IMPACT: No longer niche: The cannabis market in Western Mass. experiences growing pains Date: 8/21/2023 The cannabis industry in Western Massachusetts has changed exponentially since New England Treatment Access in Northampton became one of the first dispensaries to make a recreational sale on the East Coast in 2018.
Some communities, like Holyoke and Northampton, fully embraced the industry and are now experiencing the positives and negatives of a more saturated market. Others, like West Springfield, are just starting to make their mark on an industry that is becoming more ubiquitous by the day.
According to Aaron Vega, the director of planning and economic development in Holyoke, there was a lot of interest in cannabis in Holyoke in the beginning because the city made the process of acquiring a host community agreement to start a business very easy.
By the summer of 2020, when Canna Provisions became the first recreational dispensary to open in the city, it was reported that Holyoke had more completed cannabis license applications than any community in the state. The city quickly became a marijuana hotbed, according to Vega.
But things have changed since Canna opened.
Current industry status
“The market became pretty saturated pretty quickly here in Massachusetts,” Vega told Reminder Publishing. “And I think because of that, Holyoke has seen a lot less interest, and most of the [cannabis] developments are either backing up or paused at this point.”
As of press time, Vega said Holyoke has three grow facilities, four dispensaries and two testing labs open. Seventy host community agreements have been signed and 36 special permits have been approved by the City Council. According to Vega, a number of those permits will not go forward, which is very common in multiple industries, not just cannabis.
Beyond saturation, Vega believes recent price compression is a big concern for the cannabis industry as well. A pound of cannabis was going anywhere from $3,500 to $4,000 around two years ago, but nowadays, it is down to $1,200.
“So that kind of price compression for any product, if you were to lose value in a product in that short of time, I think people’s business plans kind of go out the window,” Vega said.
The other result of an ever-changing industry is the fact that other states around Massachusetts have recently made recreational sales legal. In the beginning, people from Connecticut and New York were crossing the border to the commonwealth to find their cannabis fix in places like Holyoke and the Berkshires. But both Connecticut and New York legalized recreational marijuana in 2021, meaning there is now less of a desire for people from those states to cross the Massachusetts border for cannabis.
“I think that’s having a big impact on the industry,” Vega said. “It’s not just the saturation of Massachusetts, but it’s also our neighboring states like New York and Connecticut.”
In a Finance Committee meeting back in the fall of 2022, Charlene Nardi — the finance director for Northampton — stated that the total cannabis revenue for the city dropped since 2019, mainly because the market is adjusting itself as more businesses in other states come online.
“Until it levels out, I’m still projecting downward revenue for this particular source,” Nardi said at the time.
Northampton is a unique cannabis spot for many reasons. The city currently features 11 dispensaries, after the 12th, The Source, shuttered in December. A more saturated market and controversy surrounding a proposed pot shop in Florence caused the City Council to further scrutinize the industry.
In January, the City Council decided to cap dispensaries at 12 with a 6-3 vote.
The new provision does not apply to social equity applicants looking to start a dispensary, which are participants in a state assistance program for business owners from backgrounds most affected by the war on drugs.
During that City Council meeting, some councilors in favor of the cap argued that public health officials warned of risks correlated with having a high number of dispensaries in a community, while others argued that regulation would unfairly alter the market.
Some officials, like Nardi and Mayor Gina-Louise Sciarra also argued against a cap. Sciarra said at the time that Northampton should continue to support an equitable and well-regulated cannabis industry that expands the city’s taxbase. Nardi said a cap could hurt small businesses.
“With a cap, the concern is that… we would be boxing out the smaller businesses,” said Nardi. “We would create a market where we would just have the larger businesses being able to afford them, and the whole point of the state with their laws was to make sure that this was available to those who have already [been] disadvantaged.”
Despite this change, Sciarra told Reminder Publishing that the city’s plan from the start was to always treat cannabis like the alcohol market in terms of regulation. She said that Northampton continues to be a leader in the cannabis market but that shifts in market availability, increased competition from other locales and the heavy regulatory environment have resulted in a significant slow in the growth of the local market.
Even with a cooling market, Sciarra said that the industry contributed to filling vacant storefronts in the city, transformed rundown buildings, increased foot traffic, contributed signficant tax reveue for the city for various public services and has created a substantial amount of jobs.
“Northampton went from having a brief corner on the market to being a city with quality cannabis retailers worth visiting alongside the other wonderful businesses and attractions we have to offer,” Sciarra said.
The city’s cap has had no known impacts on the city so far, according to Sciarra, there has been minor interest from potential new cannabis businesses over the past couple years.
The knottiness and added scrutiny of the industry are forcing more businesses to innovate and find other ways to be creative as the market continues to entrench itself in the throes of capitalism; and communities continue to understand how to react. One thing Sciarra said she will monitor is the state’s discussion around social consumption.
“I know that the next conversation is likely to center around social consumption, and I am following these policy conversations carefully to see how they might impact our city,” Sciarra said.
