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Marijuana dispensaries

    THEN THERE WERE FOUR

    One of Provincetown’s Five Pot Shops Has Closed

    Heal has shut its doors and turned in its license

    By

    PROVINCETOWN — What used to be five marijuana dispensaries in Provincetown is now just four. Heal Provincetown, which was originally planned as a medical cannabis dispensary on Harry Kemp Road but later opened as a recreational or “adult-use” dispensary at 48 Shank Painter Road, next to Stop & Shop, is now closed for good.

    Heal Provincetown is no longer a store. The owners of the license to dispense marijuana returned it to the Cannabis Control Commission on Feb. 23, 2023, 16 months after they opened in October 2021. (Photo by Nancy Bloom)

    Patricia Faass, president of Heal Inc., confirmed that the company has returned its license for the Provincetown store to the state’s Cannabis Control Commission (CCC).

    Faass declined to answer further questions about the closure. Heal Inc.’s parent company, Taj Green LLC, still owns a dispensary in Sturbridge and is developing a cultivation facility in Warren.

    Linda Fiorella, the town’s licensing agent, confirmed the closure to the licensing board at its Feb. 28 meeting.

    “At the end of January, we became aware that one of the marijuana establishments in town had posted a sign, and had something on their website, that said, ‘See you in April,’ ” Fiorella told the board.

    All of the host community agreements that Provincetown signed with cannabis dispensaries, however, require them to be open year-round — which is defined in the agreements as at least four hours per day, four days per week, with “an exception for a once-a-year break in operation not to exceed 30 days.”

    “If you’re closed at the end of January until even April 1, that’s more than 30 days,” Fiorella told the board.

    She wrote a letter to Faass on Feb. 7, ordering Heal to comply with its agreement. “Barring express permission from the select board you will be required to open … ‘Four hours a day, four days per week.’ ” Fiorella wrote. Violations would result in fines beginning at $100 per day and escalating to $300 per day, with each day being a separate offense.

    On Feb. 20, Heal’s board sent a letter back to Fiorella. (The members did not sign their names, but current filings with the secretary of state show that the directors are Faass, Alexander Oliphant, Gary Einsidler, and Jay Zimmerman.)

    “On Jan. 27, 2023 Heal Provincetown was forced to close temporarily as we had no staff left in our employ who were trained and registered to open and close our dispensary,” the board wrote. “As you are well aware, staffing and the lack of people who want to work is an ongoing issue for many local businesses in Provincetown.”

    Store manager, assistant manager, and shift lead positions were all vacant, the directors wrote, and the CCC has lengthy requirements for the vetting and training of new hires for those jobs.

    “To handicap our business after 30 days with the fines outlined in your letter is unrealistic given a staffing situation that is beyond our control,” the directors wrote. “Based on the daily fine outlined in your letter, you have left us no choice but to shutter the business permanently.”

    On Feb. 22, Fiorella sent a second letter, almost identical to the first, with an additional note that fines would begin on March 1 if the business was not open by then.

    On Feb. 23, the Heal directors wrote back: “It is unfortunate that the town is not willing to work with us while we manage through a situation that is beyond our control.” They said they had notified the CCC that, effective Feb. 23, “we were surrendering our adult-use license and have closed our business in Provincetown.”

    Heal Inc. started as a nonprofit in 2015, then converted into a for-profit before signing its host community agreement with Provincetown in October 2018. It took another three years to secure a license from the CCC. The store opened in October 2021 and was open for about 15 months.

    A Competitive Business

    Both town-by-town sales figures and the testimony of owners show that retail marijuana has been a competitive business here.

    Until the summer of 2022, individual dispensaries all paid 3 percent of their gross sales directly to town governments as “host community impact fees,” which were meant to defray extra costs those governments might face as a result of the recreational marijuana industry. The state legislature invalidated those community impact fees last July, saying that towns already receive a 3 percent tax on marijuana sales and the 3 percent “host community fees” were unnecessary.

    Nonetheless, those added fees help trace the fortunes of individual stores on the Outer Cape.

    Curaleaf, at 170 Commercial St. in Provincetown, was the first cannabis dispensary to open on Cape Cod. During its first fiscal year, which ran from July 2020 to June 2021, Curaleaf gave Provincetown $249,000 in host community fees, which corresponds to total sales of around $8.3 million.

