More than 30 dispensaries received their dual-use provisional licenses and will be able to commence sales once they meet final requirements for operation.
Thirty-one of Ohio’s medical cannabis retailers received provisional licensure June 21 to transition their operations to the state’s forthcoming adult-use program. Still, an actual launch date for dispensary sales remains somewhat of a riddle, even though it could be just days away.
These 31 dispensaries must now meet the final requirements needed—from improving security/surveillance at their facilities to updating point-of-sale systems to handle increased traffic—to receive their dual-use certificates of operations from the Division of Cannabis Control (DCC), which operates under the state’s Department of Commerce.
DCC officials indicated they believe it should be a swift transition from provisional licensure to certificates of operation for these retailers, many of whom have served Ohio’s medical cannabis patients for several years now.
“Given the foundation already laid through the Medical Marijuana Control Program [MMCP], current medical permit holders positioned to apply for dual-use status who have already undergone many of the comprehensive checks are anticipated to have a much quicker turnaround for issuance of licenses over the summer,” Jamie Crawford, public information officer with the Ohio Department of Commerce, shared in a prepared statement with Cannabis Business Times.
This development in Ohio’s program rollout comes after the DCC opened the application process June 7 for medical cannabis cultivators, retailers, processors and testing laboratories to apply for dual-use licensure. As of noon on June 21, the DCC received 235 applications across the four license types, according to the Department of Commerce.
Specifically, there are 126 existing medical cannabis dispensaries eligible to apply for dual-use licenses. And while the DCC is reviewing applications roughly in the order they were submitted for each license type, the department plans on issuing certificates of operation in batches. There will be no singular launch date for when adult-use sales begin for those who submitted applications, according to the DCC.
“We will start issuing licenses, and it will be up to the retailer based on staffing, stock and other considerations as to which day they will begin sales,” according to the Department of Commerce statement.
Moreover, it’s up to each retailer to ensure ongoing inventory is sufficient to maintain an adequate supply of medical cannabis to meet patient and caregiver demand as stores transition to adult-use sales, according to the DCC. This means it’ll be very much a ready-set-go scenario when state officials issue the first batch of certificates of operation, which could arrive as soon as this week.
While there is no specific launch date, many of the state’s medical operators have been preparing to sell cannabis to the state’s broader 21-and-older consumer base since Ohio voters approved Issue 2 with a 57.2% majority in the November 2023 election.
At Buckeye Relief, a vertically integrated Ohio-based company with a 65,000-square-foot cultivation and processing facility on Cleveland’s east side, the team has spent months building up inventory in every product category in anticipation of adult-use sales, CEO Andy Rayburn told CBT. Buckeye Relief also operates Amplify dispensaries in Cleveland Heights, Columbus and Bedford.
“And we have hired a number of people at both Buckeye Relief and at each of our three dispensaries,” Rayburn said. “They are on staff, they have been trained, and they are ready for the adult-use market.”
Adult-use sales represent a significant opportunity for Ohio’s established medical cannabis companies, including 36 cultivators and roughly 60 companies that operate the state’s 126 dispensaries. So far, 10 of the state’s 22 larger Level I cultivators have received their dual-use provisional licenses, while five of the state’s 14 Level II cultivators have.
Many of these businesses have faced challenging market conditions in the past 2 1/2 years, with a flat patient count, an increasing supply and plummeting prices.
Ohio’s medical cannabis program has logged nearly 410,000 unique patients who have made purchases since sales began in January 2019, but there are fewer than 166,000 active patients in the program today, according to the MMCP. These patients spent roughly $484.5 million at licensed dispensaries in 2023, a sales figure that lies in the shadow of bordering Pennsylvania, which reported more than $1.5 billion in medical cannabis sales last year.
In addition, Ohio’s average retail price for 1/10 ounce of medical cannabis flower (roughly 2.8 grams) peaked at more than $31 in June 2021 before dipping to approximately $17 in 2023.
“It’s been a very difficult market for the majority of licensed holders in the state,” Rayburn said. “And they’re going to see some relief now and be able to do some things with their businesses that they have not been able to do for the last two and a half years.”