Industry’s firsthand impact
Kevin Perrier has multiple stakes in the cannabis industry. He and Volkan Polatol are the owners of retail stores Dreamer Cannabis in Southampton and Honey Northampton, as well as a cannabis manufacturing facility on Welmeco Way in Easthampton. They also operate Budzee, a warehouse delivery service also in Easthampton.
In an interview with Reminder Publishing, Perrier said he remembers back when Dreamer, their first dispensary, opened two years ago and how the industry was a seller’s market.
“We were struggling to get flower and having to chase after manufacturers and wholesale suppliers,” said Perrier, of that time. “And in the course of 12 months, never mind 24 months, it has pivoted to a buyer’s market and the market is fairly flooded with product and saturated with dispensaries.”
Perrier and Polatol have been able to stay afloat because, according to Perrier, they have found a niche in each one of their markets and Polatol has done a good job of keeping a selection of high-quality inventory at competitive prices in each of their dispensaries.
“We’re still seeing growth,” Perrier said. “So, we’re very fortunate in that respect.”
The Welmeco facility is also seeing growth as Perrier and Polatol continue to bring in new brands. Perrier told Reminder Publishing that he believes going into manufacturing was a more economically-sound move than entering the cultivation business, where costs are fixed.
“It costs you about the same, if not more, to grow that plant today than it did four years ago when people were selling it for five times the cost,” Perrier said. “Electricity and labor have gone up, but you’re probably netting one-fifth of the price.”
But with manufacturing, as prices for certain cannabis products go down, the input materials are going down, which allows a place like the Welmeco facility to keep consistent margins.
“We have really great brands,” Perrier said, of the facility. “We’re also very fortunate to have a great staff there.”
A notable niche continuing to develop in Western Massachusetts is the concept of cannabis delivery, which is a whole other animal that carries a bevy of restrictions. Perrier and Polatol were early to the party in 2022, when Budzee became the first delivery operator in the state to receive a notice to commence operations.
Since then, Perrier said sales have quadrupled, but it is still a concept that has not reached its full potential yet.
“What we’re seeing is slower organic growth by word of mouth and people experiencing it and you’re seeing an uptick,” Perrier said. “We haven’t pushed it nearly as hard as we could to get the word out and educate the public and things like that, but it works. It holds its own.”
The idea of hopping on the phone or computer to place an order and having the order at your house in a couple of hours is convenient, but state restrictions have made it difficult to advertise and educate the public on cannabis delivery.
“We can’t go on Facebook or Instagram and post something on Budzee to get the word out,” Perrier said. “We’re so limited to how we can educate the public that we’ve allowed it to be a slow, natural progression.”
The other Cannabis Control Commission restriction that is also making it hard on the delivery industry is the “two-driver” rule, which basically says there needs to be at least two drivers in the car when a delivery is being made.
“It’s an unrealistic model,” Perrier said. “That’s a big problem with delivery and a reason why there aren’t as many popping up as dispensaries.”
The tricky model is particularly impacting BlazeXpress in Holyoke, a home-delivery service that offers a variety of products like flowers, edibles, vapes and drinks.
Duane Harden, the CFO of BlazeXpress, said he opened the service earlier this year to make it easier for customers to acquire cannabis products and lessen the stigma around the plant. But state laws like the two-driver rule have made it tough on the burgeoning company.
He said the state feels it is necessary to have two drivers to prevent incidents like robberies from happening, but according to Harden, these things rarely happen.
“First of all, nobody knows we’re a delivery service because we drive unmarked hybrids,” Harden said. “But also, nobody in the state has gotten robbed or killed so far.”
BlazeXpress has also felt the brunt of other major restrictions on delivery services. According to Harden, they cannot deliver to campuses and hotels, while other states allow those practices, and they have also had some of their social media taken down because marijuana is not federally legal yet, so it has been hard to get the word out.
Additionally, they only have a license to deliver recreational cannabis, which means people with medical cards who need cannabis for medical reasons cannot get medical-grade marijuana delivered. Instead, these people are buying non-medical products but still paying a sales tax that they otherwise would not have to pay if they went to a dispensary to buy medical cannabis.
According to Harden, some of these restrictions are hindering their service as well as the people who may have no other choice but to utilize delivery. Many may need cannabis for their daily regimen or health issues, but these regulations are making it difficult.
“They [the state] don’t consider these things,” Harden said. “People really need this in their daily regimen.”
Currently, BlazeXpress delivers to many places like Amherst, Northampton, Chicopee, Holyoke, Springfield and others in Western Massachusetts, but Harden hopes more communities embrace the delivery niche.
“There are communities that have banned delivery, banned dispensaries or banned both,” Harden said. “So, we have constituents from those communities who want cannabis delivered, but we can’t.”
Another obstacle delivery services face is they cannot deliver to people’s workplaces, which means most people are unable to order until after a typical workday ends, which is usually 5 p.m. This makes it difficult for BlazeXpress because the state only allows delivery until 9 p.m., meaning there is a really tight window for companies to take advantage of when BlazeXpress delivers from 1 to 9 p.m., and takes orders from 8 a.m. to 9 p.m.
