Matt Muñoz is keen to find a niche market in the state’s soon-to-be-legal recreational cannabis industry.
He has worked as a paralegal and lobbyist – experiences that he believes will come in handy as he begins to navigate industry rules and regulations that are still evolving. He also has some past experience with cannabis: a collision with the law in high school that resulted in possession charges and 10 days in prison. The old indictment was struck off his file a long time ago.
Muñoz, 38, sees a new state law legalizing recreational cannabis as a rare opportunity to break into a brand new industry – and create a standout brand.
“This is a once in a lifetime opportunity for many of us,” said Muñoz, a native New Mexican who lives in downtown Albuquerque.
He and his partners envision a micro-business that covers all aspects of cannabis production and small-scale cannabis sales, from growing plants to manufacturing products to opening retail stores.
When lawmakers drafted the Cannabis Regulation Act, which would allow adults 21 and older to use recreational and personal cannabis starting Tuesday, and requiring legal sale by April, many envisioned a program that would do it for Making small business as painless as possible would make entrepreneurs like Muñoz to get into the business. However, it is expected that he and other newcomers will face stiff competition from established medical cannabis companies planning to expand into recreational sales.
These large companies are likely to dominate the field, at least initially.
The 34 licensed producers, manufacturers, and distributors of the state’s 14-year-old Medical Cannabis Program have one distinct advantage: They don’t start from scratch.
They have the infrastructure they need, from buildings and security cameras to access to water and capital, which gives them a huge head start on what some proponents see as a big money-making company.
Jefferson King, director of marketing for Everest Cannabis Co., said existing medical marijuana companies that are shifting to recreational sales are poised to compete in the market soon.
“Establishing it will certainly make the transition to a leisure market easier,” he said.
Everest, a midsize medical cannabis company that plans to open a Santa Fe pharmacy by the end of the summer – its eighth store, but its first in northern New Mexico – is “definitely venturing into the recreational side,” King said.
King predicts that “a lot of smaller businesses will rise,” especially with the proposed regulations, which he believes are designed to support micro-businesses.
“There will certainly be enough market share,” said King. “Given the population of New Mexico and the fact that anyone over the age of 21 can buy cannabis, it seems like there will be plenty of stores.”
But getting started will be difficult.
“It’s a very expensive industry,” King said, adding that raising capital and finding a place to grow and sell cannabis are major obstacles.
Muñoz and his partners want to start small and initially grow up to 200 plants.
They have a business plan and budget in place, find a facility, and develop a security plan – criteria for applying for a production license – but they are prepared for challenges.
The well-positioned medical cannabis industry plays a large part in their concerns.
“This is very important to us,” said Muñoz. “At least in the beginning, they’ll have a big advantage.”
Newcomers are also likely to face competition from established growers in the state’s emerging hemp industry who plan to convert at least some of their acreage to cannabis.
Manuel Otero, a fourth generation farmer in Los Lunas who grows both hemp and hay, alfalfa and other products, is excited to see the state’s final rules for recreational cannabis growers so he can jump in – maybe soon a year.
He said he was planning to grow up.
The transition from hemp to cannabis should be “semi-easy,” said Otero.
He’s now growing 4 acres of hemp and imagining devoting about 2 to 3 acres to cannabis.
Otero isn’t concerned that medical cannabis companies are dominating the industry. He believes they could end up reaching out to farmers like him to market more cannabis or use it to make products.
“As long as these buyers stay consistent and don’t get greedy – yes, I can make a profit,” he said. “We’ll be farming them all day.”
Willie Ford, executive director of Reynold Greenleaf & Associates, an Albuquerque-based cannabis company consultancy, said money “will really rule” whoever is successful in the new industry.