While Ohio’s medical cannabis operators will have a first-mover advantage in the state’s adult-use program, Issue 2 requires the DCC to add 40 new cultivation licenses and 50 new dispensary licenses to the program “with preference to applicants who are participants under the cannabis social equity and jobs program,” according to the initiated text.
While many existing Ohio operators are Ohio-based, including companies like Firelands Scientific, Galenas, Harvest of Ohio/Mavuno, King City Gardens, Klutch Cannabis and Standard Wellness, several of the nation’s largest publicly traded cannabis companies also have footprints in the Buckeye State: Acreage Holdings, Ascend Wellness, Ayr Wellness, The Cannabist Co., Cresco Labs, Curaleaf, Green Thumb Industries, Jushi, Trulieve and Verano.
These multistate operators don’t have all their eggs in one basket, but Ohio represents a major opportunity for them, too. With nearly 12 million residents, Ohio will be the fourth most populated state to launch adult-use sales after California, New York and Illinois. Not to mention, Ohio will be a cannabis tourist attraction for millions of border town residents in Pennsylvania, Indiana, Kentucky and West Virginia, where adult-use cannabis reform efforts have yet to materialize.
Chicago-based Verano, for example, has active operations in 13 states, comprised of 142 dispensaries and 13 cultivation and processing facilities with more than 1 million square feet of cultivation capacity. The company’s Ohio footprint includes five Zen Leaf dispensaries and a cultivation and processing facility in Canton that features five vertical tiers of plants in its grow rooms.
“We’re very invested in the success of this launch just given the fact that we’ve been involved in Ohio since we were awarded our medical permits back in 2018,” said James Leventis, the executive vice president of Legal, Regulatory and Government Affairs at Verano.
“This is one of our older medical markets,” he said. “We’ve operated at the max capacity of licensure that the state will allow almost since the beginning of the program. And so, we’re really excited about this transition. We’re personally invested in it. We think that this is going to be a great success and a great launch. [Ohio has] some of our best regulators that we [work] with across the country. We know that they’ve been very careful about how they want to roll out the program, and we think that we’re going to see very strong success starting day one.”
Verano is one of eight companies in Ohio at the five-medical-dispensary cap. It plans to transition all five to adult-use sales. In addition, as a Level II medical cultivator, Verano is eligible for a sixth retail license in Ohio’s adult-use market under the current process.
Meanwhile, Level I medical cannabis cultivators are eligible to transition their existing dispensaries to adult use as well as add up to three additional retail locations for a maximum of eight stores. A Level II cultivator like Verano could potentially reach the eight-dispensary cap through acquisitions.
Also, medical cannabis retailers that aren’t vertically integrated with cultivation and processing operations can add one additional dispensary to their company footprint.
Site selections for these additional dispensaries—referred to as 10(B) dispensary licenses in Ohio—are a competitive process determined by a lottery. Under Ohio law, dispensaries cannot be located within 1 mile of one another. The lottery process determines the order in which companies choose their locations for these additional dispensaries.
The state conducted the randomized lottery drawing June 21, with 98 companies entering for 168 additional dispensaries. These companies have until July 1 to submit up to three potential addresses for one of their 10(B) dispensaries. But if all three addresses are within a 1-mile radius of other proposed dispensary sites with higher lottery drawings, then a company’s proposed retail facility would drop to the bottom of the site selection list.
“What they do is they pop your pin on a map, they draw a one-mile radius circle around your pin, and then they move on to the next applicant on their list,” Leventis said of the site selection process. “If you go through all three of your options and none of them happen to work, which is liable to happen as you get further down the list and people start drawing these big circles across the state, you basically get knocked down to the end of the list.”
Phase one site selections for each company’s first 10(B) dispensary license begin July 1. This selection process could go multiple rounds if companies keep getting bumped to the bottom of the list, according to the DCC.
Phase two site selections—for companies that applied for a second or third 10(B) dispensary license—will begin in late July. The 10(B) licenses will be awarded by Sept. 7, 2024.
Caveh Azadeh, co-founder of Cincinnati-based Level I cultivator King City Gardens, said the competitive landscape for 10(B) site selections in densely populated areas or border towns will be the most challenging.