    That number fell significantly as other stores opened in Provincetown, Wellfleet, and Eastham. Curaleaf’s last four quarterly impact fees to the town totaled $113,000, which corresponds to about $3.8 million in annual sales.

    Eastham, meanwhile, has benefited from its location closer to the customers of the Mid Cape. Emerald Grove was the first dispensary to open there, in May 2021. In the fiscal year that followed (July 2021 to June 2022), Emerald Grove paid Eastham $199,600 in host fees, corresponding to $6.6 million in sales.

    Emerald Grove in Eastham has reaped the rewards of its proximity to buyers from the Mid Cape. Sales here exceeded those of any other single dispensary on the Outer Cape in fiscal 2022. (Photo by Nancy Bloom)

    Salty Farmers got a later start, opening in August 2021, and had sales of about $2 million that fiscal year. Piping Plover and Cape Cod Cannabis, both in Wellfleet, sold about $3 million each.

    The boom times that first came to Curaleaf and later to Emerald Grove could soon be felt beyond the rotary. There are two stores planned in Orleans and one in Brewster. Chris Taloumis, owner of the Haven dispensary on Lopes Square in Provincetown, said he hopes to have his Brewster store open by the summer.

    And by this time next year, the rules for “social use,” also known as pot cafés, should have been developed, according to Dave DeWitt, a director of the advocacy group Cannabis on Cape Cod and a member of the High Dunes Craft Cooperative in Truro.

    “People are definitely interested,” DeWitt said, “especially because it doesn’t take the capital investment of a big cultivation facility. The cost to get into the game is going to be a lot less.”

    Provincetown at one point was one of 12 “pilot communities” for social use, DeWitt said, although the CCC appears to now be taking a statewide approach with an emphasis on access for smaller players.

    Within about a year, in other words, the battle of the pot shops could be supplanted by a different scramble for the prime pot café location.

    CANNABUSINESS

    Dispensary Owners Now Seek to Build Grow Facility in Truro

    The canopy space is 10 times as large as in earlier plan

    By

    TRURO — The owners of cannabis dispensaries in Eastham and Wellfleet plan to build a 9,600-square-foot building to grow and manufacture marijuana products off Route 6 in North Truro, an update to an earlier proposal that would significantly expand their production space.

    The proposal is a joint venture by Zachary Ment, owner of the Piping Plover in Wellfleet, and Harlen Howard and Jonah Turner, co-owners of Salty Farmers in North Eastham. Ment, Howard, and Turner had asked earlier this year to use a 960-square-foot building at 1 Noons Heights Road to grow marijuana for their businesses.

    Ment and Howard presented the expanded proposal to the Truro Select Board on July 13.

    The new structure would likely have a canopy — the area used for growing plants — of about 1,000 square feet, though plans are not yet final, Ment told the Independent. That’s about 10 times as much cultivation space as was in the original proposal. Ment said about half of the building will be used for cultivation.

    In spite of the scale of the expansion, Ment said that “the Hatchery,” as the facility is tentatively named, will still be considered a “tier 1” cultivation facility, that is, the smallest possible class, in the eyes of the state Cannabis Control Commission (CCC). But specifics of the building size have “a huge margin of error” he added, because the plan is in its early stages.

    The property at 1 Noons Heights Road is currently owned by Michael F. Winkler of Truro, according to the assessor’s database, and includes 4.43 acres of land and three existing buildings: a 960-square-foot office building, a 1,464-square-foot wood-frame storage garage, and a 6,600-square-foot metal-frame storage garage. The property is valued at $1,010,800.

    Ment told the Independent that the dispensary owners had reached an agreement with Winkler to build the new structure on the property, which Winkler confirmed.

    Winkler currently operates a crane service out of the Noons Heights Road property, and he said he will continue to do so once the Hatchery is up and running.

    “Not much has happened yet,” said Winkler. “All this stuff is preliminary.”

    The dispensary owners have been negotiating with the town since March over a host community agreement (HCA) — the state-mandated arrangement between a marijuana business and the town government where it is to be located.

    The increase in the size of the building, said Ment, came about during those negotiations.

    It’s an outcome that “seemed to both parties like a viable option,” he said, but he would not explain why the town sees a larger facility as advantageous, because, he said, those negotiations are still ongoing.

