In early 2017, there might not have been a flashier entrepreneur in the legal cannabis industry than Adam Bierman. In Los Angeles, his company, MedMen, had become known for its glossy red storefronts with sleek, minimalist interiors that drew comparisons to Apple Stores and the eyes of investors.
California had already legalized weed, allowing his company to expand from the medical marijuana market, and he proceeded to dot L.A.s’ skyline with red billboards promoting his brand. New York was years behind California on legalization, but it had an allure. He pursued the acquisition of one of the state’s five authorized medical marijuana companies in anticipation of the day New York would follow what looked like an inevitable path to full legalization.
“It was a future investment,” said Bierman. “Manhattan is a jewel — maybe the jewel in North America — for building a brand around the world.”
In 2018, MedMen opened one of its signature retail stores, for medical users only, on Fifth Avenue, envisioning the day it would sell to the broad mix of New Yorkers and tourists passing by.
While corporate controversy led to Bierman’s exit from the business a few years ago, many investors and cannabis entrepreneurs have flocked to New York in his stead, bitten by the same bug. Today, there are 11 medical marijuana companies licensed in the state. Each has invested millions in its operations, all with the gleam of the 2021 legalization in their eyes.
Now, their moment has come.
If, as expected, the state’s cannabis regulatory agency passes on Tuesday a proposed set of permanent rules for the industry, any of the 11 medical companies that pony up a $5 million down payment will be able to open one of their medical stores to sell cannabis products to adults over 21 by the end of the year — a couple of years earlier than previously proposed.
They’ll be allowed to cultivate up to 100,000-square-feet of weed in indoor environments not permitted for other growers, allowing them five harvests a year, compared to one for the struggling individual farmers currently licensed by the state to grow outdoors only.
And they’ll be the only state licensees allowed to operate full farm-to-processor-to-retail operations. State officials prohibited this type of vertical integration in the law legalizing cannabis so that small operators entering the market had a better chance to succeed against deep-pocketed corporate players.
For those who have tracked the state’s legalization process, Big Weed’s multi-million entry may come as a surprise. When legalization took place in March 2021, the law’s progressive character assumed center stage. The state granted the first retail licenses to people who had been locked up on weed-related charges and their relatives. Upstate farmers who had lost their shirts when the market for hemp collapsed got the chance to grow the state’s first legal crops. To promote sustainability, the state required them to plant outdoors instead of in greenhouses, which trap globe-warming gasses.
“No other state in the country prioritized the people who were most negatively impacted more than New York,” state Assembly majority leader Crystal Peoples-Stokes (D-Buffalo), who co-sponsored the legislation, told THE CITY in an interview.
Now, with the state having failed to roll out more than a handful of weed stores, a court injunction halting the opening of stores owned by people affected by drug laws, and licensed growers sitting on hundreds of thousands of pounds of rotting product because of the dearth of authorized retailers, the companies are about to cash in on a market they have campaigned to reach for years through millions of dollars of lobbying in Albany.
Matt Darin, the CEO of Curaleaf, a $3 billion cannabis corporation, said that getting into the wider adult-use business from the medical niche was always the goal.
“The expectation and the precedent has been in literally every other market that if you were a medical operator in good standing that you would have an opportunity to participate in the adult-use market if and when that occurred,” he said in an interview with THE CITY.
New York’s price of admission for the companies isn’t cheap: the $5 million down payment goes toward a full payment of $20 million. That would be a potential boon to the Office of Cannabis Management (OCM) whose delays have undone projections about how much tax revenue would be pouring into the state and city.
But the prospect of a wash of money righting a troubled system comes with big questions, arising out of the entwined histories of the medical companies and the state’s sputtering program.
Will a rush of corporate money, branding, and potential dominance of the wholesale market crush the prospects of the small farmers and justice-involved individuals the state has trumpeted as its priority? Or will Big Weed’s plunge into retail sales not be as enormous a splash as many cannabis licensees fear?
Some of the companies are on the verge of collapse. MedMen, for example, is deep in debt and its stock is selling at two cents a share. Other companies are wary of the state’s record of missing every deadline set for opening stores and helping licensees find financing, and may be looking for opportunities elsewhere.
But major investment at some scale is around the corner. Tice, vice president of New York’s newest medical cannabis provider, RIV Capital, said his company is all in. “We’ve invested heavily in New York,” he said. “This is the market we’re excited about.”
Damian Cornwall, who qualified for one of the early licenses and operates a legal store in Binghamton, contemplated the imminent competition glumly. “It’s just the perfect storm,” he said in an interview with THE CITY. “The state had such an awesome plan and it’s just unfortunate. We could just not bring it home.”
H/T: www.thecity.nyc
