Monday, July 15, 2024

Connecticut Cannabis


Where Does Stratford Stand?

By Barbara Heimlich

Sources: Kalleen Rose Ozanic, Staff Writer, Norwalk Hour
Jared Weber, Staff writer, Stamford Advocate
Jordan Nathaniel Fenster, Connecticut Insider

Stratford town officials approved plans from two companies to open separate facilities to grow cannabis and make THC-infused snacks and drinks, neither of which are presently up and running!

The Stratford Zoning Commission voted unanimously to authorize the respective projects that are manufacturing only, and they also agreed to update the town’s cannabis regulations to allow a wide-range of new marijuana-related business beyond dispensaries and production facilities, including food makers and delivery services.

Officials hope the decision to allow more cannabis businesses, which comes nearly a year and a half after the commission voted to welcome the nascent adult-use industry into the town, will help grow the local economy and generate tax revenue.

“In an ultra-competitive economic climate, the town should consider welcoming these non-retail businesses that support the cannabis industry throughout the state, while other municipalities are figuring out the positions of the matter,” Planning & Zoning Administrator Jay Habansky wrote in a memo to the five-member panel.

As a part of an ambitious effort to enter the state market, Shangri-La, a Missouri-based cannabis production company, is planning to outfit a 40,000 square-foot building at 305 Hathaway Drive to grow cannabis, according to an application submitted to the town. Shangri-La officials have said the company plans to ship the product to dispensaries across the state, including a retail store the company is building in Norwalk. The production facility, which will not offer retail sales, is expected to employ around 130 workers.

The project “will result in significant jobs, additional significant sales tax income to the town as a result of the cannabis sales tax formula … and the reuse of the currently unoccupied facility,” Barry Knott, an attorney representing both companies, told the commission.

Lorrain’s CT, which is operated by Zayna Francis, plans to open a modest 3,700 square-foot manufacturing facility in an old brewery at 724 Honeyspot Road. The company plans to bake cannabis edibles, THC-infused beverages and create other snacks mixed with marijuana, such as gummies. The products will be sold on a wholesale basis, and no retail sales will take place at this location.

In addition to proposing the manufacturing center, Lorrain’s officials successfully sought to tweak the town’s zoning regulations to loosen the cap on the number of local cannabis facilities that do not directly sell or grow marijuana.

Under the previous rules, only up to two cannabis dispensaries and two production facilities were allowed within certain zones within the town limits. The change retains the cap on those facilities but places no limits on the number of businesses dedicated to manufacturing, packing and delivering, but not directly selling or growing, cannabis products.

In October the Stratford Zoning Commission voted unanimously to approve plans from C3 Industries, which operates two dozen dispensaries in the Midwest and New England, to open a cannabis retail store at 130 Honeyspot Road, the former Johnny’s Restaurant. The company plans to construct a new entrance for the two-story structure and is aiming to renovate much of the existing 113-year-old building, which previously housed Johnny’s Restaurant but has sat empty for several years and has fallen into disrepair. These plans are presently on hold as St Nicholas Russian Orthodox Church at 1 Honeyspot Road, has filed a lawsuit to halt the project.

 Recreational marijuana use was legalized in Connecticut in July 2021. Adult-use cannabis sales officially began across the state on January 10th, 2023. For adults over the age of 21, marijuana can be consumed and legally purchased from licensed retailers. In the nearly 10 months since recreational cannabis sales began in Connecticut, the market has grown quickly — already surpassing the number of dispensaries per person that neighboring Massachusetts had within its first year.

Connecticut cannabis retail and medical dispensaries sold $25.6 million in cannabis products in November, up by about $600,000 in sales than the previous month. Recreational cannabis sales reached a new high of $15.3 million in November, an increase from the $14.7 million sold in October, according to data from the state Department of Consumer Protection. Medical cannabis sales also increased month-over-month, from $10.1 million in October to $10.3 million in November.

With a 21 and up population of about 2.7 million people, each of Connecticut’s 27 dispensaries serve about 117,000 people on average, based on United States Census Bureau data. That number is expected to triple next year. Economist Fred Carstensen said that the rapid growth in Connecticut is not concerning.

Many of existing dispensaries sell cannabis for medical use only, while a few sell recreational cannabis and others have hybrid licenses, meaning they may sell both.

“It’ll take three to four years to see how the market develops,” said Carstensen, a professor at University of Connecticut and the director of the Connecticut Center for Economic Analysis.

Connecticut’s cannabis market can, and will, expand, according to Kaitlyn Krasselt, the Communications Director for the state’s Department of Consumer Protection. By this time next year, she said there will be 69 dispensaries in the state.

There are, according to state data, a total of 64 cannabis dispensaries with either provisional or final licenses granted by the state. Of those with final licenses, sixteen are hybrid retailers, selling cannabis for both recreational and medical purposes. Another six are recreational only.

An additional 42 — ten hybrid dispensaries and thirty-two recreational retailers — have received a provisional license, which is required before a cannabis business can qualify for and be granted a final license to do business in Connecticut.

“The department continues to monitor available supply in our state, as well as analyze market trends and related issues in other states, and will consider all factors when determining how many licenses to make available in the next lottery round, as well as future lotteries,” she said. Krasselt said the DCP will continue its “ongoing analysis of the market.” And as the state government checks the expansion of Connecticut’s adult-use cannabis market, Carstensen said local governments do the same.

“Every municipality has the right to say yea or nay (to retailers),” Carstensen said.

But he said an estimated 69 cannabis retailers in the Nutmeg State’s pipeline will make the bigger picture clearer.