    Production at the facility will be limited to products to stock the two stores, Piping Plover and Salty Farmers, Ment said, to give them a competitive advantage. While he is unsure exactly what they will make, he anticipates the products will include edibles.

    “The idea is we want things from beginning to end,” Howard said at the meeting.

    If it is approved, the business will have the only licenses available in Truro for marijuana cultivation and for manufacturing — the two licenses are separate, as required by state rules. That limit on licenses available in Truro was approved by voters at a special town meeting in 2018.

    The High Dune Craft Cooperative, a group of farmers who were recently approved for a provisional license to grow marijuana at five farms, is the only other cannabis business in Truro. They have a different type of license, intended for small farmers, called a craft marijuana cultivator cooperative license, and are currently in the process of preparing a site plan review application for the Truro Planning Board, said Michael Fee, a Boston-based lawyer who is representing the cooperative during the application process.

    The new scope of the Hatchery proposal means the timeline for the project is longer than at first anticipated. Most of the additional time will come from building an entirely new structure, which was not in the original proposal. “It’s not easy to get anything built,” Ment said.

    Ment’s and Howard’s presentation to the select board featured a rendering of what the building could look like: a steel-frame structure with solar panels on the roof. Ment said the details are likely to change after incorporating more input from community members and town officials.

    But the additional challenges of building a new facility should pay dividends, at least according to the owners’ projections. The updated financial forecast they presented to the select board projected nearly $1.4 million in revenue in FY2023 and $2.5 million in FY2024, more than doubling the predicted revenue for the original proposal.

    As with retail business, the host community agreement for this type of facility could call for a “community impact fee.” Select board vice chair Kristen Reed said that is in the cards, though the details of how it would work remain to be negotiated.

    Depending on the fee percentage in the agreement (which is capped at 3 percent and can be imposed for no more than five years) and the accuracy of financial projections, the town could collect an estimated $41,000 in FY 2023 and $75,000 in FY 2024 from this facility.

    Massachusetts law requires marijuana operations have sufficient security measures to prevent unauthorized entrance. The Hatchery will not be open to the public and will have a security plan approved by Truro police, Howard and Ment told the select board. They also said the facility will be equipped with “surveillance cameras, perimeter alarm, and electronic access controls,” and that only authorized personnel will be allowed on the premises, and the building will be locked at all times.

    Before the presentation began, board chair Bob Weinstein commended the “thoroughness and clarity” of Ment’s and Howard’s presentation slides.

    Reed and Town Manager Darrin Tangeman, who are part of the team negotiating the HCA on behalf of the town, praised the security systems they saw at site visits to both existing retail locations as part of negotiations.

    “I couldn’t say enough positive things about the way both of their establishments are being run,” Reed said. Compared to dispensaries she said she’d seen both in and out of state, she said the two collaborating on this project were “impressive,” in terms of their facilities and professionalism.

    CANNABUSINESS

    Wellfleet’s First Pot Shop Doesn’t Look Like One

    Cape Cod Cannabis has no visible sign — for now

    By

    WELLFLEET — For the past month, since the Cape Cod Cannabis dispensary opened its doors at the old South Wellfleet General Store on April 20, Allan Kronfeld, the manager of the store, has been getting phone calls from confused customers. They can’t find the store. They’re pretty sure that they’re at the right address — 1446 State Highway Route 6 — but Cape Cod Cannabis is nowhere to be seen.

    In fact, they’re usually standing right outside the store, said Kronfeld. There’s just no way for them to know that. The special permit that the Wellfleet Zoning Board of Appeals granted Cape Cod Cannabis last June stipulated that signs for the store could not include the words “cannabis” or “marijuana,” or any “similar language that would identify the type of facility or nature of business carried on therein,” which is a little like telling a pharmacy that it can’t put up a sign that says “drug store.”

    Add to the language prohibition the requirement that the store’s windows be covered with tinted film — a rule imposed on all marijuana businesses in Massachusetts — and it’s no wonder people are lost, even when they’re just a few feet away from Cape Cod Cannabis. In fact, the only sign on its storefront is, oddly, a bright blue illustration of a whale tale.

    The store’s logo design offended some local officials.

    “People usually think it’s a whale watching store,” Kronfeld said.

    Cape Cod Cannabis is the first retail marijuana store to open in Wellfleet. The Piping Plover, which is expected to open on May 21 at 10 Main St., and Terps, also expected to open later this month right next to the Dunkin’ doughnut shop, have both erected signs with the word “cannabis” prominently displayed. Cape Cod Cannabis is the one exception.