“Those with access to capital, like companies outside of the state, will be able to really do things the little guys can’t,” said Ford. “My big fear is that some of them [microbusinesses] will come and put their savings in an industry that may not even be possible for them to succeed. You know, it’s almost like the state is giving them false hopes. “
Ford criticized what he called a “rushed legislative effort,” saying the state government was promoting the idea that small operators could enter the industry but had “done nothing.” [in the law] to protect them. “
“We’re New Mexican citizens running these medical programs because it’s so required by law, and now we’re going to see a huge onslaught of MSOs – multistate operators – keen to come in and sink lots of resources to help Dominating the New Mexico market and getting that money out of New Mexico, ”he said. “That breaks my heart.”
David White, founder of Organtica, which has been in the medical cannabis business since 2009, said his company will likely wait a year and then reconsider whether to expand into the recreational industry. For him it is of the utmost importance that patients have access to their medicines.
“We really focus on making sure our patients don’t suffer [during] this transitional period, ”he said. “We think it’s going to be very messy.”
Trends in other states that have legalized recreational cannabis, like Colorado, suggest that the state’s supply could get “pretty tight,” said White, “and we want to make sure patients get what during this time they need. “
For New Mexico’s more than 117,000 medical cannabis patients, “this is not a fad,” White said. “This is not a recovery. This is their medicine. “
White said he hopes medical cannabis companies will not dominate the industry and that micro-businesses will thrive as the new law calls for.
“We are promoting the micro-business so much that we will work with some potential candidates and do everything in our power to help them obtain a license,” he said, adding that Organtica does not charge entrepreneurs for these services .
“We firmly believe that the micro-enterprises can prop up the market so that we are not dominated by one, two or three really big producers, because we believe that this is not good for the plant or the community. ” he said.
Muñoz and others with small business plans believe they will be able to offer something that customers cannot find elsewhere: a taste of New Mexico.
“People like the boutique, the intimate experience of their own,” says Erica Rowland, a farmer and medicinal cannabis consumer in Bernalillo County.
Though she only initially plans to grow cannabis, Rowland, whose family has been farming for at least 60 years, has a long-term view of what smaller businesses like theirs can offer their customers.
“I see a new lifestyle, a consumption lounge lifestyle, an elimination of the stigma associated with cannabis. That’s the ultimate goal for me, “she said.
Muñoz said he believes cannabis micro-businesses are the ones that will give a high profile identity to the state’s new recreational industry.
“Micro-businesses should be treated like micro-breweries,” he said. “That is our business model: quality over quantity. We want to focus on customers who want a local IPA as opposed to a national branded beer. I think people will pay a little more for that local touch. That will be our niche. “
Muñoz and his partners Andrew Brown and Erika Hartwick Brown are working to raise $ 500,000 to start the company. You have received $ 300,000 in pledges to date.
Every new obstacle they face seems to increase the price.
He’s also researching commercial water rights, a requirement for cannabis growers. He said he was budgeting $ 10,000 a year for water.
Micro-businesses like yours that integrate manufacturing and distribution can only market their own products and reduce their potential profit margin. And they have to reserve 25 percent of their products for medical cannabis patients in the event of a shortage.
Muñoz wonders why he can’t sell these products directly to medical cannabis companies instead of keeping them for potential patients in need.
Rowland doesn’t feel that way. She said keeping 25 percent for medical cannabis patients is “a service to those who built this program.”
Their main concern is that state production regulations may not be finalized until September, when most of the cannabis growing season will be over.
How, she wonders, are 200 crop producers like her going to produce a crop next year when legal sales begin?
The new law gives local governments oversight over the locations and hours of operation of cannabis stores, which they believe could lead to changes that could affect their farm.
“How can we replenish inventory without making extreme investments in infrastructure while dealing with uncertainty about borough zoning? She asked.
Rowland already has water rights on her farm, where she grows alfalfa and flowers. She pays the Middle Rio Grande Conservancy District about $ 175 a year for these rights, a small fee. But she estimates she’ll pay at least $ 100,000 to build a security fence and install cameras on the 5-acre property that her family has farmed for at least 60 years.
This is a major financial upswing, she said.