it back onto the ship, how do you stop people … to see if any of them have marijuana in them?”
John Schroyer can be reached at [email protected]