    It appears that the reason for the anomaly might be, mainly, taste. “The main reason,” said Sharon Inger, chair of the zoning board, of Cape Cod Cannabis’s unusual situation, “is that neighbors were very much not happy about the design for the store’s sign.”

    The sign for Cape Cod Cannabis — which appears inside the store, on the store’s website, and on its social media accounts, but not on the storefront — is a takeoff on the bookleaf-shaped town entrance signs that dot the state.

    “I’m very deeply offended by this logo,” said Kathleen Bacon, a former Wellfleet selectwoman, during public comment at a March 2020 zoning board hearing. “It’s like ‘Welcome to Cape Cod. Here’s the cannabis.’ Right there on the highway we have a sign that says, ‘Welcome to Wellfleet’ and that’s what you’re mimicking.”

    Bacon also said at that 2020 meeting that, in the time since the select board had granted Cape Cod Cannabis its host community agreement, much of its corporate structure had changed. She singled out Kronfeld: “This young man here, you’ve got an accent. Where are you from?”

    Kronfeld replied that he was born in New York but grew up in Russia.

    “You’re Russian. Mmm-hmm,” Bacon said, arms folded across her chest. “You’ve got a Russian accent. Interesting.”

    Cape Cod Cannabis is, at 4,000 square feet, the largest cannabis facility on the Cape. The shop is owned by Simon Baker, who is based in Florida. This is Baker’s first cannabis shop.

    “Simon was here for the opening,” Kronfeld said. “But now he’s back in Florida.”

    Kronfeld, likewise, is from Florida but moved to the Cape for his job. When asked where on Cape he was living, Kronfeld said, “I think it’s around Dennis Port.”

    Inger said that the zoning board hearings for Cape Cod Cannabis were unusually “contentious.” Many citizens came to a March 2020 session to speak out against the store, primarily on the grounds that the location was too close to a school bus stop and the entrance to the Cape Cod Rail Trail, where many children play.

    Some also felt that the cannabis shop would ruin the character of the area.

    “I don’t need a high from marijuana,” said Barbara Kennedy, who lives in Wellfleet center. “I get my high from living in the beautiful village of Wellfleet.”

    The main problem, from the zoning board’s perspective, was traffic. Inger said that, to mitigate this problem, Cape Cod Cannabis “volunteered” to have customers come to the store by appointment only, which would allow a greater degree of control over how many people were turning off the highway and into the dispensary’s parking area at any one time. Kronfeld, however, said that the town “required” them to have the appointment-only setup. In any case, the policy was specified in the special permit conditions and appointment-only operation is required of the business during its first six months.

    So far, signs and appointments aside, all is going well for Cape Cod Cannabis. Only a month after opening, Kronfeld said, they already have a lot of returning customers, many of whom are happy that they no longer have to drive all the way to Provincetown to get their hands on the good stuff.

    Right now, the store employs 14 people, all of them local, who have “high expertise in cannabis,” said Kronfeld. In a month, when the summer season kicks into high gear, the number of employees at the shop will double.

    And, by that point, it’s possible that Cape Cod Cannabis will be allowed to identify itself as such. Inger told the Independent that, in the time since the special permit was granted, Massachusetts has altered its regulations to explicitly provide that cannabis dispensaries are allowed to use the words “cannabis” and “marijuana” on their storefronts. Before that, the state had not said anything about the issue one way or the other.

    “I expect we’ll hear from Cape Cod Cannabis soon about updating their permit,” said Inger.

    CANNABIS CASH

    Pot Produces $480K in New Tax Revenue

    Receipts indicate nearly $9 million in sales from two stores in 2020

    By

    curaleaf
    Curaleaf delivered a $10,000 check to the AIDS Support Group of Cape Cod late last year. (Photo courtesy Curaleaf)

    PROVINCETOWN — A long-anticipated source of new tax revenue was confirmed last week when Provincetown reported fourth-quarter payments from Curaleaf and b/well, the two cannabis dispensaries that opened here in 2020. The town took in $480,000 in taxes and fees for the year.

    That corresponds to about $8.7 million in total sales, despite the pandemic and decreased tourist traffic.