Cincinnati is in Hamilton, the third most populated county in Ohio. It lies on the Kentucky and Indiana borders, with cities like Indianapolis (110 miles), Louisville (100 miles) and Lexington (80 miles) all within driving distance.
Although King City Gardens does not currently have a medical cannabis retail footprint, the company applied for three 10(B) dispensary licenses to become vertically integrated.
“You want to be able to brand within your local area,” Azadeh told CBT before the lottery. “So, we [anticipate] a very difficult time because there’s either a local dispensary already there, or we already know other sites that people are going to put applications in for, or the city has put up some kind of law saying there’s no dispensaries allowed.”
Under Issue 2, local control is preserved for municipalities to adopt resolutions to ban or limit the number of adult-use cannabis operators permitted in their jurisdictions. As of mid-June, there are 55 localities with active cannabis moratoriums, including roughly 20 in Southwest Ohio, according to Ohio State University’s Drug Enforcement and Policy Center.
While there are already 10 medical cannabis dispensaries in Hamilton County, including eight with Cincinnati addresses, King City Gardens could be in luck for its first of three 10(B) dispensary licenses, which drew the 16th spot in the lottery. Just three of the 15 companies with higher lottery spots operate in or near Greater Cincinnati.
Still, Azadeh said planning for potential 10(B) site locations has “been one of the biggest challenges we’ve had to navigate.”
As a newer cultivator in Ohio’s medical cannabis program, King City Gardens was awarded its license in 2022 after roughly five years of litigation. In December 2022, it began reconstructing a 110,000-square-foot Kmart building, became operational in August 2023, and went live with flower on Ohio’s medical market in January.
“It was a long journey,” he said.
The company now has roughly 150 employees and is cultivating nearly 50,000 square feet of canopy with eight double-stacked grow rooms. Azadeh said the team harvests almost 800 pounds of dry-weight flower per week.
Although Ohio will be transitioning from a saturated medical market to an adult-use market, and Ohio cultivators are busy building up inventory in anticipation of the adult-use sales launch, Azadeh predicts a short-term supply shortage from the initial demand surge.
“The question is how long will it be,” he said. “Most people are [expanding], but that’s going to take time. … So, I think there’s going to be a shortage. I don’t think it’s going to be as bad as you’ve seen in some of these other places. … But I do think there’s going to be a shortage, which, unfortunately, will probably cause the price to go up as well.”
As part of the DCC’s proposed rules for the state’s adult-use cannabis market, “Cultivators must ensure a consistent supply of cannabis plant material is available for sale to consumers, which may be evidenced by not more than 120 days elapsing between harvests totaling at least 15 pounds and sale or transfer totaling at least 20 pounds for a Level I cultivator and 10 pounds for a Level II cultivator.”
But ensuring that Ohio’s medical cannabis patients continue to receive the same level of care they’ve become accustomed to is very much in the hands of dual-use retail operators: Whatever a dual-use cultivator grows or processes can be sold as a medical or adult-use product.
At Buckeye Relief, Rayburn said patients will continue to come first.
Buckeye Relief received its certificate of operation to cultivate in Ohio’s medical market in July 2018. It began sowing seeds the next day, harvesting its inaugural crop in December of that year, and then put the very first flower on the state’s market in January 2019.
Behind that history, maintaining a robust, well-supported medical program will remain one of Buckeye Relief’s highest priorities, Rayburn said. This will include having priority lines for medical patients when the company’s Amplify dispensaries transition to adult use.
“As far as inventories [are concerned], we will just continue to monitor them as closely as we always do, so we are always in stock on what the medical patient is looking for,” he said. “One of the advantages we have is our oldest dispensary is not quite two-and-a-half years operating now, so we laid out and planned all three Amplify dispensaries to be ready for the adult-use market.”
Leventis at Verano echoed Rayburn’s remarks, saying he doesn’t anticipate losing medical patients while transitioning to adult-use sales.
“They’re going to be put on a pedestal,” he said. “Our patients are first and foremost; this is just expanding the use to a wider customer base.”