“(Then) it’s pretty much available to everybody on a relatively short-travel basis,” Carstensen said. “Then we’ll actually know what the market is.”

Darren Weiss is president of Verano, which grows and sells cannabis and related products nationwide, including in Massachusetts and Connecticut. Verano owns CTPharma, one of the state’s four major cannabis growers. He said Connecticut runs a tight ship; he’s not worried about the cannabis market in Connecticut, a state roughly half the size of its neighbor with roughly half as many eligible adult-use consumers.

“Connecticut started out, and remains now, one of the most highly-regulated programs in the country,” he said. “There were a much smaller number of licenses relative to population.”

Carstensen said legal cannabis options are likely pulling some consumers from the illegal, unlicensed cannabis market. Carstensen also said what can’t be quantified is how many Connecticut users are getting their supply from Massachusetts.

According to data from each state’s cannabis regulators, Massachusetts’ cannabis flower costs much less than Connecticut’s does. In June, a consumer could buy 3.5 grams of cannabis flower in Connecticut for about forty dollars. In the Bay State? The price was half, roughly twenty dollars. Experts said a more stable price point is thirty to thirty-five dollars.

While twenty-dollar cannabis flower can appeal to consumers, experts say cheap cannabis everywhere is no good. Market over-saturation jeopardizes the longevity of cannabis businesses, which isn’t beneficial to the owners and operators.

This is especially true for Connecticut, where stakeholders in cannabis businesses have roots in communities disproportionately targeted by the war on drugs. Avoiding these harmful effects is why the DCP exercises caution.

Tom Peake, an economics and public policy senior research analyst at the Donahue Institute at the University of Massachusetts Amherst, agreed that interstate commerce is a real aspect of cannabis profits. He said while each state that legalizes cannabis use monitors and regulates its industry, cannabis moves across state lines, not just within them.

“For the first few years of operation (in Massachusetts), and even to this day, a lot of the license plates you see around (retailers) are Connecticut license plates,” Peake said.

Carstensen said he sees the appeal of buying cannabis in other states, especially now that Massachusetts’ cannabis is so cheap. “It’s an attractive price,” he said.

But as more states legalize, consumers will cross state lines to buy cannabis less frequently, Peake said.

“To say nothing of Connecticut, I think Massachusetts is seeing diminishing returns from that,” he said. “As more places legalize it, I have to imagine we’re not seeing very much traffic from New York.”

Carstensen said that as the Nutmeg State’s market matures, retailers will “pull that business back into Connecticut when we become more competitively priced.”  Peake agreed that “as (more Connecticut retailers) open up, we can probably expect the vast majority of those folks to be buying cannabis in Connecticut.”

Carstensen said that as much as interstate cannabis purchases skew understanding Connecticut’s market, it also serves as a check on over-saturating the Nutmeg State’s cannabis economy. He said that Massachusetts attracting consumers from Connecticut creates conservative estimates of demand.

Weiss, the president of the Nutmeg State’s largest cannabis grower, Verano, said Massachusetts regulators mishandled the state’s cannabis market.  “What Massachusetts did is it gave away too many licenses,” he said. “And primarily on the supply side. You’ve got, you know, very strong demand in Massachusetts…But you’ve got too much supply.”  And that’s coming from the state that Weiss said is one of the “highest consuming markets out there.”

According to a spokesperson from the Massachusetts Cannabis Control Commission, since 2018, the Bay State has licensed 320 adult use-retailers.

Aside from Connecticut’s local, statewide and commercial safeguards against an oversaturated market, Weiss said his company employs in-house strategies to prevent over-saturation. He said Verano isn’t going to wait for the market to mature to make business decisions, so it maintains “flexibility” as a manufacturer, reseller, wholesaler, and cultivator of cannabis products and flower.

“By dedicating more of our own shelves to our own products, we are able to retain more margin,” Weiss said. “As a result of which we are able to provide more flexibility to the end consumer on pricing and variability.”

Weiss said that, while heavy-handed regulation goes against “free-market principles,” it’s better to let the state correct and regulate the cannabis market. Otherwise, the market would correct itself with retail closures — the “least-preferred method” of dealing with over-saturation, he said.

Carstensen said, if there were too many cannabis dispensaries, “the market will tell us.”

“They’ll close,” the economics professor said.

Krasselt said the state wants to manage the cannabis industry to prevent that outcome.

“We continue to work with the policy makers to take a measured and thoughtful approach to expanding the market in order to create an environment where businesses can succeed, while still creating a competitive marketplace for consumers.”

Connecticut has garnered a relatively small amount of taxes from the sale of recreational cannabis compared to other states, according to federal data. The U.S. Census Bureau released a state by state breakdown of excise taxes collected from the sale of cannabis. According to that data, Connecticut netted more than $3.5 million in cannabis taxes during the second quarter of 2023.

That puts Connecticut fifth from the bottom of all states and territories with legal cannabis sales, ahead of Mississippi, Washington D.C., Rhode Island and Vermont

At the top of the Census Bureau’s list for cannabis excise tax collections was California, which made $152.2 million for the same time period, followed by Illinois, Colorado, and Michigan.

The $3.5 million Connecticut collected in the second quarter represents a significant increase from the first quarter of 2023, when the state pulled in $1.15 million in excise tax revenue from cannabis sales. Legal cannabis sales began January 9th in Connecticut.

State cannabis taxes include a standard 6.35 percent sales tax and an excise tax, which changes based on the amount of THC sold per unit. THC is the psychoactive substance in cannabis. Local municipalities also collect taxes from the sale of cannabis.


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