    Curaleaf opened its doors on Jan. 29, 2020, closed again in late March for the lockdown, and reopened on May 25. B/well opened for business on Sept. 4.

    Even though there were no pot shops open for three months of the year, tax payments indicate that Curaleaf had gross sales of $7.3 million, and b/well sold about $1.5 million.

    More cannabis stores are expected soon in Provincetown, Wellfleet, Eastham, and in the mid-Cape. Too many variables make forecasting future revenue difficult, but significant growth is likely.

    Three Plus Three Equals Six

    Retail cannabis shops send money to town coffers in two parallel tracks. Three percent of sales revenue is collected by the state and forwarded to town governments as a “local option tax.” Separately, towns negotiate a host community agreement (HCA) with each retail outlet, and most HCAs include a “community impact fee” of 3 percent of sales.

    Both streams of money go into a town’s general fund. Local option tax revenue can be used for any municipal purpose, but not “community impact fees,” which are meant to offset the negative consequences of having pot shops.

    In guidance published on Jan. 16, 2020, the Cannabis Control Commission (CCC) specified that impact fees should “bear some reasonable relation to the costs” that towns experience as a result of the cannabis industry. Costs cited by the CCC included traffic studies, public safety personnel, inspections, and substance abuse programming.

    Host community agreements must be renegotiated every five years, and community impact fees are not guaranteed. In renegotiating them, towns need to document the costs they face and how the money will be used.

    Plus One: Charity, Service

    Separate from taxes and fees, Provincetown’s HCAs require cannabis retailers to donate 1 percent of their gross revenue to local nonprofits, and to perform 100 hours of community service per year.

    This is a common arrangement — according to an investigation by WGBH in Boston, about two-thirds of the almost 500 HCAs they examined require charitable giving and/or community service from dispensaries.

    These provisions have been called into question by retailers and the CCC, however, and last February, the state House of Representatives passed a bill that would strike them from the agreements. It never reached a vote in the state Senate.

    Though Provincetown had planned for dispensary contributions to go into a town-administered grant fund, the town counsel has not yet advised whether that’s appropriate, Assistant Town Manager David Gardner said.

    “There has been considerable pushback from the dispensary association about extraction of fees above and beyond the 3 percent allowed by the law,” said Gardner. “There was also the criminal complaint against the mayor of Fall River [for extortion of cannabis retailers], as well as the subsequent investigation by the FBI into how towns implemented the host agreements. We feel it is prudent to wait to see the issue play out.”

    Instead, Curaleaf and b/well have both agreed to donate 1 percent of their gross revenue to various charities on their own, Gardner said. “Curaleaf is at their one-year anniversary, and they’re willing to complete their 1 percent requirement,” he said. “Nobody is kicking and screaming for them to comply — they’re doing it eagerly.”

    According to Casey Sherman, a publicist for Curaleaf, it recently donated $10,000 each to the AIDS Support Group of Cape Cod and Provincetown LGBTQ Welcome Center, and $5,000 to the Provincetown Scholarship Fund. Donations were also made to the Soup Kitchen in Provincetown, Carrie A. Seaman Animal Shelter, and Marcey Oil’s hardship fund. Curaleaf employees have already done more than 300 hours of community service, Sherman said.

    Gardner noted that employees of Curaleaf were the primary volunteer support for three different town elections in 2020. “They were at least two-thirds of the people in the auditorium running the national election, both the early voting and for election day,” he said. “At the outdoor town meeting, they had six or eight people there — the whole perimeter security was Curaleaf.”

    The principal owners of Curaleaf, whose headquarters are in Wakefield, are Russian oligarchs.

    B/well has committed to community service as well, said owner Karen Nash of Provincetown. “When we hire people,” she said, “we tell them part of what we’re doing is giving back to the community — people really like that. Around Christmas, we delivered meals to elderly people. They want to do beach cleanup when it’s a little warmer. And I’ve already committed us to the dog park.”

    Though b/well hasn’t started its donation program yet, “I’m glad we have the whole summer before my anniversary date comes up,” Nash said, adding that she likes being able to choose where the money goes. “I’d much rather build a direct relationship with charities than just surrender it to the town.”

    Editor’s note: This story has been corrected to note that $480,000 is the annual, not the quarterly, town revenue from marijuana sales.

