Econ­omy may get a mar­i­juana lift

Medical cannabis in­dus­try could aid ev­ery­one from sci­en­tists to T-shirt mak­ers

Baltimore Sun Sunday - - FRONT PAGE - By Mered­ith Cohn

Over lunch years ago, a man who ran a suc­cess­ful mar­i­juana busi­ness in Cal­i­for­nia com­plained to his friend Arnold Heck­man about how hard it was to find the right pack­ag­ing ma­te­ri­als.

Heck­man thought the an­swer was sim­ple: “It seems like you could just go off­shore and have what you want made.”

His friend replied: “Why don’t you go off­shore and have what I want made, and I’ll buy it from you?”

That con­ver­sa­tion years ago was the be­gin­nings of Can­naline, which sells cus­tom bags and jars and other con­tain­ers from its Elkridge head­quar­ters to mar­i­juana re­tail­ers in states where the drug is le­gal.

Now Heck­man is poised to take ad­van­tage of busi­ness in his own back­yard.

Mary­land is li­cens­ing 15 grow­ers, 15 pro­ces­sors and 102 dis­pen­saries for the launch of the medical mar­i­juana in­dus­try. Can­naline rep­re­sents the next tier: the firms to be started or ex­panded to sup­port the trade.

An­a­lysts don’t ex­pect mar­i­juana to ri­val the state’s big­gest in­dus­tries, but say it could pro­vide thou­sands of di­rect and in­di­rect jobs and hun­dreds of mil­lions of dol­lars in eco­nomic ac­tiv­ity.

Adam Orens is a found­ing part­ner at the Mar­i­juana Pol­icy Group, an eco­nomic anal­y­sis and con­sult­ing firm that has stud­ied le­gal mar­i­juana sales in Colorado.

“There are eco­nomic ben­e­fits beyond di­rect taxes,” he said. “There are jobs, and real es­tate and spin-off busi­nesses. That can have a real im­pact on a com­mu­nity.”

Oren’s anal­y­sis found that the Colorado medical and recre­ational mar­i­juana mar­ket cre­ated 12,500 di­rect jobs and about 18,000 to­tal jobs in 2015 and gen­er­ated about $1 bil­lion in di­rect and nearly $2.4 bil­lion in spin-off eco­nomic ac­tiv­ity. He called mar­i­juana a rapidly grow­ing small in­dus­try “that has very high lo­cal im­pacts.”

He said some pub­lic costs could off­set ben­e­fits. His firm did not ac­count for health, en­ergy or en­force­ment ex­pen­di­tures, for ex­am­ple. And cer­tainly some com­mu­ni­ties want noth­ing to do with mar­i­juana, which is still il­le­gal at the fed­eral level.

John Ka­gia is ex­ec­u­tive vice pres­i­dent of in­dus­try an­a­lyt­ics for New Fron­tier Data.

He said most of the eco­nomic ben­e­fits and costs of mar­i­juana will be felt lo­cally, be­cause most prod­ucts and ser­vices are pro­duced and of­fered in-state.

Ka­gia used Colorado data to as­sess mar­i­juana’s po­ten­tial in Mary­land. He said Colorado is a good model for Mary­land be­cause the pop­u­la­tions are sim­i­lar. About 130,000 peo­ple par­tic­i­pated in Colorado’s medical mar­i­juana mar­ket be­fore recre­ational cannabis was ap­proved about three years ago.

Mary­land has ap­proved medical mar­i­juana only. About 2 per­cent of the pop­u­la­tion would be likely to tap medical mar­i­juana prod­ucts, Ka­gia found. An es­ti­mated 10 per­cent or more would be in­ter­ested in a recre­ational in­dus­try.

He said Mary­land is an at­trac­tive mar­ket be­cause gov­ern­ment sur­veys sug­gest wide ac­cep­tance of medical mar­i­juana and the reg­u­la­tions al­low for a wide spec­trum of qual­i­fy­ing medical con­di­tions, in­clud­ing the rel­a­tively broad “chronic pain.” Regis­tra­tion is not as cum­ber­some as in other states, and Mary­land is al­low­ing a sub­stan­tial num­ber of re­tail out­lets.

Ka­gia said a low num­ber of par­tic­i­pat­ing doctors could ham­per ac­cess for patients who will need a rec­om­men­da­tion to se­cure mar­i­juana. But he said tele-medicine has made up for low num­bers elsewhere.

More than 17,000 con­sumers in Mary­land have reg­is­tered for medical mar­i­juana. More than 500 providers, in­clud­ing doctors, nurses, dentists and po­di­a­trists, have signed on.

Ka­gia es­ti­mated sales in Mary­land could reach some $34 mil­lion in 2018, and jump to $494 mil­lion by 2025. For com­par­i­son, Baltimore-based Un­der Ar­mour’s 2016 rev­enue was $4.8 bil­lion.

