Massachusetts Marijuana gold rush? Walmart of Weed? Not so fast

Massachusetts Marijuana

massachusetts marijuana

“Big Pot” is not coming to Massachusetts.

Though voters approved Massachusetts marijuana last week, don’t expect a land rush to Massachusetts by out-of-state corporate profiteers who can quickly throw up a weed store on every corner.

Instead, cannabis companies anticipate the retail market for legal Massachusetts marijuana here will be slow to develop and fragmented among numerous small firms, most of them homegrown startups or locally-owned partnerships with boutique pot companies from states such as Colorado.

“There isn’t some megalithic industry that exists today,” said Kris Krane, the Boston-based president of marijuana investment and consulting firm 4Front Ventures. “The notion that there are these gigantic, big-money players running in to take this whole thing over is just a fiction. There’s no Philip Morris, no Anheuser-Busch, no cannabis division at Bank of America. Even the most successful company is still barely in the growth stage.”

The absence of such conglomerates is due in large part to marijuana’s status as an illegal drug under federal law, which makes it very difficult for a single company to operate in multiple states and enjoy the economies of scale available to more conventional retailers. Colorado pot retailers that wanted to move into Massachusetts, for example, would essentially have to start from scratch here, building new growing and processing centers or partnering with a local cultivator.

And despite pot’s much-touted upside — investment and research firm Arcview Group forecasts a $1.1 billion marijuana market in Massachusetts by 2020 — capital can be surprisingly hard to come by, again thanks to the federal prohibition, which scares off institutional investors.

As a result, experts predicted most marijuana storefronts — the most visible public sign of the drug’s legality — will be run by small companies with local ties and funding from boutique investment firms or even friends and family. Existing medical marijuana facilities will also likely play a role. Some retailers may partner with experienced operators from Colorado or Oregon, but a Walmart of Weed? There’s no such thing.

“Unless you’re extremely well-capitalized and have a large workforce and are willing to re-create your business, jumping to a new state is extremely challenging,” Krane said.

Massachusetts was one of four states to legalize marijuana last week, bringing the total nationwide to eight. That means companies that do have national ambitions have a pick of where to open next.

The biggest companies in the US pot business so far are not retailers — Colorado’s largest chain, Native Roots, has just 14 stores — but rather product companies that license their brands and recipes to dispensaries.

One of the largest such firms, Denver-based Organa Brands, has licensed its “O.penVAPE” brand of liquid marijuana concentrates to a medical dispensary in Salem. Organa makes concentrates for medical and recreational uses that are consumed through a vaporizer.

Organa Brands is planning an advertising push in advance of entering the Massachusetts marijuana market, though president Chris Driessen said he would keep the tone of his marketing low key, to match the state’s somewhat more reserved attitude about marijuana.

“I’m not going to have billboards blasting cannabis things all over the place,” he said. “We’re not the party crowd from Colorado trying to shove it down your throat.”

Leave a Reply