     

    CANNABUSINESS

    Eastham Pot Shop Hopes for February Opening

    Cannabis commission must approve license first

    By

    emerald
    The Emerald Grove marijuana dispensary at Main Street Mercantile is expected to open in February. (Photo Linda Culhane)

    EASTHAM — The marijuana dispensary Emerald Grove is anticipating a February opening for adult-use retail sales, but it may have to delay launching its medical marijuana dispensary until later in the year.

    The business currently has provisional licenses for a retail operation and a medical marijuana treatment center at its commercial condo in the Main Street Mercantile complex at 3 Main St., on Route 6.

    According to Phil Silverman, Emerald Grove’s attorney, approval of its license would most likely be on the agenda of the Cannabis Control Commission’s February public meeting.

    “Even after that, there’s some additional inspections that you have to go through before you get what’s called your notice to commence operations or sales,” said Silverman, who serves as counsel in the Boston office of Vicente Sederberg, dubbed “the country’s first powerhouse marijuana law firm” in an October 2015 Rolling Stone article.

    Emerald Grove, which is owned by Alexander Jamoulis, Timothy Jamoulis, and Demetra Jamoulis, had planned to obtain marijuana and marijuana products from its affiliated cultivation and product manufacturing facility in Middleborough, but that location is not expected to open until late next summer.

    “It’s going to take a little longer to undergo construction and inspections to get open,” said Silverman.

    Initially, the company will be purchasing most of its products wholesale from other suppliers. Medical marijuana, however, is subject to more stringent requirements than the adult-use retail product.

    “You’re supposed to be, in theory, vertically integrated,” said Silverman of medical marijuana — that entails cultivating, processing, and selling your own product.

    “Because their production facility may not be up and ready by the time they’d like to open, they may have to start with just adult use,” said Silverman. “Although it’s possible the Cannabis Control Commission would allow them to purchase product from other people for the medical operations as well.”

    Silverman acknowledged that many people would not bother getting a medical marijuana prescription and would instead shop at the adult-use marijuana dispensary.

    “The people that work at these dispensaries, they’re very knowledgeable about these products,” he said. “They obviously can’t give medical advice to anybody, but they can give anecdotal advice — from knowing what other customers have told them.”

    Silverman said the dispensary would probably carry a wide range of products, including cannabis flowers, edibles, vaporizer pens, topicals, and sublingual sprays.

    “Everybody in the industry right now is sort of figuring out what the Massachusetts market is looking for,” he said. “The Cape will have its own unique aspects, because there are not a lot of places down there right now that are open. I’m sure Emerald Grove is going to be trying to figure out what products will serve the market best.”

    The dispensary plans to be open seven days a week. According to the agreement with the town, the first two weeks of operation would be by appointment only.

    CANNABIZ

    The Pot Profit Puzzle, Part One

    Why local ownership is rare, growers may still get in the game, and the tax promise is enticing

    By

    PROVINCETOWN — When b\well opened here on Friday, Sept. 4, it became the second recreational (or “adult-use”) marijuana dispensary on Cape Cod. Nine more dispensaries are on a path to opening on the Outer Cape. They could be a boon to town finances, but it is still unclear whether the industry — so far dominated by larger players — will benefit local entrepreneurs.

    Local ownership is rare, so far, because of the difficulty of obtaining capital for marijuana businesses. Because marijuana has not been legalized at the federal level, borrowing from federally insured banks for any kind of pot business is not an option. It’s not even possible to get a mortgage for the property involved. Having to buy everything with cash up front is a bigger barrier to entry than any regulatory hurdle, said Karen Nash, an owner of b\well.

    bwell
    B\well has opened at 220 Commercial St. in Provincetown. (Photo Paul Benson)

    Nash said her business is being financed by “90 percent Provincetown investors, meaning they live here year-round, are business owners here, or have second homes here.”

    Nash lives in Provincetown. Only one of her investors, Judy Mencher, is listed on b\well’s provisional license. Mencher has a home in Provincetown.

    Curaleaf is the other adult-use dispensary on the Cape, and it stands a few blocks away from b\well. The Curaleaf chain has 90 dispensaries and operates in 23 states. The cash to develop that business has not come from local investors. According to the New York Times, Curaleaf “is led by one of Russia’s most influential financiers, and backed by another.”

    Almost every business that is pursuing a retail license to sell pot on the Outer Cape is also pursuing either a cultivation license or a production license, or both.

