Hope Wiseman knows what it’s like to compete against bigger businesses.
She runs an independent medical cannabis Dispensary in Prince George’s County called Mary & Main. A March profile by CBS News called Wiseman, 29, the youngest Black woman to own a dispensary in the country.
Being an independent Dispensary means supply chain issues, difficulty securing product, and not always getting the product she wants. If a grower can sell larger amounts of cannabis to someone else, Wiseman said she gets what’s left.
Wiseman said there is increasing pressure on Dispensary owners like her to sell to bigger companies, known in the industry as multi-state operators.
She compared the mentality to “if you can’t beat ‘em, join ‘em.”
And a lot have been joining. Many business licenses for the cannabis industry have only recently become eligible to be sold — and they are selling. According to November data from state regulators, nearly half of growing and processor licenses and almost 40% of Dispensary licenses are now controlled by multi-state operators.
Most multi-state operators are based outside of Maryland, and some are publicly traded. They have two crucial advantages over the average independent Maryland cannabis business: Money and experience.
“I understand that the industry is evolving and becoming more sophisticated,” Wiseman said. “I just think the original spirit of the law in Maryland was for Maryland residents to have an opportunity in this industry … We have to shape what we want it to be in Maryland.”
Wiseman said she doesn’t know of any large, publicly traded multi-state operators that are run by Black folks or people of color.She blamed the industry consolidation on Maryland’s cap on licenses (the state limits the number of dispensaries to just over 100), which she said artificially increased competition in the market. The license cap, Wiseman said, is “creating a breeding ground” for multi-state operators.
Will Tilburg, executive director of the Maryland Medical Cannabis Commission, said there has been consolidation in the state’s cannabis industry, but it’s not as dramatic as it might appear.
Tilburg gave a presentation to lawmakers on Nov. 9 that included the recent data about license ownership. A top concern among lawmakers, he said, was consolidation.
According to Tilburg’s presentation, multi-state operators control:
- 39 of 101 Maryland’s Dispensary licenses
- 10 of 21 growing licenses
- 11 of 26 processing licenses
Of the 47 growing and processing licenses, 11 were recently added by lawmakers specifically to increase diversity in the industry. None of those new licenses are eligible to be sold yet. As of November, women and/or minorities own 15 of the growing licenses and 14 of the processing licenses. Of Maryland’s 95 operational dispensaries, women and/or minorities own 39, though regulators are still waiting on responses from five dispensaries, Tilburg said this month.
It might look like multi-state operators have been snapping up Maryland dispensaries recently, but Tilburg pointed out that dozens entered into management agreements with out-of-state firms in early 2018.
“Much of this consolidation actually occurred three years ago,” he said.
Of the 21 growing licenses awarded by regulators, Tilburg said only six have been transferred since they were first awarded. Multi-state operators have bought the licenses of three Maryland growers, he said, and two of those deals took place in 2018.
Some of the multi-state operators are companies that started in Maryland and have since expanded to cannabis markets in other states, Tilburg said, like gLeaf Medical and Holistic Industries.
Digging deeper into the numbers, Tilburg said many independent Maryland cannabis dispensaries have also been outperforming multi-state operators.
The Maryland Medical Cannabis Commission found that the median gross revenue for a Maryland dispensary is $450,000 a month, or more than $5 million a year.
Nine out of 10 of the state’s best performing dispensaries are independent, the presentation said, and they earn an average of $1.2 million a month, or more than $14 million a year.
Meanwhile, 18 of the 25 worst performing dispensaries are associated with multi-state operators, the presentation said, and they earn an average of $182,000 a month, or just over $2 million a year.
To Tilburg, that shows there is a “thriving small business aspect” to Maryland’s medical cannabis industry.
That’s not helping Jake Van Wingerden sleep at night. Van Wingerden runs SunMed Growers, a cannabis grower in Cecil County with about 140 employees, and leads the Maryland Wholesale Medical Cannabis Trade Association.
The goal of multi-state operators is to crowd out independent Maryland businesses like his, Van Wingerden said. When the BBJ spoke with Van Wingerden, slides of Tilburg’s presentation to lawmakers were sitting on his desk, marked up with notes.
“The MSOs [multi-state operators] are all following the same playbook,” Van Wingerden said. They have teams of people in corporate offices whose sole job is fine-tuning applications for cannabis licenses, he said, and they’re “coloring in the map,” expanding state by state.
Van Wingerden said SunMed has “resisted the urge” to sell to a multi-state operator, despite multiple overtures, but he worries about dispensaries. Companies were originally limited to only one Dispensary license, but now they can have up to four. Independent dispensaries warned against that change, Van Wingerden said, but lawmakers didn’t listen. He said the ability to own four dispensaries makes Maryland’s medical cannabis industry much more enticing to out-of-state firms.
Based on public reports and conversations with other people in the cannabis industry, Van Wingerden estimated that a well-run Dispensary in Maryland is now worth between $8 million and $30 million, and a license alone is worth about $4 million. Van Wingerden said that’s a tempting price for an independent Dispensary looking to sell to a multi-state operator.
Steven Hyatt, a lobbyist for Marylanders for Cannabis Business Equality and outside counsel for Shore United Bank, is not surprised by consolidation in the industry.
“I think that the general free market mentality is clearly at play. The almighty dollar is at work,” Hyatt said. “… The mom-and-pop (businesses) can do it for a while and hope to knock the cover off the ball, but with limited capital and resources, you can only go so far. The runaway eventually ends.”
Hyatt worked with state regulators on a new banking policy that will allow cannabis license holders to use their license as collateral for a bank loan — a major hurdle for small businesses in the industry.
That policy won’t take effect until sometime next year. Currently, many independent medical cannabis businesses either have to “take off” or get bought by a multi-state operator, he said.
Consumers might like that, Hyatt said, because multi-state operators will probably have high-quality product and low, consistent prices.
“There needs to be balance,” he said. “You’ve got Anheuser-Busch selling Bud Light and then you’ve got your craft brewers. Both serve their purpose. I think that’s what we’re seeing here. It’s not a good or bad thing, necessarily … I think it’s fine. I think it’s ultimately beneficial to the end user.”