Cannacurio Podcast Episode 9 with David O'Brien of Massachusetts Cannabis Business Association

In the latest episode of the Cannacurio Podcast from Cannabiz Media, my co-host, Amanda Guerrero, and I discuss microbusiness licenses in California and hemp license data across the country. We also speak with David O'Brien, President and CEO of the Massachusetts Cannabis Business Association (MassCBA), a professional organization and advocate supporting the responsible growth of the cannabis industry in Massachusetts.

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Cannacurio Podcast Episode 9 Transcript

Amanda Guerrero: Welcome to the Cannacurio Podcast. We’re your hosts, Amanda Guerrero and Ed Keating. On today’s show, we’re joined by David O’Brien of the Massachusetts Cannabis Business Association.

But as always, before we jump in with David, let’s check in with Ed and see what news he’s learned from the data vault this week. Ed.

Ed Keating: Hey Amanda. Most recently, we put out a blog post on California microbusinesses. These were envisioned as ways to help mom and pops, small operators, be able to compete in the cannabis industry out there. Some of the interesting things that we found was, we dug into what activities did each owner choose to participate in, because it’s a little bit of, make your own adventure.

What we found is that 97% chose distribution as one of the six things they’d like to do, and 91% chose manufacturing, and cultivation rounded at the top three. So kind of interesting especially on the distribution side.

And then just to look at how many things people chose, 71% chose three activities to pursue out of a possible six. We thought that was kind of interesting to dig in and get a little bit more detail on a set of licenses that is pretty rare in a cannabis economy.

Amanda Guerrero: Yeah, definitely. In terms of the microbusiness, what defines a microbusiness, and are they local to California?

Ed Keating: The way it’s set up in California is, really, a choose your own adventure, as I said. So you have to choose three out of the six activities. They tend to be retailer, delivery, cultivation, but it must be less than 10,000 square feet, distribution or distribution transport only, or manufacturing, and it’s a specific kind of manufacturing.

We just view this as a way for them to have that craft cannabis and really control a lot more of the value chain as opposed to if you just choose one activity. The point about, is it unique to California? That’s where the most active microbusinesses licenses are, but we’ve seen movement in other states that include Illinois, and I believe, Massachusetts, and a few other places, because I think a lot of the regulators see it as a way to make the business more accessible to not just big companies to come in and sort of take over all the licenses.

Amanda Guerrero: Understood, hence the mom and pop connotation there.

Ed Keating: Exactly.

Amanda Guerrero: Understood.

Ed Keating: And then in addition, we’ve also been keeping an eye on hemp. That’s been a lot of what we’ve talked about in the data vaults. One thing that we’re seeing more of is food and hemp, or CBD and hemp being licensed. We’ve seen that in Florida and Louisiana. We’ve done some blog posts on that. One of my senior research people just pointed out that Texas is also moving that direction.

It’s kind of interesting to me to see that sort of along the southern tier of the US, we’re seeing this happen. Something to keep an eye on, because one thing we’ve certainly learned with cannabis regulation is that once one a state comes up with a program that seems pretty rock solid, other states will borrow that regulation so they don’t have to start from scratch. I’ll be curious to see if these regulatory schemes roll out to other states.

Amanda Guerrero: Yeah. In that kind of same thought process here, Ed, do you think that it’s going to be similar to the cannabis programs where they’ll have different regulatory bodies overseeing these functions per state?

Ed Keating: I think what we’ll see is each state will do their own program. Down in Florida, what they did is they just work with the regulators who already handle food, because I think from a cost and from a complexity standpoint, some of these states are probably thinking, “This isn’t cannabis. We don’t need to create some big monolithic regulatory structure. We already have regulators who do this stuff and have done it maybe for decades. So listen, we’re going to deputize you to do this.”

Save in Connecticut where the Department of Agriculture manages hemp if you’re growing it or if you’re processing it, but if you’re going to manufacture it to food, that is handled by the Department of Consumer Protection that handles all the other food stuff.

I think, my guess, my hypothesis is we’re going to see more of this because it’s easy to regulate. You don’t have to create a whole bunch of rules and regs from scratch. You probably already have them on the books and you’re just adding CBD in as an ingredient, which probably happens with some frequency in that kind of a regulatory framework. That’s my guess, at least at this point.

Amanda Guerrero: Well, I’m curious to see if your hypothesis will come true.

Ed Keating: Thank you.

Amanda Guerrero: Thank you as always, Ed, for the update here. When we come back, we’ll be joined by David O’Brien, the President and CEO of the Massachusetts Cannabis Business Association. Stay tuned.

Welcome back to the show, everyone. As promised, we are joined today by David O’Brien. We’re so happy to have you on the show, David. Welcome.

