It is exciting to learn that recreational pot shops will reopen for business starting Monday next week. It’s been eight long weeks since these recreational pot shops were closed down in a bid to comply with the COVID-19 pandemic regulations. While this was not the only industry that was affected in such a way, the impact has been felt severely in this space. So much so it is not clear if some pot shops will be able to recover the two months of total blackout.
On March 24th 2020, Governor Charlie Baker ordered for the closure of all non-essential business services in Massachusetts in a bid to slow down the spread of the novel coronavirus. Adult-use marijuana shops were included in this category and consequently had to comply with the orders. Surprisingly, pot shops in other states were allowed to continue with “business as usual,” having been categorized as essential services. Governor Baker however has remained adamant in spite of mounting pressure to reopen legal marijuana dispensaries from stakeholders in the industry.
It appears that this is about to change. With coronavirus cases in the state declining steadily since the last week of April, a statewide reopening plan is in the works. Adult use marijuana dispensaries stand to benefit from this move. After a meeting between the Governor and stakeholders marijuana dispensaries will be allowed to reopen for curbside deliveries starting on Monday, 25th May 2020. Adult use stores will have a chance at recouping their losses and starting afresh with their customers all over again. This may mean rehiring staff who had been laid off and re- contracting suppliers who had been forced to take a break.
Marijuana dispensaries selling medicinal cannabis were however exempted from the compulsory closure of business. This is because they were categorized as essential services. During the period in which recreational stores were shut down, medical stores witnessed a sharp spike in sales. They also recorded high numbers of applications for medical marijuana card registration.
In March, 63,720 patents had been certified as medical marijuana patients in the state. By the first week of May, this number had risen to 72,502 which is a 14% spike.
This served to confirm the belief that many medical marijuana patients rely on recreational stores for their medicine. This also raised concerns about the sufficiency of the supply chain of the medical marijuana market. Or why are patients ordering medical marijuana from recreational stores where they will be forced to pay higher prices?
Economic Impact of the COVID-19 Lockdown on Rec Pot Shops in Massachusetts
Most definitely, recreational pot stores have lost sales and consequently lost money in the short term; translates to two months worth of sales. It is not clear if these stores will recover from this considering that several were struggling to remain afloat prior to the lockdown. Another concern is whether customers will return to these pot shops once this season is over. They could have found alternative avenues (black market included) to source their stash from.
Unfortunately marijuana businesses are not eligible for the Paycheck Protection Program since marijuana is still illegal under federal law. It will be up to each individual store to bear the brunt of the lockdown at an individual level.
At a state level, the government has also lost a significant sum of money in tax revenues from marijuana sales in the last two months. It is not clear when marijuana tax collections will bounce back, if at all they will.
Adult-use marijuana is taxed at 10.75% at the state level and up to 3% tax at the local level. On the flip side, medical marijuana is not taxed at all. This means that for as long as rec marijuana shops remain closed the government is not collecting any taxes from marijuana. According to data from the Cannabis Control Commission (CCC), recreational marijuana sales exceeded $420 million in Massachusetts in 2019; the first full year of legalization.
At the beginning of this month, Gov Baker convened a meeting with stakeholders in the marijuana industry where they discussed the way forward for the marijuana industry. The meeting brought together the likes of Joseph Lusardi from Curaleaf, Amanda Rositano, the president of NETA, and Kobie Evans from Pure Oasis in Boston. This resulted in an agreement to reopen marijuana stores for curbside delivery, in tandem with the statewide reopening which is coming in a week’s time.
Prior to this, a representative of recreational stores had launched a lawsuit against the Governor’s “extreme” measure affecting recreational stores. While recreational stores were forced to shut down, medical marijuana and liquor stores were allowed to remain operational during this period; something that didn’t go well with stakeholders in the industry. As much as the lawsuit did not sail through, the judge conceded that there had to be a way to reopen recreational stores without compromising on safety. It appears that curbside delivery is one way to go about this.
With recreational pot shops in Massachusetts opening next week there is a lot of optimism in the industry and state in general.