A handful of medical marijuana dispensaries in Connecticut on Tuesday will expand into adult-use retail, establishing another new market on the Eastern Seaboard with sales expected to hit at least $300 million this year.

The state’s adult-use market, dominated by multistate operators, will open with only 13 cannabis companies of any kind licensed to take part in Day One sales, one of the smaller cohorts among U.S. recreational launches.

Dispensaries expect an initial surge in demand, reflecting customer enthusiasm, novelty factors and limited retail access.

Some stores are a 30-minute drive or longer from their nearest competitor.

“A deluge is coming, and we expect hundreds of thousands more potential customers plus whomever might come from neighboring states,” said Benjamin Zachs, CEO of Fine Fettle Dispensary, which has converted three of its four medical marijuana licenses into hybrid retail permits to serve recreational consumers.

Connecticut is the third East Coast state to usher in adult-use sales in just over a month, following New York’s Dec. 29 opening and Rhode Island’s Dec. 1 debut.

Recreational sales this year in Connecticut are projected to reach $300 million to $375 million, growing to $650 million-$800 million in 2026, according to the 2022 MJBiz Factbook.

Prepping for a new day

To ensure smooth transactions and an enjoyable shopping experience, Acreage Holdings implemented several initiatives at The Botanist in Montville, the multistate operator’s first dispensary to launch adult-use sales in Connecticut.

“We’ve added more point-of-sale terminals, reconfigured the lobby layout and dispensary flow, hired more employees, doubled our parking availability and so much more,” said Dennis Curran, chief operating officer of New York-based Acreage.

Acreage plans to convert its sister locations in Danbury and South Windsor to recreational stores later this year.

Fine Fettle has been prepping its dispensaries for weeks for a rush of new customers on opening day.

Efforts included hiring about 100 employees and adding several registers in each location, according to Zachs.

Its dispensaries serve about 9,000 medical marijuana patients in Connecticut, roughly 20% of the total market.

In one of several regulatory policies aimed at mitigating product shortfalls at rollout, sales to adult-use consumers will be limited to a quarter of an ounce of cannabis flower or product equivalent.

Massachusetts-based MSO Curaleaf Holdings, which operates four MMJ dispensaries and has a cultivation license in Connecticut, has applied to convert two of its stores to hybrid retail.

“We hope to begin adult-use sales in Stamford in the coming days,” CEO Matt Darin told MJBizDaily.

Though Curaleaf dispensaries will initially be omitted from the adult-use market, all seven of the state’s licensed recreational retail stores will carry its products, according to Darin.

“These products include Curaleaf flower and pre-rolls as well as Select Cliq, our proprietary vape hardware system, and Select Squeeze, our fast-acting THC-infused beverage enhancer,” he said.

High cost of admission

Connecticut retailers and marijuana producers might face the highest premiums in the country to convert their medical marijuana licenses to hybrid retail operations.

Dispensaries are charged a $1 million fee and producers a $3 million fee, though those rates could be cut in half if businesses agree to form separate joint ventures with two social equity applicants, an allowance that includes two additional licenses.

Most, if not all, cannabis business license applicants in Connecticut are expected to take this option, industry sources and operators told MJBizDaily.

The initial rollout includes only four producers – a catchall term for vertically integrated cultivators and manufacturers in Connecticut – which is the same number of licensees that were selected in 2014 to supply the state’s medical marijuana program.

Three of them – CT Pharmaceutical Solutions (now known as CT Pharma), Curaleaf and Theraplant – still operate under the same or similar names.

Theraplant and CT Pharma were acquired in 2021 by The Greenrose Holding Co., a special purpose acquisition company (SPAC), and Chicago-based Verano Holdings, respectively.

Connecticut’s high compliance costs could further jeopardize Greenrose’s financial position, which has teetered for well over a year.

The SPAC, in recent SEC filings, disclosed it missed a quarterly financial reporting deadline, broke credit agreements and needs “substantial additional capital” to fund ongoing operations.

Greenrose did not respond to inquiries from MJBizDaily.

“It’s something we’re aware of and monitoring,” said Kaitlyn Krasselt, spokesperson for the Connecticut Department of Consumer Protection (DCP), the state’s chief cannabis regulator.

The state has 26 cultivators in the process of establishing operations as well as a handful of micro-cultivators, she added.

“I don’t think we have a concern about the supply,” Krasselt noted.

Preserving the medical market

Meanwhile, Still River Wellness is doubling its retail space to about 2,500 square feet in anticipation of attracting a much larger customer base.

The company serves about 2,000 medical patients at its Torrington dispensary in northwest Connecticut.

Though Still River Wellness was approved a few weeks ago to sell recreational marijuana, ongoing construction to build and parse out that operation from its medical marijuana store will likely push its first adult-use sale to early February.

“Basically, two centers all in one,” Still River Managing Partner Thomas Macre said.

As part of Still River’s MMJ preservation plan – a state requirement aimed to maintain product supply and seamless transactions for medical patients – the property will feature separate parking lots, entrances, reception areas and points-of-sale.

Macre doesn’t expect many of his 300 or so daily medical patients to switch to recreational consumers, a common development in other markets.

“I don’t think that’s going to decline very much because of the product availability, the allotments and taxes,” he said.

“Most of these medical patients are here daily. I don’t see them transferring over to the adult side.”

Under Connecticut’s adult-use program, THC is capped at 30% for flower and 60% for all other cannabis products –  restrictions excluded from the medical market.

Other marketplace distinctions include:

• Products administered like medicine, including capsules, pills, suppositories and under-the-tongue sublinguals, are prohibited for recreational consumers.
• Medical marijuana products are tax-free, and the state plans to eliminate the $100 fee for MMJ patient cards, regulators told MJBizDaily.
• Recreational marijuana consumers can possess up to 1.5 ounces of cannabis product; medical patients can possess up to 5 ounces.

“Preserving the medical market was definitely top of mind for DCP as well as the lawmakers in Connecticut when they were crafting legislation,” Krasselt said.

“Our medical market has been in existence for a little over 10 years, and we have a little more than 50,000 patients who come to rely on that medicine.”

Sales in Connecticut’s MMJ market this year are expected to hit $175 million to $215 million, according to MJBizDaily projections.

Supply and demand

By law, Connecticut couldn’t open its adult-use market until regulators approved at least 250,000 square feet of growing and manufacturing space held by its four existing medical marijuana producers, an affirmation that came only a month ago.

That mandate, like the transaction limit, was implemented to ensure product availability in both the medical and recreational markets.

In preparation for the Jan. 10 launch, CT Pharma increased its SKUs (stock-keeping units) and production capacity for flower, pre-rolls, vapes, concentrates and edibles, according to Rino Ferrarese, executive vice president for Verano’s Northern Region. Verano also operates two Zen Leaf dispensaries in the state.

“We have expanded our cultivation areas, invested in additional automation, redesigned product packaging and labels to meet the new adult-use regulations, and implemented Connecticut’s new seed-to-sale tracking system,” he said.

Curaleaf expanded its edibles production capacity and stockpiled inventory to ensure ample supplies for existing medical patients and new adult-use consumers.

“We are also in the process of expanding our processing and production facility, which is scheduled for completion by the end of Q1,” Darin said.

Fine Fettle is tripling the amount of inventory at its recreational stores in Newington, Willimantic and Stamford, which is located near the New York state line.

“We expect it to be busy, so we’re stacking up on a ton of inventory from the producers and getting ready for what we expect to be pretty good demand,” Zachs said.

Source: https://mjbizdaily.com/connecticut-adult-use-marijuana-sales-to-start-with-big-opportunities-few-operators/