    There are two reasons to vertically integrate like this, said Nash: the margins in retail are thin, and the supply is still unsteady.

    “The supply side has been coming online more slowly than the retail side,” said Nash. “Prices have fluctuated — the wholesale price is up to $4,100 a pound right now in Massachusetts. In Oregon, there’s an oversupply, and the price has crashed to $900 a pound.”

    Pot can’t be sold across state lines, so each state is essentially setting up a separate industry with separate supply chains.

    “Even in a mature market, it’s going to be more like a restaurant — the sales numbers are large, but the profit margins are relatively small,” Nash said. Almost every operator is trying to be vertically integrated in order to build a better profit structure.

    Going Vertical

    Cultivation licenses allow for up to 100,000 square feet of marijuana plants, either outdoors or indoors; production licenses allow for the conversion of raw marijuana flower into edible foods and concentrates. Developing a retail operation and one or both of these other businesses at the same time magnifies the complexity, the time involved, and the up-front costs of getting underway.

    Curaleaf has retail, cultivation, and production operations in Massachusetts. B\well has a retail license and is pursuing a production license. Almost all of the other retail applicants on the Outer Cape are also pursuing cultivation licenses, although in nearly every case that cultivation would take place off Cape. Salty Farmers of Eastham is the exception; if approved, its cultivation operation would be in Eastham.

    The High Dune Craft Cooperative in Truro recently submitted applications to the Cannabis Control Commission for a specialty cultivation license. David DeWitt, a farmer in the co-op, said what they’re pursuing is a “social equity license.” DeWitt, who also works for b\well and has worked for Curaleaf, said such licenses “are meant to create a way into the business for people who might not have millions and millions in cash.

    “My old business partner Tim McCarthy worked with Sheila Lyons and [state Sen.] Julian Cyr to figure out how outdoor farmers could get back in this,” said DeWitt. He credited both Cyr and state Rep. Sarah Peake with helping pass the legislation to create these new kinds of licenses. (Lyons was a county commissioner, and is running for the office again.)

    A craft marijuana cooperative can include multiple outdoor farms, indoor farms, and production operations. The High Dune Co-op currently consists of four farmers in Truro: DeWitt, Peter Staaterman, Deb McCullough, and Stephanie Rein, who is a member of the Truro Select Board.

    When it comes to cultivation, “All there is right now is the big guys,” said DeWitt. “It has to do with the transition from the medical-use rules into the new adult-use rules. Early on, they only let people who had already applied for medical licenses apply for adult-use. They gave them a six-month head start. And in order to do medical, you had to be fully vertically integrated: grow, process, manufacture, package, sell, all under one roof. It favored huge players at the outset. You had to have a half-million in the bank or they wouldn’t even look at your application.”

    The Cannabis Control Commission and the state government are trying to reshape that market now. Nash said she believes the CCC wants the market to be more diverse.

    Tax Revenue

    Regardless of the composition of the businesses, tax dollars are expected to benefit towns where they are located. First, all marijuana license holders are obligated to negotiate host community agreements with the towns they are in. In the case of retail licenses, towns are allowed to ask for 3 percent of revenues as a community impact fee, to be used to mitigate any problems arising from the industry (examples include traffic, congestion, policing, fire, or other needs). This is in addition to the 3 percent of revenue that is collected by the state and returned to towns through the local option tax.

    Six percent of retail revenue could wind up being a lot of money.

    Curaleaf opened on Feb. 6, 2020, and had to close on March 24 as part of the statewide coronavirus shutdown. It opened again on May 25. That means Curaleaf was open for seven weeks in the first quarter of 2020, and for five weeks in the second quarter.

    The tax revenue to Provincetown from those seven weeks of sales in the first quarter was $53,500, according to Assistant Town Manager David Gardner. That reflects about $127,000 a week in gross sales for those seven weeks.

    Early returns show that the tax revenue from the five weeks of the second quarter that Curaleaf was open will be about $54,000. At 6 percent of gross revenue, that means Curaleaf was selling about $180,000 of product a week in those five weeks.

    Based on the earlier, lower sales figures, a full 13-week quarter could represent $100,000 in revenue to the town. At the higher sales number, it could be $140,000 per quarter.

    Editor’s note: The print version of this article erroneously stated that b\well was pursuing a cultivation license; in fact, it is pursuing a production, not cultivation, license.

     

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