Robert Hunt brings is an attorney, entrepreneur, activist and cultivation expert. He has been involved in multiple aspects of Cannabis for over 20 years and as a result has the ability to help new MMJ businesses succeed. Mr. Hunt started the Coalition for Responsible Patient Care in Massachusetts, a trade group for Medical Marijuana Industry. He also works with a small private equity firm that makes investments in the marijuana space – the firm doesn’t invest in growing or the direct sales of cannabis per se but other aspects of the industry. Here is a summary of his talk at the Cannabis World Congress and Business Expo in Los Angeles:
This is a great time to be in the marijuana industry. We currently have four states allowing recreational use of marijuana, Oregon started sales Oct 1st, all NE states now have MMJ laws, Hawaii is now accepting applications for dispensaries, and CA is on track for recreational use of marijuana being legalized in 2016.
At the current time there are very few investment professional involved in the marijuana industry. There is a lot of grey area with the laws in many states and more issues arise when MMJ crosses state lines. People need to read and fully understand the regulations in their state before investing. Many states still reject profiting from medical marijuana. In other states an investment can be made in a round about way. Take MA as an example: A for profit business can license intellectual property (IP) to non-profit medical marijuana facility. This allows the auxiliary business to reap profits while not directly selling cannabis. The laws in many states are not cut and dry. Something that is working today may soon be outlawed so stay informed and be ready for change.
The current medical marijuana industry will ultimately evolve into recreational. Mr. Hunt believes in the benefits of MMJ but ultimately sees pharmaceutical companies and labs will ultimately take over the medical side. For an investor to make money in this industry you need to thoroughly understand what the laws are and where your money is going. You need to look into the future and what will the landscape look like in 5 or 10 years.
As another example of how MMJ requirements can vary state to state, lets look at Illinois. Many people where excited about its new MMJ law that recently passed. IL has a population of about 13 million people and has the potential of becoming a large player in the marijuana industry. However, in actuality the stiff regulations have made it so only a small number of individuals qualify for medical marijuana access. To date IL only has 3000 registered patients. This is an example of how the requirements for doctors and patients also vary greatly from state to state.
Mr. Hunt’s firm strives to partner with the local Law Enforcement including the district attorneys. They observe the black market medical marijuana of the local areas and see who is buying and see if the marijuana laws in place can compete. Take NY for example, which has a massive black market. The current laws in NY allow for only five dispensaries that can only sell unique forms of sublingual marijuana. The black market will continue to thrive. Also given that neighboring states have looser marijuana laws exacerbates the cross border transactions (into NY).
Some brief excerpts/notes on various states:
Colorado MJ – Is the most mature marijuana state it has roughly 450 dispensaries down from the roughly 1,150 it had prior to legislation. It requires investor or owner to have at least 2 year residency to qualify. This restriction was put in place to keep money in the state and reduce the likelihood of organized crime getting involved.
Washington MJ [WA502 compliant] – Produces good outdoor product and has a large black market. Its laws clearly define three grow sizes. Prior to July 2015 all producers, processors, and retailers paid 25% of their marijuana sales revenue as excise tax to the Washington State Liquor Control Board. Since July 2015 only the retailer pays tax at a rate of 37%. Washington Marijuana has a great website where you can review detailed sales from retailers and producershttp://www.502data.com We definitely recommend checking it out. For example you can easily click trough and find monthly sales of the best performing shops. For example Uncle Ike’s had sales of $1.5M in the month of August!
Rhode Island MMJ – Loosely defined law and only three state licensed facilities allowed. The Thomas C. Slater Compassion Center in DR providence. They are said to sell up to $100K per day. RI follows the non-profit model with no vertical integration. These laws will likely be revamped soon. Investors can get creative with structuring a debt position but no equity investments are allowed.
Maine MMJ – Has a mature MMJ market with eight licensed dispensaries. It will likely legalize recreational usage soon. Over 1,300 registered caregivers. The market is flooded with inventory making prices low and growers battling for position.
Massachusetts MMJ – Currently only 2 dispensary allowed. You don’t want to be one of the first in. Unsure when new shops will be allowed. They suffer from “NIMBYISM” (Not in my backyard).
Connecticut MMJ – Has three major cultivators that produce medical cannabis. This Oligopoly structure is squeezing the retailers. The retail dispensaries can’t mark up the product and also stay competitive with the black market.
Illinois MMJ – A for-profit model looked really good going in but in the end it’s a “no go”. He saw some of the best business teams and marketing plans in the country in Illinois. For not it seems like a waste and the patient count is limited. FBI fingerprints are required to get a recommendation. He recommends you stay away.
Ohio MMJ – It’s Responsible Ohio initiative is very controversial – they have a bill to legalize both medical and recreational at the same time. There are ten cultivator spots available already earmarked by a “cartel” like group who spent millions of dollars on this campaign.
Florida MMJ – FL currently only allows for CBD to a limited number of patients. It is basically a gamble at this point. Stay away for now.
Michigan MMJ – There are illegal dispensaries everywhere. Caregiver model. Will become a large MMJ state once regulations are put in place. A lot of potential if the industry can get contained and regulated.
California MMJ – Not-for-profit model is biggest MMJ market in the world. New (prop 266) laws just passed. Thirteen license available by 2017. Three cultivator types: Distributors, retailers, and nursery. Recreational usage will pass in 2016 creating even more opportunity.