The prospect for grownup hashish legalization is nice in Connecticut

(This story has been updated with details of the legislative proposal announced by Governor Ned Lamont on Wednesday.)

The highly regulated medical cannabis market in Connecticut is expected to see a whopping 15% increase in sales this year. However, it is the prospect of adult legalization and a nearly $ 750 million market that multi-state operators rub hands on.

Several MSOs, including Curaleaf, Green Thumb Industries, and Trulieve, have spent tens of millions of dollars in the past two years entering or expanding the Connecticut MMJ market and positioning themselves for the possible legalization of recreational cannabis.

In addition, each adult use market is expected to offer licensing and ancillary opportunities for a number of Connecticut-based companies, including social justice applicants and small business owners.

The Marijuana Policy Project, investment analysts, and industry representatives believe Connecticut is likely one of the next states to legalize a commercial adult market.

They point to pandemic-related budget problems and pressures from voter-approved adult legalization in nearby New Jersey.

Governor Ned Lamont, a Democrat, is pushing for legalization and attended a summit hosted by New York Governor Andrew Cuomo ahead of the coronavirus pandemic to develop a regional framework for commercial recreational marijuana.

“I think it’s a three-state competition and a collaboration,” said Michelle Bodian, senior associate attorney in the New York office of Vicente Sederberg, a cannabis law firm.

“At this point New Jersey is the leader. New York and Connecticut see this as an opportunity to catch up. “

Connecticut House Democratic spokesman Matt Ritter recently estimated the likelihood of legalization laws being passed at 50:50.

“I think there will be a very, very close vote in the house,” Ritter told the Hartford Courant.

Up to $ 725 million in annual sales

Marijuana Business Daily estimates an adult market in Connecticut could have sales of $ 250 million by the first full year and annual sales of $ 725 million by the fourth year.

By comparison, the state’s medical marijuana market, which launched in September 2014, will generate sales of $ 160 to 195 million this year, an increase of around 15% from 2020, according to the Marijuana Business Factbook.

Last year sales were estimated at $ 140 million to $ 170 million.

Bodian says companies are interested in the Connecticut market because of its potential opportunities.

Lamont’s legislative proposal, which was presented on Wednesday, contains the following key elements:

  • Leisure sales would begin in May 2022.
  • Licenses would be awarded by lottery to cultivators, retailers, hybrid medical / adult retailers, microcultivators, product manufacturers, food and beverage manufacturers, product packers, and delivery services.
  • Existing medical marijuana companies could move into the adult market for a substantial fee.
  • Social justice: delivery service, microcultivator and licenses for food and beverages would have lower barriers to market entry in order to promote market fairness.
  • Each backer can participate in a maximum of two licenses of each type.
  • Municipalities would be allowed to use their zone code or zone ordinances to regulate cannabis operations, with the exception of medical marijuana companies.
  • Three types of taxes would be levied: cultivation excise taxes, a 3% municipal sales tax in retail, and state sales tax (currently 6.35%) in retail and delivery. Excise taxes are $ 1.25 per dry gram of flower, 50 cents per dry gram of cut, and 28 cents per gram for wet cannabis.

Sharp MSO interest

Many of the players in the Connecticut medical marijuana market are local.

Massachusetts-based Curaleaf is the largest provider with one of four manufacturer licenses and four of 18 pharmacy licenses.

Curaleaf began wholesale medical marijuana in October 2014, selling to the state’s 18 pharmacies from a 60,000-square-foot facility that opened in the fourth quarter of 2019.

The company and other MSOs have also paid high prices to acquire operations in Connecticut in recent years:

  • Illinois-based Green Thumb Industries purchased Advanced Grow Labs in February 2019 for $ 110.1 million, including $ 15.5 million in cash and 7.3 million subordinated voting shares. The acquisition included a 41,000 square foot manufacturing facility in West Haven with expansion potential and a 46% stake in a Westport pharmacy called Bluepoint Wellness.
  • Curaleaf bought Arrow Cos., Which operated pharmacies in Hartford, Milford, and Stamford, last year for $ 37.7 million, including $ 16.3 million in cash and the remainder in stock. Curaleaf got a fourth pharmacy in Groton through its 2020 acquisition of Grassroots Cannabis from Illinois.
  • Florida-based Trulieve acquired The Healing Corner pharmacy in Bristol for $ 19.9 million in May 2019. Founded in 2014, the pharmacy had sales of approximately $ 12.8 million in 2019 and, according to government regulations, supplies approximately 10% of the state’s medical marijuana patients.

Medical operators want first crack

Patrik Jonsson, regional president of Curaleaf’s Northeast Operations, wrote in an email to MJBizDaily that “as an emerging but high-growth industry, there is significant room for expansion in adult use.”

However, he wrote that it made most financial sense to allow medical cannabis operators to quickly enter an adult market.

“Using a track record of medical operators to jump-start Connecticut’s adult application program is a smart and solid approach that also welcomes the success and involvement of other companies,” wrote Jonsson.

“Not only are these vendors ready to scale efficiently to find a legal way to buy safe and regulated products, but they are ready to launch critical social justice programs, as has been done in other states.”

Connecticut, like its New Jersey and New York counterparts, has a fairly restrictive MMJ program that could make it difficult to generate enough supply to meet adult demand.

The Marijuana Business Factbook characterizes the Connecticut market as highly regulated, with the number of licenses available being limited to a small number and the market tightly controlled.

“Many pharmacies have argued that the four licensed producers cannot meet the demand,” states the 2020 factbook update.

Jonsson of Curaleaf agreed, noting that “while establishing and expanding an adult use program is a key priority, protecting and further expanding Connecticut’s medical program is equally important.”

However, it is unclear whether adult legalization will have the support it needs to survive this year – as House spokesman Ritter said.

“But if we don’t have the votes – and I don’t hoist the white flag – I want to be very clear: we’re going to put something on the board for Connecticut voters to change the constitution to legalize marijuana,” he said.

Jeff Smith can be contacted at [email protected]

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