In this article, we will thoroughly explore the present economic condition of the cannabis market in Maryland.
Background
In July 2021, Luke H. Clippinger, Maryland House Speaker, convened the Cannabis Referendum and Legalization Work Group. The Work Group was tasked with crafting the implementation of a legalized cannabis program in Maryland after voters approved the ballot question in November 2022.
The Cannabis Referendum and Legalization Work Group was formed with four subcommittees to focus on the following subjects:
- Business Implementation: The regulatory structure for the cannabis industry, including licensing and permitting.
- Cannabis Taxation: The taxation of cannabis products and the distribution of tax revenue.
- Criminal Justice Impacts: The impact of marijuana legalization on the criminal justice system, including expungement and release of people convicted of marijuana offenses.
- Health Determinants: The public health impacts of marijuana legalization, including addiction treatment and healthcare support.
Common practice in new legal cannabis states is to commission a research firm to develop a Behavioral Economic Study. This study is meant to predict the market size and demand, the risks of cannabis legalization, determine appropriate taxation, and make conservative recommendations on the number and locations for licensed cannabis businesses.
On January 5th, 2023 the House Cannabis Referendum and Legalization Workgroup met to discuss the research findings provided by Cannabis Public Policy Consulting, the leading government consulting & research firm producing dozens of publications on cannabis demand, public health outcomes and market surveillance. These research findings are discussed in the following section. The Maryland Legislature subsequently passed the Cannabis Reform Act (H.B. 556/S.B. 516) in the spring of 2023.
Maryland Market Demand
According to a recent article by Forbes, Maryland’s first month of sales has put the state on track for an annual run-rate of $700 million to $800 million, making it one of the top-performing markets this year. The research sponsored by the House Cannabis Referendum and Legalization Workgroup and provided by the Cannabis Public Policy Consulting’s report, Maryland Future Adult Use Cannabis Demand & Predictive Modeling, paints an exciting picture of the upcoming industry, particularly for those with the first-to-market advantage.
Potential Customers
As of early 2023, 43% of Marylanders admitted to using cannabis within the past year, with 36% reporting daily or almost daily cannabis use. According to Cannabis Public Policy Consulting’s report, the demand for cannabis in Maryland is approximately 824M grams or 1.8M lbs per month. Maryland consumers are willing to travel up to 20 minutes to purchase cannabis, roughly equating to walking 1 mile. This information provides essential context for urban vs. rural dynamics in dispensary density.
Cannabis Public Policy Consulting’s study determined a ratio of 17,000 residents per dispensary, recommending the highest total number of dispensaries in Montgomery County (48), Prince George’s County (43), Baltimore County (39) and Anne Arundel County (27).
The Maryland Cannabis Administration has approved a limited number of licenses for the initial round of dispensary licensing. This number is significantly lower than the recommended amount. Montgomery County and Prince George’s County will each allow nine dispensaries, while Baltimore County will have six and Anne Arundel County will have only five. As a result, these select few retailers will have a considerable advantage regarding customer engagement and retention.
Moreover, research suggests that the residents of these counties would not hesitate to shell out $15 or even more for each gram of cannabis. The estimated median willingness to pay for a gram of adult-use cannabis stands at a staggering $14 in Maryland, significantly higher than in other states with legalized cannabis.
Taxation
To combat the illegal sale of cannabis and maximize profits for licensed sellers, the research firm strongly suggested implementing a tax rate ranging from 15-20% and ensuring a minimum of 300 dispensaries in the market. However, the Economic Matters Committee of the House of Delegates in Maryland recently passed a 9% sales and use tax on cannabis products, which aligns with the state Senate’s verdict and is equivalent to the tax rate on alcohol.
It is almost certain that the competitive tax rate will lead to a surge in demand surpassing the initial projections, resulting in a significant boost in sales for the first 83 dispensary license winners. The increased demand for cannabis products with reasonable taxes will come from local consumers and those residing in adjacent states on the East Coast.
- Pennsylvania – Medical only
- Delaware – Set to begin issuing retail store and testing facility licenses in November 2024. Recreational cannabis in Delaware will include a 15% sales tax.
- Virginia – The recreational marijuana market is stalled indefinitely, but was set to impose a 21% excise tax on adult use marijuana sales, and a 5.3% sales tax applying to the sale of both recreational and medical marijuana.
- West Virginia – Medical only
Medical Dispensary Conversion and Future Potential
On July 1st, during the first day of recreational sales, Maryland’s recently converted cannabis retailers averaged nearly $50,000 in total sales of product. Compared to the previous four Saturdays where sales were limited to medical marijuana only, this was a substantial increase of 252%. By the end of the month, the Maryland Cannabis Administration had converted 95 medical marijuana dispensaries into recreational cannabis dispensaries. The state’s seed-to-sale tracking system technology vendor, METRC, and the Maryland Cannabis Administration provided data indicating that the total revenue generated from the first month of recreational cannabis sales amounted to $85 million, with $21 million in sales made within the first week alone.Though converted medical licensees had the advantages of an existing customer base and fully built-out facilities and infrastructure, according to Cannabis Public Policy Consulting’s report, the MCA predicts it will not be enough.
A survey conducted in September 2022 for the Maryland Medical Cannabis Commission found a current shortage of medical cannabis supplies and products in the market. “While it is common for states to allow a dual licensing opportunity for medical and adult-use cannabis,” states Cannabis Public Policy Consulting’s report, “the currently existing medical market will not suffice for the total future adult-use market based on year-end data provided by the Maryland Medical Cannabis Commission.”
Market Optimism
Though more conservative than the projections by Forbes, the 2023 MJBiz Factbook forecasts that recreational cannabis sales in Maryland will likely reach $275 million this year and $2.1 billion by 2027. Revenues, as projected by the beginning weeks of legalization, would be nothing less than life-changing for the social equity applicants exclusively invited to take part in the first round of licenses.
Application Process and Key Dates
Prior to November 3rd, 2023
First, prospective Social Equity Applicants are required to complete the MCA’s Cannabis Business Licensing Interest Form. An individual must answer each question correctly to obtain a personalized link to the Social Equity Verification Portal.
September 8th to November 7th, 2023
Within two business days of Cannabis Business Licensing Interest Form submission, the link to the Social Equity Verification Portal will be sent via email. The portal will only be open for only 60 days.
November 13th to December 12th, 2023
The application round will be open for exactly 30 days. In addition to meeting the criteria for a social equity applicant, an application must include:
- A detailed operational plan
- A business plan; and
- A detailed diversity plan.
During this time, an applicant must submit an application fee of $5,000 for a standard license; or $1,000 for a micro license.
January 1st, 2024 (at the Latest)
Under the Cannabis Reform Act, the Administration will begin conducting the lottery on or before January 1, 2024. Any applicant who meets the minimum requirements for licensure, on a pass-fail basis, will be placed in a randomized lottery based on license type (grower, processor, or dispensary) and county or region for which the application was submitted.
For more details on the Maryland Adult Use Licensing process, see our detailed overview here.
Need assistance?
Harvest 360 is a trusted partner in the often complicated process of cannabis licensing. We’re dedicated to helping prospective applicants initiate the application process efficiently and effectively, developing an application that not only wins, but is designed to be implemented.
Schedule a free support call with our team, or refer to our Social Equity Verification Guide to begin the process. Our comprehensive support will guide you seamlessly through each step of the Maryland adult use licensing process, help you navigate start-up processes, and plan for growth.
Looking to get in on the first round of licensing in Maryland as a social equity applicant?
Grab our free Social Equity Verification guide to get officially verified by the state before the window closes on November 7th.
