It was a good run while it lasted.
When Massachusetts voters passed Question 4 in 2016, the state became an oasis of legal marijuana on the East Coast, surrounded by neighbors that prohibited the drug entirely or only allowed its medical use. Today, total pot sales are approaching $1.5 billion.
But with New York legalizing cannabis late last month, the first recreational shops now ringing up customers in Maine, Vermont recently authorizing commercial sales, and Rhode Island and Connecticut lawmakers poised to establish regulated marijuana markets in their states, our early-mover advantage is rapidly evaporating.
That could mean trouble for many of the 130 recreational marijuana stores operating in Massachusetts. Other than clusters of shops around the population centers of Boston and Worcester, nearly all other cannabis retailers are located on highways within quick striking distance of the state’s borders. On weekends, their parking lots are packed with cars bearing out-of-state plates. While regulators don’t track where marijuana buyers live, several operators said the majority of their revenue comes from out-of-staters on pot pilgrimages, not Bay Staters.
Meanwhile, competition within the state is also set to increase, with more than 160 additional stores currently moving through the Cannabis Control Commission’s licensing pipeline.
Still, marijuana operators aren’t panicking. In part, that’s because they expect the rollout of recreational sales in neighboring states to be at least as painfully slow as it was in Massachusetts.
“New York isn’t ready for this at all,” said Brandon Pollock, chief executive of Western Massachusetts-based marijuana operator Theory Wellness. “You’re probably looking at three years minimum before customers have anything like a competitive marketplace there.”
In Massachusetts, two and a half years after the first legal pot sales — and despite a substantial increase in the pace of licensing — the state’s cannabis industry remains relatively immature. Prices are stubbornly high and selection is often meager, thanks to steep taxes, a grueling and expensive approval process for new pot facilities (especially at the local level), and a limited wholesale supply of lab-tested marijuana flower, edibles, vapes, and other products. As a result, many marijuana consumers still frequent the vast and far cheaper illicit market.
An influx of new cannabis consumers seeking relief from the anxiety of the pandemic or flush with stimulus cash has only put further strain on the regulated supply chain.
Experts predicted New York will struggle even more at first to satiate its population’s appetite for cannabis, because the state’s existing medical marijuana system is ultrarestrictive: There are only 10 licensed companies, and regulations mandate that they may sell only preground marijuana flower, not the familiar and higher-quality dense buds that most consumers expect and which remain the most popular category of cannabis product. Starting from such a small foundation means the state has little capacity to quickly ramp up production and will need to permit numerous new growing facilities to serve the far larger recreational marijuana market.
But what will happen when marijuana sales do finally pick up in neighboring states? Massachusetts operators are already planning for that day, though their strategies for competing differ significantly.
Theory Wellness and a number of other larger players in Western Massachusetts are simply planning to offset any losses by expanding into New York themselves, hoping their brands will already be familiar to consumers there who have been traveling to Massachusetts for pot. They also expect more Massachusetts consumers will switch from the illicit to the regulated market as prices decline, helping to make up for any losses in customer volume.
Many smaller cannabis firms, on the other hand, are doubling down on their local roots, emulating craft beer brewers as they aim for a more artisanal, high-quality niche in the marketplace — buzzworthy weed and customer service that are worth the drive, in other words. Some smaller companies are also counting on more routine tourism to sustain sales.
“People have been coming to the Berkshires to ski, hike, eat, and relax for over 100 years, not to mention all the second-home owners,” said Donna Norman, owner of the Calyx Berkshire marijuana store in downtown Great Barrington. “Will [New York legalizing marijuana] be a little bit of a hit? Probably, but we’re always going to have visitors, so we’re really not worried.”
Cannabis companies that fail to successfully position themselves, however, may see half-empty parking lots as out-of-state consumers switch to alternatives closer to home.
Several experts predicted the financial pressures brought by the advent of cannabis competition from surrounding states might eventually push Massachusetts lawmakers to lower pot taxes, ease regulations, speed the licensing process for applicants, and make it easier for consumers and visitors alike to actually use marijuana. New York’s law allows pot smoking anywhere tobacco smoking is allowed, unlike Massachusetts, which has banned public consumption. New York will also offer cannabis consumers regulated “social consumption” lounges where they can use the drug, a concept that was included in the Massachusetts marijuana law but requires further legislative action to implement.
“If there’s more out-of-state competition, we can make the argument for those reforms more forcefully,” said Commonwealth Dispensary Association lobbyist and former state representative David Torrisi. “Legislators are very cognizant that the cost of doing business in Massachusetts affects companies and municipalities in their districts.”
A loss of marijuana revenue in Massachusetts wouldn’t hurt just cannabis companies but also public coffers, especially at the municipal level, as nearly all cities and towns take a roughly 6 percent cut of local pot sales.
In Easthampton, just off Route 91, Mayor Nicole LaChapelle said local dispensaries have “broadened the appeal” of the city and attracted a welcome influx of visitors, many from Vermont, Connecticut, and even New York. While the resulting revenue hardly forms the basis of Easthampton’s budget, it has allowed local officials to invest in infrastructure improvements that otherwise would have been unaffordable.
“Cannabis allowed us to catch up after decades of not being able to fully maintain the roads and sewer and water pipes,” LaChapelle said. “But we came in eyes wide open — we don’t expect to be the cannabis hub of New England.”
For now, as other nearby states slowly boot up their recreational sectors, Massachusetts marijuana sellers remain happy as ever to accept their residents’ business.
“One guy left us a review saying, ‘You were my favorite shop, I’m going to miss you now that New York has legalized,’ ” Norman said. “I was like, ‘Dude, it’s gonna be a few years. We’ll see you next week.’ ”