Ohio operators prep for launch of adult-use marijuana market

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Image of trays containing cannabis gummies being loaded into a rack

(Photo courtesy of Hundred Percent Labs)

Ohio’s transition from a medical marijuana market to one that also offers adult-use sales will not follow the blueprint of other states.

For starters, Day 1 of sales – typically a celebratory event statewide – is still a mystery, even as the application window to convert MMJ business licenses to dual-use permits opened June 7.

And while some industry sources told MJBizDaily that Ohio’s first dual licenses could be approved within the next few weeks, state regulators have been noncommittal.

Ohio cannabis license priority

In another anomaly, it appears retailers will not be the first in line for approvals.

“To help ensure an efficient supply chain, applications from cultivators, processors and testing laboratories will receive priority,” Jamie Crawford, spokesperson for the Ohio Department of Commerce’s Division of Cannabis Control (DCC), told MJBizDaily via email.

Marijuana operators and consumers can expect a rolling approval process completed in batches, depending on when applications were received and if licensees meet all requirements for certificates of operation.

Such requirements include potential inspections and point-of-sale integrations that distinguish between medical and recreational sales for state tracking purposes.

“There will be no one singular day when sales begin,” Crawford confirmed.

Billion-dollar marijuana market?

When the Midwest market reaches its full potential, sales could eclipse $1 billion in 2025 and hit $1.5 billion-$2 billion by the end of 2027, according to MJBizDaily projections.

Ohio’s large population and geographic location likely will help attract hundreds of thousands of new consumers to its recreational cannabis market, more than offsetting the continued exodus of medical patients.

The state has nearly 12 million residents – making it the seventh-most-populous in the country – with nearly three-quarters of Ohioans older than 21.

Ohio also borders five states, of which only Michigan has a regulated adult-use market.

Adult-use marijuana holdouts

In the heartland, Indiana and Wisconsin remain holdouts for a marijuana program of any type, and it might take federal reform to push Iowa from medical to adult use.

Iowa’s limited MMJ market is very restrictive, while Indiana and Wisconsin are among nine states without any regulated cannabis program.

Minnesota regulators and politicians are drafting rules and regulations in anticipation of issuing recreational marijuana business licenses next year.

Long wait for cannabis

Ohio will become the 21st U.S. state to establish an adult-use program when the first licenses are awarded, following Maryland’s launch last July and Missouri’s debut in February 2023.

The nearly one-year gap between recreational market launches is believed to be the longest drought since the first wave of consumer access to adult-use marijuana more than a decade ago.

Ohio’s pathway to creating a consumer retail market was prompted through a special election last November, when voters overwhelmingly approved a ballot initiative legalizing the cultivation and sale of recreational marijuana.

Where did they go?

As the recreational market launch nears, Ohio’s medical marijuana market has been steadily losing registered patients and sales are dropping.

The most recent tally counted 165,746 MMJ patients, down nearly 15,000 (or 8%) since the November election and well below patient counts in similar-sized states.

Neighboring Pennsylvania, which has a population of almost 13 million, had 441,083 MMJ patients through April, according to the state health department.

Since November, the patient count there has increased by more than 6,000.

Michigan marijuana sales

Ohio shares its northwest border with Michigan, where weed is much cheaper, likely contributing to the decline in Ohio patient counts.

Tim Johnson, a longtime Ohio lobbyist and marijuana industry consultant, estimates Ohioans spent more than $700 million at Michigan marijuana stores last year.

Some Michigan operators near the Ohio border claim as many as half their customers live in Ohio.

In 2023, MMJ dispensaries in Ohio reported selling $484 million of medical cannabis, up only 1% from the year before.

Demand for quality

Johnson called the discrepancies an “embarrassing joke” while taking a pot shot at Ohio producers, a mix of multistate operators and local growers.

“As the old saying goes, give me a bud that sticks to my fingers, not one that crumbles to dust,” he mused.

“Unfortunately, we get a lot of dust in Ohio.”

In a bid to prop up the MMJ market, regulators in March reduced the fee for medical marijuana patient cards or caregiver cards to 1 cent.

Ohio operators all in

The DCC told MJBizDaily it expects most operators will apply to convert their licenses to dual use.

According to the latest state data, the total number of licenses include:

  • 132 dispensaries.
  • 37 cultivators and processors.
  • 10 testing labs.

“We are working on submitting adult-use license applications for our existing locations in Newark and Cuyahoga Falls and plan for continued growth in the market,” said Paul Chialdikas, senior vice president and central regional leader of New York-based multistate operator Curaleaf Holdings.

Sept. 7 deadline

Hundred Percent Labs, an extraction processor in Mount Orab, Ohio, submitted its application June 7.

“We don’t know any timeline at this point,” Chief Operating Officer Jason Littman said.

Under Ohio law, approved through the voter referendum, converted marijuana business licenses must be issued by Sept. 7.

“Our hope is that it will be before then,” Littman added.

Increasing staff, production

Curaleaf is increasing cultivation capacity, hiring workers to handle an expected bump in foot traffic at its two stores and dedicating lines and checkout terminals for existing medical patients, according to Chialdikas.

Acreage Holdings, which owns five stores in Ohio under The Botanist brand, is planning to extend operations from 9 a.m. to 9 p.m., adding two hours per day.

The New York-based MSO is hiring 85-100 new production and retail positions across the state to meet expected demand.

“It is expected that there’s going to be an increase in traffic, probably more than what the norm will become, because people want to really be a part of history,” said Kate Ols, Acreage executive vice president of the Midwest and Northeast regions.

Acreage was part of Ohio’s Day 1 launch of MMJ sales in January 2019.

As a Level 1 license holder, Acreage can expand cultivation from 25,000 square feet to 100,000 square feet under the adult-use program and add three stores.

Hundred Percent Labs has been prepping its processing operation for automation and equipment upgrades in the lead-up to adult-use sales.

“We are working hard in Mount Orab to ramp up our production to handle the new patients and customers who will be visiting dispensaries across Ohio soon,” Littman said.

Medical rules for now

The Sept. 7 licensing date is also the deadline to regulators to finalize rules and regulations for the recreational marijuana market – until then, retail must abide by the state’s standards for MMJ – another difference from nearly every other recreational market launch.

That means consumers will have to wait for the introduction of pre-rolls into the market and an increase of the 70% THC potency cap on concentrates to 90%.

Smoking accessories such as rolling papers also are prohibited to sell under the medical program.

Preparing for retail

Deliveries also are restricted, placing more emphasis on the in-store retail experience.

In response, Philadelphia-based MSO Ethos Cannabis recently refreshed its website design to highlight certain products, installed integrated touch screens at its stores and plans to launch a loyalty program.

“We’ve also looked inside the business at how we’re setting up our retail spaces and laying out accessories,” Ethos CEO Gibran Washington told MJBizDaily.

“It’s definitely going to be heavy on the experience.”

Chris Casacchia can be reached at chris.casacchia@mjbizdaily.com.