Early Oregon Rec Sales Would Provide Lifeline for Some Dispensaries, Big Profits for Others

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By John Schroyer

The fate of some Oregon medical marijuana businesses rests in the hands of Gov. Kate Brown.

A measure that would allow the state’s 310 licensed dispensaries to begin selling recreational cannabis on Oct. 1 now sits on Brown’s desk, and she can either veto the bill or sign it into law.

Her decision will create huge ripples across the state’s cannabis industry, and it ultimately could mean the difference between life and death for numerous dispensaries struggling to survive in a crowded market.

“It’s a very good thing for the state,” said William Simpson, the president and founder of Chalice Farms, which owns a cultivation operation and three dispensaries around Oregon. “I know there are a lot of dispensaries that are having a hard time because there’s so much competition… It will be a lifeline for certain shops, for sure.”

Recreational sales are not slated to begin until the state solidifies rules on the new industry and issues cultivation and retail licenses.

The bill would bridge the gap until that time by allowing existing dispensaries to sell up to a quarter-ounce of flower at a time to recreational cannabis customers or up to four non-flowering plants. The measure would prohibit the general sale of extracts and edibles to rec users via dispensaries, although medical patients could still purchase them.

Observers expect the governor to sign the measure, but the MMJ industry is waiting with bated breath.

The manger of one dispensary in Portland – who asked that his name be withheld – said a veto of the rec bill “would be a killer” for many MMJ businesses because the medical cannabis industry is saturated.

“Most dispensaries are struggling right now,” said the manager, estimating that his dispensary would be able to survive a few months past October without being able to sell to recreational customers. “We’re making enough to pay the bills, pay the rent, keep the lights on, and pay our employees.”

Allowing rec sales would help these dispensaries stay afloat, and possibly even thrive.

Simpson estimates that many dispensaries would be able to triple or even quadruple sales. He noted that there are only about 71,000 registered MMJ cardholders in the state vs. an estimated 1 million consumers who at least occasionally use cannabis in Oregon.

“So you’re looking at a market that’s 20 times bigger, not even taking tourism into account,” Simpson said.

Aside from in-state demand, dispensaries in Oregon could lure a hefty amount of visitors – including some Washington State marijuana consumers who live near the border.

Simpson said he’s crossed into Washington several times recent months just to check out prices, and he’s found the average gram there costs between $25 and $30, while Oregon MMJ prices stand at $8-$10.

“That’s not going to change Oct. 1. At least not in our stores. So we have a lot of potential for cannabis tourism,” Simpson said.

Still, he doesn’t think that dispensary owners would suddenly become rich. The market would certainly expand, but there’s enough competition already that it wouldn’t be raining money, Simpson said.

Portland cannabis attorney Amy Margolis was also measured in her assessment of the impact the measure might have.

“It’s not going to hurt, but how much it helps is anybody’s guess,” Margolis said.

Under the bill, the state would assess a 25% sales tax on recreational marijuana beginning Jan. 4. But between October and then, medical and rec sales would be tax-free.

The measure could therefore provide a sizable sales boost in November when dispensaries typically have a lot of excess product, Margolis said, but activity could then decrease early in 2016 when the tax rate kicks in.

There also could be government fees for dispensaries that want to begin selling rec on Oct. 1. In Portland, for example, dispensaries will have to pony up between $1,000 and $1,500 for a temporary license, according to the Willamette Week. The state’s health agency also might introduce additional fees and rules.

Margolis said it’s still an open question as to whether dispensaries will be allowed to keep selling recreational cannabis after the state completes its regulatory work and begins issuing rec store licenses next year.

Simpson, as a member of the Oregon Liquor Control Commission’s Rules Advisory Committee, said it’s likely that dispensaries will have that option. (The committee is still in the rulemaking phase for the state’s rec industry.)

But, he added, if dispensaries choose to become rec stores, they’ll almost certainly be taxed at a higher rate than dispensaries that only serve medical patients.

“The OLCC wanted to keep them very separate. You’re either medical or you’re rec,” Simpson said.

John Schroyer can be reached at johns@mjbizmedia.com