The rate at which cannabis businesses are surrendering licenses has picked up rapidly in the past year as the industry faces economic and regulatory headwinds.
Since last September, four retail licenses have been either surrendered, not renewed or revoked. In the entire five years since the legal cannabis industry sparked up in Massachusetts prior to September 2023, just five licenses had been surrendered by local businesses.
On the non-retail side — which includes manufacturers and growers — 26 non-retail licenses have been surrendered, revoked or not renewed over the past year. Over the previous five years, only 11 such licenses were surrendered.
The loss or surrendering of a license doesn’t necessarily mean a business has closed. Some businesses hold multiple licenses and multiple types. The Cannabis Control Commission also pointed out that the rate of approvals has also increased by 22% over last year.
Competition is stiffer now, with more businesses open across Massachusetts and in five neighboring states, and prices have cratered since the industry first began. The cost of cannabis flower is at an all-time low, dating back to early 2018, at $5.06 per gram.
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CommCan Inc., which surrendered two non-retail licenses in March gave up a cultivator license and a product-manufacturer license. One of its founders and owners, Ellen Rosenfeld, said the measure was intended to save money.
The surrendered licenses cost the business tens of thousands of dollars in commission fees, she said, in addition to licensing employees for work in both medical and adult cultivation and production. She and the other owners became aware they could consolidate work under a single medical license and save over $30,000 a year on fees.
“We learned after spending a million for five years, that you can do it all under the medical license. Do you think that the CCC told us that? No,” Rosenfeld said.
A ‘chase to the bottom’
Some business owners in the cannabis space have expressed recent frustration with the commission and its leadership challenges as being harmful to business, though long-awaited changes to some regulations are poised to become reality this month.
The CCC attributes the turning in of licenses to the maturing of the cannabis industry in Massachusetts, and said the industry continues to grow despite economic pressures. According to the commission, there are over 700 cannabis businesses in the state that have received licensing approval as of October 2024.
Rosenfeld said her CommCan business is in good shape because she and her two co-owners, who are her brothers, own all their assets and don’t owe anyone any money. CommCan has a wholesale operation, she said, and through that business she said she sees first-hand how other businesses are struggling, which she attributes to overcrowding in the market.
“You’ve got one open on your left, one open on your right, you’re not going to make it,” Rosenfeld said. “They’re chasing each other to the bottom.”
She said she has six claims out against businesses that have purchased wholesale product but haven’t paid their bills because, she believes, they don’t have the liquidity to do so.
“It’s unfortunate because you sink every penny into it,” she said, adding that she doesn’t believe the industry has seen a natural bottoming of closures yet. In the meantime, she said, she will continue to weather the reduced prices and decreases in sales until the competition is where it should be.
“When it shakes out, I hope that it will be a maturing market that respects itself,” Rosenfeld said.
Here’s a list of the licenses surrendered since the Business Journal’s reporting last year:
Shine Delivery LLC in Plainville gave up a courier license in September 2023
Heka Inc. Inc Westfield gave up a product manufacturer license and cultivator license in October 2023
JustinCredible Cultivation LLC in Cummington gave up a cultivator license in November 2023
Good Chemistry of Massachusetts Inc. in Bellingham gave up a product manufacturer licesne in November 2023
Just Healthy LLC in Northampton gave up a retail license in December 2023
Mission MA Inc. in Worcester gave up a product manufacturer license in December 2023
Clovercraft LLC in Easthampton gave up a delivery operator license in January 2024
Community Growth Partners Delivery Inc. in Northampton gave up a delivery operator license in January 2024
Herbology Group Inc. in Easthampton gave up a retail license in January 2024
MJ’s Market in Grafton gave up a retail license in January 2024
Garden Remedies Inc. in Fitchburg gave up a product manufacturer license in and cultivator license in January 2024
Blackstone Valley Naturals LLC in Uxbridge gave up a microbusiness license in February 2024
Harmony of MA Inc. in West Boylston gave up a retail license in February 2024
CommCan Inc. in Medway gave up a product manufacturer license and cultivator license in March 2024
I & I Rose Garden LLC in Boston gave up a product manufacturer license in April 2024
Healing Calyx LLC in Holyoke gave up a courier license in April 2024
Nature’s Remedy of Massachusetts Inc. in Rowley gave up a retail license in June 2024
CDX Analytics LLC in Salem gave up a independent testing laboratory license in June 2024
Life Essence Inc. in Northampton gave up a retail license in June 2024
H/T: www.bizjournals.com