Na­tion­ally, New Fron­tier es­ti­mates the cannabis mar­ket was worth an es­ti­mated $6.6 bil­lion in 2016, and sales could reach $24 bil­lion by 2025. It es­ti­mates there will be 280,000 di­rect jobs by 2020. Twenty-one states have le­gal­ized medical mar­i­juana. Eight more states and the District of Columbia also al­low recre­ational mar­i­juana.

Ka­gia said Mary­land, be­ing a rel­a­tively small state, won’t be a na­tional leader in sales, and mar­i­juana won’t likely be among the top in­dus­tries in the state. But he said there will be mea­sur­able eco­nomic ac­tiv­ity di­rectly and in­di­rectly from lawyers, ac­coun­tants, se­cu­rity firms and com­pa­nies that sup­ply equip­ment re­quired by law.

“The to­tal­ity of the eco­nomic ac­tiv­ity is go­ing to be hap­pen­ing beyond re­tail sales,” he said.

Dr. Ja­han Marcu is chief sci­ence of­fi­cer for the ad­vo­cacy group Amer­i­cans for Safe Ac­cess, which has been train­ing peo­ple to work in the field.

Even­tu­ally, he said, the fed­eral gov­ern­ment will col­lect jobs data.

Jeremy Schwartz, an as­so­ciate pro­fes­sor of eco­nomics at Loy­ola Univer­sity, said a num­ber of fac­tors will limit the im­pact of the in­dus­try in Mary­land. First, he said, the un­em­ploy­ment rate is al­ready low at about 4 per­cent, mean­ing most in­dus­try work­ers will likely be mov­ing from one field to an­other rather than en­ter­ing the job mar­ket.

Fur­ther, many of the jobs and much of the eco­nomic ac­tiv­ity likely al­ready ex­ists, though il­le­gally. Even­tu­ally, if ev­ery state ap­proves a mar­i­juana mar­ket, the in­dus­try could be­come sat­u­rated, as with le­gal­ized gam­bling.

Still, he said, there will be some new jobs and taxes, per­haps some up­ward pres­sure on salaries and even a few more peo­ple re­turned to the job mar­ket be­cause their chronic con­di­tions are bet­ter man­aged by medical mar­i­juana.

“It’s hard to imag­ine this causes some kind of boom” to the Mary­land econ­omy, he said. “But a new busi­ness open­ing in a lo­cal com­mu­nity won’t be noth­ing. There will be new busi­nesses and jobs and some kind of eco­nomic ef­fect.”

Pa­trick Jame­son, ex­ec­u­tive di­rec­tor of the Mary­land Medical Cannabis Com­mis­sion, es­ti­mates the in­dus­try will add be­tween 700 and 1,000 jobs to Mary­land ini­tially. The law re­quires cer­tain po­si­tions to en­sure qual­ity and se­cu­rity for users.

Sales are ex­pected to be­gin this year, but Jame­son said it’ll be an­other six months or more be­fore store shelves are well stocked. He said the com­mis­sion has no plans to as­sess eco­nomic im­pact.

“We have one mission and it’s medical mar­i­juana,” he said.

Philip Gold­berg, pres­i­dent of the Mary­land Cannabis In­dus­try As­so­ci­a­tion, said the in­dus­try could create more than 2,000 new jobs at the out­set, with up to 1,000 em­ployed by grow­ers, up to 75 by pro­ces­sors and up to 1,100 by dis­pen­saries. All will also need sup­port and ser­vices.

Gold­berg, who is CEO of the Fred­er­ick grower Green Leaf Medical, said he’s re­ceived re­sumes from roofers and even an X-ray tech­ni­cian who wanted a new ca­reer with growth po­ten­tial. One on­line job post drew 268 re­sponses in 12 hours.

Gold­berg said many be­lieve in the mission of pro­vid­ing medical mar­i­juana.

Some have agreed to take pay cuts for one of the 50 or so jobs he ex­pects to ini­tially create. He said pay starts at $30,000 with ben­e­fits for the peo­ple who tend the mar­i­juana plants, ris­ing to $80,000 for sci­en­tific po­si­tions.

“It’s not hard to find ap­pli­cants,” he said. “We prob­a­bly could have got­ten away with pay­ing $10 an hour, but we’re in­vest­ing a lot in train­ing and don’t want peo­ple to leave. We want peo­ple to see up­ward mo­bil­ity and feel good about their ca­reers.”

Shad Ewart, a pro­fes­sor at Anne Arun­del Com­mu­nity Col­lege, is train­ing en­trepreneurs. He said plenty of peo­ple are seek­ing to ben­e­fit from the in­dus­try with­out ac­tu­ally work­ing in the in­dus­try.

His course fo­cuses on “the picks and shov­els part of the gold rush,” mean­ing an­cil­lary jobs nec­es­sary to start up an in­dus­try.

Some stu­dents are aim­ing for en­try-level jobs as a grower, pro­ces­sor or re­tailer. Oth­ers want to ex­pand their ac­count­ing or le­gal prac­tice. But many want to un­der­stand how to sup­ply the parts to grow hy­dro­ponic crops in­doors or the dis­play cases or even the T-shirts with lo­gos on them.

