By Omar Sacirbey
Hawaii’s eight medical marijuana license winners have their work cut out for them as they enter what could be a tough initial market in the state.
The winners – announced last week – are allowed to open July 15, but it is unlikely they will have their first harvests ready by then.
When the dispensaries do open, probably late this year, they will face stiff competition from nearly 3,000 caregivers who now can grow MMJ for the state’s 13,000-plus patients.
The bottom line: It could take new dispensaries several years to develop a healthy customer base, according to some observers.
Cannabis entrepreneurs wanting to provide ancillary products and services in Hawaii, as well as those entering similar MMJ markets in other states, should take note, as it might take longer than expected to start generating revenue and posting profits.
“I think it’s going to be a challenging marketplace because you have a very robust personal caregiver model already in place,” said Brett Roper, chief operating officer of Medicine Man Technologies, a cannabis consulting firm in Denver. “When you look at the existing marketplace, these are mostly people who already have pretty reliable access to products they use, and they’re getting them probably pretty cheaply.”
And the Winners Are…
Hawaii received 66 applications from 59 companies for licenses to grow medical cannabis and sell it through dispensaries.
The winners have until Friday to pay a $75,000 licensing fee to the state health department. If they fail to do so, the department will pick the next highest-scoring applicant for the county.
Businesses that won licenses for the counties on Hawaii’s islands are:
- Oahu – Aloha Green Holdings, Manoa Botanicals, TCG Retro Market 1
- Hawaii – Hawaiian Ethos, Lau Ola
- Maui – Maui Wellness Group, Pono Life Sciences Maui
- Kauai – Green Aloha.
Each winner can operate two dispensaries, bringing to 16 the total number of dispensaries statewide. Each also can have two cultivation centers. None of the winners returned emails or calls seeking comment.
Some notable license applicants did come up short last Friday, including actor Woody Harrelson.
Don’t Hold Your Breath
For the winners, the next several months will be filled with construction, permitting bureaucracy, planting, growing, harvesting, drying, curing and packaging product. And it will be several months before patients will actually be able to buy cannabis, some observers predicted.
“All of that is going to be hard to get done and grow a plant by July 15,” Greta Carter, president of The G. Car Companies, a marijuana consulting firm in Washington state, said.
Roper of Medicine Man Technologies agreed.
“With the normal cannabis cultivation process, I just don’t know how it’s possible for them to have products that have been tested and on the shelves in less than 90 days,” he said.
Another big question: How soon can the winners have their facilities ready for business? Roper, for his part, expects most already have purchased buildings. But that’s only a start.
“I think it’ll be six to seven months from now before product can even hit the shelves. And that doesn’t include testing,” he said. “Best-case scenario is that product hits the shelves by late this year.”
On its blog, Aloha Green acknowledged as much.
“There is slim chance that a dispensary will be selling any substantial amount of marijuana at the July 15 start date,” the blog post said, adding the dispensary would be up and running by late summer.
At the same time, licensed home growers could be the dispensaries’ biggest barrier to market, Roper said.
“You’re probably not going to penetrate the caregiver market too heavily,” Roper said. “Those people are likely not to embrace the new model. Why would they pay the equivalent of $4,000 a pound when they can grow it for pennies on the dollar, or buy it from someone maybe for less?”
Instead, dispensary owners should look for customers among people currently using mainstream medicines, but may be curious about alternatives.
“If I had one of those licenses, that’s the marketplace I would be focused on to build for myself,” Roper said.
The new dispensaries can still try to woo home growers or patients who get their cannabis from home growers. But they’ll attract them not with flower, but with oils, vapes or other extracted products that growers usually don’t do, Roper said.
Hawaii should be encouraged, however, with how the market evolved in Nevada, which was in a similar situation when its dispensary license winners were announced in late 2014.
At the time, the state had nearly 7,500 card-holders who could only obtain their cannabis from caregivers, but patient counts have surged since then, resulting in a robust market.
Limitations and Black Market
Dispensary owners also can expect to peel some customers away from the black market. But Hawaii’s new MMJ rules have a quirk that Roper said could encourage a “gray market.”
The rules prohibit “sweets and savories,” Roper said. But people are allowed to buy their own cannabis-infused oils from dispensaries and could make large batches of edible products that they could resell into the illicit market.
Despite the challenges, observers believe Hawaii’s market will pay off for those who got in, so long as they don’t over produce, that they comply with state rules, and that they provide top-quality product.
“Anytime you got your hands on weed from Hawaii, that was some something special,” Carter said. “They’ve got an opportunity to blow away the rest of the country. It’s really good cannabis.”
Omar Sacirbey can be reached at firstname.lastname@example.org.