A range of businesses have high hopes for marijuana opportunities
Since the 1970s, law enforcement officers across New England have stored marijuana they seized in secure evidence lockers purchased from Donnegan Systems in Northborough.
Today, the storage solutions company says a full 10 percent of its revenue comes from licensed marijuana cultivators, which are snapping up its sliding “ActivRAC” shelves to maximize the amount of cannabis they can grow in a warehouse. And with recreational marijuana sales about to start in Massachusetts and other states contemplating their own commercial cannabis markets, Donnegan Systems chief executive Jeffrey Loreaux expects that figure will soon pass 20 percent.
“We’re already reinvesting the money we’ve made in cannabis,” Loreaux said in an interview. “We’ve hired more service technicians, more salespeople, more installation crews — it’s provided a lot of growth and it will continue to. We definitely see a huge opportunity here.”
Donnegan Systems isn’t alone in its vision. Across the state, longstanding companies ranging from law firms to gardening equipment suppliers are looking to the marijuana industry for a shot in the arm, figuring the end of pot prohibition is the kind of sudden business opening that only comes once in a lifetime.
Optimism is high. Cannabis technology company Weedmaps recently predicted that marijuana-related business at such “ancillary” companies — those that don’t grow or sell the plant itself but provide products and services to firms that do — should create the equivalent of roughly 5,800 full-time jobs in Massachusetts.
For some firms competing in mature, relatively static markets, marijuana promises the kind of rapid growth not seen in years.
That’s the case for Griffin Greenhouse Supplies in Tewksbury, a national greenhouse supply and horticultural consulting firm founded in 1947 that now helps marijuana growers optimize their cultivation techniques and sells them LED lights, fertilizer, nutrients, soil, and pest control products.
“Historically, our biggest business has been flower production — bedding plants and ornamentals — but that market is flat,” said Tami Van Gaal, who leads the company’s four-year-old indoor agriculture division. “Cannabis is coming so fast. It’s driving the division right now. And the beautiful part is that the growth is supporting our expansion plans.”
For now, the Massachusetts marijuana market is somewhat limited. Only a handful of companies have won provisional recreational licenses from the Cannabis Control Commission, and fewer than 30 medical marijuana dispensaries are currently operating here.
But most executives agree that the bulk of the eventual spoils from marijuana sales — which are expected to top $1 billion in Massachusetts by 2020 — will go to companies that get in early. That means yesterday was the time to learn the lingo, set up a booth at a cannabis trade show, and fine-tune offerings to meet the needs of marijuana firms.
For example, Donnegan’s main supplier, Spacesaver Corp., added an irrigation drain and other features to its shelving products so they could be more easily used by cannabis growers. Those features helped open up unexpected opportunities in another market — microgroweries operated by restaurants to cultivate herbs and vegetables on-site.
“We realized the same technology can be used to grow other plants, and that the whole grow industry has great potential for us,” Loreaux said.
At Boston-based brokerage Lighthouse Insurance Agency, owner Brian Boucher and sales executive Jack Lambert began studying the cannabis industry in 2014, piecing together products from willing insurers — many based overseas. They created policies addressing the risks facing marijuana growers: product liability, fire, crop loss due to pests or equipment failure, and so on.
“We cover marijuana from seedling to finished product,” Lambert said. The average policy for a medium-sized operator costs around $50,000 annually.
Lighthouse, founded in 1993, has fewer than 10 marijuana clients today — a drop in the bucket compared with its business insuring taxicabs across the country. But Boucher said Lighthouse’s presence at marijuana conventions and its knowledge of the industry’s intricacies makes it well-positioned to cash in when the recreational sector expands.
“Between the fact that it’s so new and that it’s federally illegal, not a lot of insurers will touch it, so I thought it was prudent to get ahead of the curve,” Boucher said. “It could be a major growth driver for us.”
Besides the potential profits, Boucher added, cannabis was just plain interesting — a refreshing change of pace.
“To be honest, insurance is not a sexy industry,” Boucher said with a laugh. “Researching this has been a fascinating exercise in economics — we’re watching how cannabis is going to grow from a chrysalis into a new industry that’s going to be so prevalent in everyone’s minds.”
Some companies admitted they wrestled with whether to join the marijuana space, given the lingering social stigma around the drug and potential legal risks. They also worried about what other clients might think. But after weighing the risks and upside, many decided to forge ahead.
“We do a lot with law enforcement, public safety — a whole group of people that have basically been fighting against cannabis for many years,” Loreaux said. “But they’re still our customers. I think everyone realizes that we’re just helping other companies do what they do.”
Some companies had to worry about what their suppliers might think. Burlington-based ID Products, for example, sells and configures labeling machines made by corporate giants Epson and Avery-Dennison. Paul Enos, the firm’s president, said the equipment is ideal for applying adhesive labels to marijuana containers, but the manufacturers weren’t so sure.
“A year ago, they were like, ‘We don’t really want our name associated with that stuff,’” Enos recalled. “They were very concerned about the stigma. I mean, Avery is a really high-profile company. They sell in Staples.”
But last year, “Avery-Dennison called me and said, ‘Just so you know, we now have a product manager whose sole responsibility is developing the cannabis market.’ It’s a big turnaround.”
What caused that change of heart?
“Social acceptance,” Enos said. “A year doesn’t sound like a long time, but it really is in this market.”