Financially, these restrictions are making things tough.
“This is not a profitable business model,” Harden said, of delivery in Massachusetts. “But we’re doing this out of the good of our hearts and we see the bigger picture, our mission and the service that we are providing to people at Western Mass. At some point, the state is going to get it together with these regulations that make it nearly impossible to be profitable, and we just got to tread the water and survive until then.”
Communities entering industry now
It is only natural that a new industry will come with growing pains, and we are starting to see how some communities are adjusting and learning from the market.
West Springfield was one of those communities that entered the cannabis game late due to some pushback in the past, but the Town Council officially voted for the legalization of recreational sales in 2022.
“I think the fears expressed by some of the public in 2018 did not come to fruition,” Mayor William Reichelt said, in an interview with Reminder Publishing.
At that time, Reichelt said, there were a lot of health and traffic concerns relating to the cannabis industry, but those concerns-specifically traffic and parking ones-only pertained to places like Amherst and Northampton in those days because they were some of the first to embrace the industry.
With more places entrenched in cannabis now, those concerns are not as valid anymore, according to Reichelt.
“I understand the fears of the unknown,” Reichelt said. “But now with more places open, I think people are generally more used to it.”
Reichelt, who has been a proponent of the cannabis industry since recreational sales became legal statewide, said West Springfield could be $4 million richer had they embraced the industry early on.
But there have been benefits to waiting and seeing how the market functions in other communities.
For example, because some of those aforementioned risks were generally unfounded, West Springfield was able to implement fewer restrictions on where cannabis businesses can open in town, thus opening the market a bit more.
Beyond that, though, the town also has a cap of three dispensaries, which is something the council wanted. In talking to others in the industry, Reichelt said this cap was a beneficial decision.
“The cap made sense because there needs to be some kind of restrictions so that the [dispensaries] making a significant investment in this business,” Reichelt said. “They don’t want to be like an Amherst or Northampton that has them closing because there’s too much.”
Based on how West Springfield approached the industry, Reichelt believes the town can be successful in the future. Currently, they have two dispensaries set to open in the near future, and they are going to see how things go before a third is considered. But overall, Reichelt is optimistic since places like Memorial Avenue and Riverdale Street are already big retail havens.
“I’m hopeful that, with West Side being a retail capital of Western Mass., we’ll be successful because of location,” Reichelt said.
What’s next?
At this point, cannabis is normalized to the point where Reichelt said very few people showed up for public comment in 2022 when the recreational legislation was introduced. In 2018, however, Reichelt said, the place was packed when the concept was first discussed.
“We don’t have to be afraid of this new industry anymore,” Reichelt said. “People have become more open to marijuana.”
That may be true in many cases, but as the market continues to evolve and expand, changes are going to have to be made to sustain the industry.
According to Harden, there is still some negative stigma surrounding cannabis, which he feels is why restrictions in Massachusetts are oftentimes tighter than in other states where marijuana is legal.
Perrier agrees that some of the state regulations are a bit cumbersome, though he understands why some are necessary.
“I’m hoping things will kind of evolve over time to have a little more practicality to some of the regulations,” Perrier said. “I think there’s a lot of regulations that are perhaps a little cumbersome that have a big financial impact, and that’s why you’re seeing dispensaries and growing facilities close.”
As of press time, some dispensaries like The Source have closed and Trulieve has closed all three of their Massachusetts dispensaries earlier this year. The Trulieve decision came after an employee at the Holyoke cultivation site died from asthma complications due to inhaling cannabis dust in the facility.
Much like other states where marijuana is legalized, like Colorado or California, Massachusetts may continue to see an additional contraction of the market.
Vega appeared cautiously optimistic when talking about the future.
“I’m generally optimistic in that I think it’ll become a permanent fixture and part of our manufacturing sort of fabric that we have here,” Vega said, of Holyoke’s place in the industry.
What we are starting to see, according to Vega, is the industry morph into something that is similar to any other business, where — for example — manufacturing cannabis is just like manufacturing anything else. Because cannabis is becoming more normalized, Vega said Hoyloke will treat the cannabis business like any other.
“There will be a couple of big companies and a number of small companies,” Vega said. “I think some of the smaller companies will find a home in Holyoke, but I wouldn’t be surprised if others closed or never come to fruition.”
Perrier thinks the industry is still going in a positive direction, but it needs to stabilize.
“You’re going to continue to see folks pop up, but you’re also going to see folks close,” Perrier said. “That’s just part of the growth period.”
When asked what advice he would give to someone coming into this industry, Perrier said people need to understand that the days of the green rush are over.
“I think you need to go in with your eyes wide open, understand your numbers, understand your bugs, and have something to differentiate yourself,” Perrier said. “The days of just opening a dispensary with a ‘build it, they’ll come’ mentality…that’s not the case anymore.”
Reminder Publishing also reached out to Insa and NETA for this story, but did not receive a response.
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