Can Marijuana Bring Social Equity? In Massachusetts, a case study | Connecticut and area
“The rates are just ridiculous,” Dailey said. “We’re just two little guys trying to survive.” In the end, Dailey and his partner Carlo Sarno resigned themselves to self-financing most of the business. But he knows that’s not an option for many budding entrepreneurs.
Youngblood said he met with angel investors, venture capital and private equity firms and banks, “you name it, most of them failed.” Major Bloom is a certified “economic empowerment” company under the state’s Social Equity Program, but Youngblood and his business partner Valentin Faybushevich ended up raising the capital they needed primarily through friends and family. This included $50,000 of Youngblood’s money.
Bruce Stebbins, a commissioner for the Massachusetts Cannabis Control Commission, said that in light of the financial problems social equity applicants have faced, state lawmakers are considering legislation that would establish an “equity trust fund.” Social” to provide financial support to these entrepreneurs.
“We hope that if this is enacted into law and the fund is created, we can see more social equity candidates reach the finish line,” Stebbins said. The deadline for the legislature is July 31.
The red ocean
While smaller companies struggle to get a foothold, cannabis conglomerates known as multistate operators seem to overcome many of the same obstacles with ease.
There are now several large, publicly traded cannabis companies that, compared to smaller startups, have access to much more capital that they can use to grow. Multi-State Operators, or MSOs as they are known, also have attorneys and accountants to collect and file the complex documents required by many states. Deeper pockets mean it’s less of a pain to endure the inevitable delays in licensing and zoning processing – common issues in this new industry.
Once operational, the scale of MSOs can allow them to buy larger quantities of raw products, often at discounted prices, and to occupy more expensive outlets in upscale areas. Their brands are recognizable to many cannabis consumers, another advantage in new markets.
With each new state that legalizes recreational marijuana, these benefits could multiply, exacerbating inequalities rather than mitigating them, as many legalization policies have attempted to do.
In the coming year, adult cannabis retail sales are expected to begin in Vermont, Rhode Island, New York, New Jersey and Connecticut, expanding the region’s market beyond Massachusetts and of Maine and opening the prospect of fierce competition.
Still, CCC’s Stebbins says he feels Massachusetts’ “micro-business” operators are confident they can take on the industry heavyweights.
“They don’t seem to be afraid of competition,” Stebbins said. “I think they really focus on, ‘I want to establish my brand, I want to build my customer base.'”
Dave Cichocki, co-founder of Pioneer Valley Extracts in Northampton, believes in carving out a niche. By establishing a name, building trust and making good products, he says it is possible for many smallholders to make a profit.
“It’s like every other business, and it takes time,” he said. “Don’t think you’re going to make a million dollars tomorrow.”
Pioneer Valley Extracts manufactures vapes and pre-rolled joints, and holds a local license to produce California-brand Kanha edible gummies. Cichocki and his sister self-funded the business — they did not participate in state social equity programs — and today they distribute their products to about 60 Massachusetts dispensaries. Cichocki expects the company to make around $7 million in sales this year — far from a multi-state operation, but a stable and successful business.
Dailey and Youngblood borrow a page from conglomerates: vertical integration. Major Bloom’s business includes manufacturing, retail, wholesale and door-to-door delivery. Youngblood and his team also record and produce a radio show and podcast at Major Bloom’s Worcester shop.
The state set limits on the number of licenses each business can own and made certain types of licenses — for delivery and social consumption — available only to Massachusetts residents. The goal of these policies is to level the playing field, Stebbins said, by not allowing large operators to fully integrate vertically.
Boston Bud Factory is licensed as both a product manufacturer and a retailer. Dailey said profit margins on the manufacturing side are higher than those on the retail side, helping the whole business stay afloat.
He also saves money by doing much of the administrative work himself. Prior to entering the cannabis business, Dailey worked in chemical engineering and manufacturing operations, and he leveraged that expertise in setting up the manufacturing side of the Boston Bud Factory business and managing all license filings and corporate legal documentation.
“We haven’t used a lawyer or a consultant yet,” Dailey said. “I did our special permits, I did our compliance, I did all of that. And that’s basically just learning the rules inside and out. Anyone can do that.”
Inside the Boston Bud Factory’s three-story brick building on a quiet street in industrial South Holyoke, Dailey has set up an alcove where he offers “educational demonstrations”, teaching anyone interested how to make rosin – a cannabis concentrate – from the plants they grow. at home.
Behind the retail counter and through a set of security doors, a member of staff watches the extractor. A sprawling factory beyond will soon house more processing and packaging operations, but for now it’s the site of a food truck renovation project. Dailey plans to periodically park the truck out front, inviting local restaurants to take turns serving their dishes to store customers and the community.
As a participant in the Social Equity Program, Dailey says it’s important to him to be present in the community and to teach and support cannabis customers and growers. Boston Bud Factory is working on opening a second location in the East Forest Park neighborhood of Springfield, where Dailey lives.
“It’s supposed to be community businesses, isn’t that what everyone says? But if you look at that, all the money, everything is sent out of state,” Dailey said. “The profits don’t go to equity, the profits don’t go to the residents…these corporations take their money and send it back to Chicago or Colorado or wherever they’re based.”
On their websites, leading MSOs such as Curaleaf, Trulieve and Green Thumb highlight a range of corporate social responsibility and diversity, equity and inclusion efforts.
Youngblood finds much of it inauthentic.
He emphasizes how essential it is for Major Bloom to maintain the trust and respect of his customers and the cannabis community, which is why he lends his own voice to the weekly radio show and uses original artwork on company packaging.
Youngblood’s focus on “the legacy market,” longtime cannabis enthusiasts who are still adjusting to buying cannabis from a legal dispensary, means he’s listening to their skepticism of cannabis. standardized image marketed by multi-state conglomerates.
This is Youngblood’s “blue ocean” slot.
On Major Bloom’s website, they avoid using stock photos, favoring images of real cannabis users.
“You’d be surprised how much people understand this shit,” he said.
Major Bloom’s stone and frosted-glass storefront is tucked between a spa and a package store, just down the street from a handful of Polish delis and markets. A smiling, calm demeanor attendant buzzes customers through a door from the sunny lobby to the main room, where the retail counter is. Customers, for the most part, pay with debit cards, not cash.
Years ago, before Major Bloom moved in, the property was vacant and often home to illicit drug dealers and users. The neighborhood still has its challenges, but Youngblood believes the presence of the store – the foot traffic it generates, cameras and security – has made the block safer.
Stebbins says it’s happening statewide: “We’re seeing buildings that could have been overdue or underutilized or even an eyesore in the local community that are now being brought back to life.” Cannabis businesses now become “part of the economic development of every small community,” he said.
Each licensed company must track its progress on the community and diversity plans it has submitted, providing an annual update when applying for license renewal.
HCC’s Agron says legalization has had many positive effects in Massachusetts communities. Older customers and many women, who previously could not legally access cannabis in a way that seemed safe to them, no longer have to worry. And social equity programs, for all their challenges, have helped create a number of businesses that are fiercely dedicated to helping their neighborhoods recover from the war on drugs.
“I’ve seen people get discouraged. I saw people getting angry,” Agron said. “I’ve also seen people push through and, with more determination and raw willpower than any other resource at their disposal, pull themselves together and make it happen.”
“The mythical ‘green rush’ is over, if there ever was such a thing, and it’s a real industry now,” she said.