Jun. 30—Just three years after a record-setting boom, Maine's medical cannabis market is hanging on by its fingertips. Oversaturation, competition with recreational cannabis and high costs have caused revenue to plummet and people to leave the industry in droves.
Unlike many other states, Maine's medical cannabis market has always outperformed its recreational counterpart. But the gap between the two is narrowing.
Together, the two markets make up an almost $500 million industry, but it remains to be seen whether the state can continue to support the so-called green rush in both markets over the long term.
The state's roughly 3,000 medical cannabis providers raked in more than $371 million in sales in 2021, and there was relatively little competition from the adult-use market, which was still struggling with limited supply and high prices.
But industry experts say the boom has been followed by a bust.
The medical market brought in $280 million last year, a decrease of about 25% from the 2021 peak. The roughly 3,000 providers, known in the industry as caregivers, have dropped by more than 45% to 1,647 in May, according to data from the Maine Office of Cannabis Policy.
The state's recreational market, on the other hand, has been gaining steam and last year brought in about $217 million.
While medical cannabis has been legal in Maine since 1999, caregivers couldn't open stores until almost 20 years later, in 2018. Recreational cannabis got off the ground in late 2020.
Recreational, or adult-use, cannabis is regulated and taxed more heavily than products in the medical market, with plant tracking requirements and a slew of mandated tests for everything from potency to chemicals. As a result, it's more expensive.
Patients have historically sought out medical cannabis for its lower prices or the knowledge providers have about how the substance impacts conditions like anxiety, insomnia, nausea and pain.
It's also possible for 18-year-olds to qualify for a medical card, whereas people must be at least 21 to buy recreational cannabis.
The nascent recreational market has drawn people who are willing to pay a little more for their cannabis but don't feel they have a health concern, don't want to consult with a health worker or don't want to pay an annual fee for the card.
SUPPLY IS EXCEEDING DEMAND
John Hudak, director of the Office of Cannabis Policy, said the decline in medical cannabis revenue and caregivers is the result of oversaturation.
It's not clear exactly how many cannabis businesses exist in Maine, but there are a lot.
The state has 154 registered recreational shops, 65 medical dispensaries and an estimated 289 medical storefronts. Caregivers are not required to report their stores, so the Office of Cannabis Policy believes the number is likely much higher.
There are another 89 cultivation sites and 71 manufacturing facilities in the adult-use market, and an untold number in the medical.
"There are a lot of businesses producing far more cannabis than there is demand for it," Hudak said. "It's really no surprise that we've seen decreases in the number of caregivers, but that's still not had a significant impact on the ability to oversupply the market."
That oversupply, he said, is driving the price of cannabis down while the costs of running the business, including payroll and energy bills, are only increasing.
"The cost of everything keeps going up but the cost of cannabis hasn't gone up," said Paul T. McCarrier, a caregiver at 1 Mill in Belfast. Plus, with inflation, people have less disposable income.
"It's incredibly challenging to be in the cannabis industry," he said.
Hudak said the idea that medical cannabis in particular is a get-rich-quick scheme is still pervasive.
"They don't fully understand the challenges that exist within markets and the fact that businesses do end up failing," he said.
Alex McMahan, a medical caregiver and CEO of The Healing Community Medco, said this isn't inherently a bad thing.
"Honestly, I think what we're going to be left with is operators that are truly passionate about cannabis," he said.
'MAINE HAS SURPRISED EVERYBODY'
The medical market's decline started around the same time the recreational market found its footing, which experts say is par for the course.
"Historically, as cannabis markets launch adult-use sales, medical channel sales decline significantly," said Brendan Mitchel-Chesebro, an analyst for cannabis data company BDSA.
In Missouri, which launched adult-use sales in early 2023, medical sales declined by 22% the first year.
In New Jersey, medical sales fell by 50% from nearly $248 million in 2021 to $124 million last year. The state's adult-use market launched in 2022 and just a year later had far surpassed the medical market with $675 million in sales, according to BDSA data.
"Even markets like New York, which experienced a chaotic launch to adult-use, with low retail availability and stiff competition from illicit suppliers, saw medical sales decline (by) 12% in the first full year of adult-use sales," Mitchel-Chesebro said.
Both markets brought in about $147 million last year.
Comparatively, Maine's medical market is doing relatively well and is still outperforming adult use almost four years after it launched.
"Maine has surprised everybody," McMahan said. "A lot of people assumed medical would have been swallowed up by (adult-use) by now, which is typically what happens, but that hasn't been the case at all."
Instead, two distinct customer bases have emerged, he said.
McCarrier chalks this up to two different approaches to the drug.
"The caregivers and their staff in medical have a different mentality when it comes to the therapy cannabis provides," he said. "It's about the patients more than the profits."
The lower prices in the medical market are also a draw for consumers, but some say that won't be the case for long.
RECREATIONAL SALES MAY SLOW
The recreational market has some additional costs, such as mandatory testing and a seed-to-sale program that tracks plants through the growth cycle, that keep the prices higher.
But recreational prices have decreased substantially in the last few years — too much, some say — to be more competitive. The adult-use industry is struggling with many of the same challenges as the medical market, including concerns about saturation.
The majority of Maine's municipalities have not opted in to allow recreational cannabis businesses, leaving entrepreneurs clustered in the ones that do. Many recreational business owners say they expect sales figures to plateau.
Meanwhile, Hudak wants to see the track and trace and testing requirements instituted in the medical market — an addition that has so far been swatted down by the Legislature after substantial outcry from industry members who say the additional costs will sink them.
Hudak doesn't buy it.
"If producing uncontaminated cannabis is too expensive for you then you're probably not running a business in an efficient way," he said.
SMALL BUSINESSES SQUEEZED
In some cases, the medical market is competing against itself.
Until 2021, the state only allowed eight medical dispensaries. When the cap was lifted, that number quickly escalated to 65, and there are more in the approval process. Dispensaries are generally larger than caregiver retail stores, as they can grow an unlimited number of plants.
But some fear that the growth in dispensaries will only push out some of the smaller businesses that have long been the backbone of the industry.
"(Small cultivators) can't produce the product at a cheap enough level to compete with someone at the dispensary level," McCarrier said.
McMahan said his business has converted a few of its grow operations to the dispensary model. He agreed that competition in the market is stiff but said that ultimately, it's a good thing.
"It makes us all hone our businesses," but it's still a time "to operate lean," he said.
"There's a boom and bust in any business cycle. We experienced the boom."
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