He said his course be­gins with a re­view of the state reg­u­la­tions. They out­line what is needed.

Stu­dents al­ready have been creative, Ewart said. As a class project, one stu­dent bought hun­dreds of cheap cannabis leafthemed stick­ers in col­ors of the Mary­land flag and sold them for $5 a piece. An­other stu­dent was work­ing to trans­form his limo ser­vice into a cannabis trans­port busi­ness.

“These busi­nesses won’t be game-chang­ers for the state, but they will be gamechang­ing to in­di­vid­u­als and com­mu­ni­ties,” he said. “T-shirts may end up be­ing where the real money is.”

Most ini­tial jobs will be at dis­pen­saries, pro­ces­sors and dis­trib­u­tors. Ti­mo­ni­um­based Cu­rio Well­ness has li­censes for all three busi­ness and ex­pects to hire 69 peo­ple. The po­si­tions range from hourly re­tail jobs to highly skilled sci­en­tists.

Wendy Bron­fein, a founder of Cu­rio Well­ness and a mar­ket­ing and prod­uct de­vel­op­ment ex­ec­u­tive, echoed Gold­berg’s de­sire to pro­vide good ca­reer op­por­tu­ni­ties. The com­pany of­fers ben­e­fits such as health care and profit shar­ing plus a “liv­ing wage” for ev­ery­one.

Cu­rio has re­ceived 16,000 re­sumes and has filled key man­age­ment po­si­tions al­ready, she said. Just a hand­ful of the new hires have come from out of state.

“It al­most sounds a lit­tle hokey, or old school, but when we were form­ing the com­pany we de­cided we wanted it to be one of those places where peo­ple would say they worked at this com­pany for 40 years and got the watch,” Bron­fein said. “At the same time, it’s a brand-new in­dus­try. A par­al­lel would be the dot-com in­dus­try, where peo­ple could come into an en­trylevel po­si­tion and maybe rise up at a faster pace to be­come a se­nior vice pres­i­dent in charge of the Ohio divi­sion.”

Bron­fein said the com­pany has sought to do busi­ness with as many lo­cal com­pa­nies as pos­si­ble. That in­cludes com­mer­cial Re­al­tors for as­sis­tance buy­ing its 56,000square-foot for­mer fac­tory build­ing, lo­cal con­struc­tion con­trac­tors for up­grades, and lo­cal dis­trib­u­tors for equip­ment and even the cof­fee in the break room.

One lo­cal com­pany that hopes to get some of that kind of busi­ness is SOS Tech­nol­ogy Group in Baltimore County, which pro­vides cy­ber and phys­i­cal se­cu­rity ser­vices. Scott Hall, a tech­ni­cal sale en­gi­neer, said pro­fes­sion­als at the firm al­ready have stud­ied the reg­u­la­tions so they can add medical mar­i­juana to their ros­ter of health care, gov­ern­ment and other clients.

Hall pre­dicted many will want the busi­ness. That will be good not only for those that get deals, he said, but for the state gen­er­ally.

“I think there is po­ten­tial for a far­reach­ing eco­nomic ben­e­fit,” Hall said.

Heck­man at Can­naline said he’s al­ready see­ing busi­ness. The Elkridge of­fice has had to ac­com­mo­date walk-in cus­tomers for the first time.

Heck­man and his part­ner re­cently in­vested in a $10,000 la­bel maker that can pro­duce a foot of la­bels a sec­ond so they can cus­tom­ize and ful­fill orders more quickly. He said he’s also in­vested in child-re­sis­tant pack­ag­ing and plas­tic in­no­va­tion, im­prov­ing his bags’ abil­ity to mod­er­ate air and mois­ture.

The busi­ness, he said, al­ready has moved far beyond its ori­gins in his part­ner’s base­ment. Can­naline now em­ploys seven peo­ple, and rev­enue has grown 10-fold in less than a decade. Lo­cal busi­ness will only help it ex­pand.

“This is go­ing to be noth­ing but good for the econ­omy,” he said.

KIM HAIRSTON/BALTIMORE SUN

Arnold Heck­man stands near a dis­play of cus­tom jars his Elkridge com­pany, Can­naline, sup­plies to the mar­i­juana in­dus­try.

KIM HAIRSTON/BALTIMORE SUN

Arnold Heck­man is a co-owner of Can­naline, a com­pany that sup­plies the medical cannabis in­dus­try with var­i­ous types and sizes of con­tain­ers. His busi­ness is one that could ben­e­fit when medical mar­i­juana soon be­comes avail­able in Mary­land.

KIM HAIRSTON/BALTIMORE SUN

Heck­man holds smell-proof bags for pack­ag­ing mar­i­juana. He said his com­pany is al­ready see­ing busi­ness from Mary­land’s medical mar­i­juana in­dus­try.

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