David O’Brien: Sorry about that guys. How are you?

Amanda Guerrero: Doing great, David. How about yourself?

David O’Brien: Doing well, thanks.

Amanda Guerrero: Thanks so much for coming on the show. As I mentioned, everyone, this is David O’Brien with the Massachusetts Cannabis Business Association. David and the Mass. CBA have joined us as our most recent Trade Association Partner here at Cannabiz Media. We’d love to learn a little bit more about yourself, David. When did you start working with Mass. CBA and in the cannabis industry?

David O’Brien: Mass. CBA was founded, actually, back in December of 2017 with the anticipation of the industry opening up here. As you know, adult-use didn’t start sales until the fall of 2018. At the time, I was working as East Coast Government Relations Director for Weedmaps with quite an emphasis on Massachusetts because that was the only state that was moving toward legalization at the time. I got my feet wet in this industry doing Weedmaps lobbying, and then took over the Mass. CBA full-time as the president and CEO a little over a year ago.

Amanda Guerrero: Wow. What were you doing before you got into the cannabis industry?

David O’Brien: My background is in sort of public policy and politics. I’ve worked in state government and the federal government back in the 90s, and have worked on a number of presidential campaigns, and worked on races up here in Massachusetts as well, and worked on the political staff of one of our former governors, Governor Deval Patrick.

A lot of policy campaign – those were skills that lent themselves to getting the legislation passed in Massachusetts that the governor signed in the summer of 2017, and then, obviously, getting the industry perspective in the entire process as they write the regulations and continue to rewrite them even today.

Amanda Guerrero: Wow. David, why did you, given your background in policy, why did you get into the cannabis space?

David O’Brien: It’s an interesting question because most people who know me personally know that I’m not a big consumer of the product. It’s really about seeing an opportunity in a state for a brand new economy, the cannabis economy, and being the first state on the East Coast to be able to do this. I actually care about having this done right, and what better way to do that than to jump in with both feet.

Again, being the only legal state for now a couple of years, I think there’s… Like other states before us where Massachusetts has looked West to build out its infrastructure and regulations, I’m hoping that other neighboring states in the region, once they get to the point of legalization, will look to us to say, “All right, you’re the most recent state in our region, how did you do it, what can you teach us?”

Ed Keating: That’s a great segue because there’s really no better way to make things happen than to, in your case, run a trade association. I used to run part of a trade association when I was down in DC. The thing that was so great about it was, when people ask, “What did you do?”

It usually boiled down to three things, and I’ve said this before to other trade association people, “We’re here to protect, promote, and inform for the industry.” I think that model fits. I’m curious as you look at Massachusetts CBA and what you’re trying to do, does it fit into the protect, promote, and inform buckets in terms of the things that you’re trying to accomplish?

David O’Brien: Yeah. Never more so than today, I’ll tell you. The notion of protecting our industry from policy that’s misinformed, and there’s a great example of it, and it’s actually not COVID. It’s last fall when we had our vape crisis in Massachusetts and the rest of the country was looking at us and saying, “What are you guys doing there?”

We had our state department of public health shut down all vapes. Now, the problem was, they thought they were shutting down the legal market vapes, but also, they were sending some sort of a message, I think, to the illicit market vapes, which was the only market that was open.

Ed Keating: Yeah. Exactly. They sent a message, all right.

David O’Brien: Yeah, they sent the message, and customers beating their feet to get there. The frustrating thing about that is, at the time, I think the public health perspective was, “Hey, there’s a problem. Let’s shut it all down until we figure it out.” We raised our hands and said, “We’re the legal market, we’re tested. We’re tested more than anything and it’s safe. We wouldn’t be serving it otherwise.”

It took a lawsuit for the Cannabis Control Commission, which is the state entity that oversees both the medical and the adult-use market here, and within a month, they had the industry back up and running with, I will say, a little bit of further guardrails on things related to legal market vapes. It was an overcorrection for something that was not implied in the legal market. That was frustrating. That was probably an example of protecting.

In the promotion front, and Ed and Amanda, you and I have all talked about this when we’ve seen each other at trade shows, one of the things that I think we have a real chance to do here in Massachusetts, and I’m hoping other states that come after us will follow it, we are very intentional in our goals toward social equity and economic empowerment.

If we’re not talking about that every time we get together and gather as a group, and we’re not messaging that in all of our communication that is brought to the whole cannabis economy, I think we miss an opportunity.

So many people I meet in the space that we ask to sign up and be members or just participate in what we do, we say, “Hey, would you be interested in being a mentor to an aspiring company that may be a single licensee?” It may be a small manufacturer, or a microbusiness, or a single store dispensary.

We ask larger companies that have been at it for a while, “Would you sort of do a little hand-holding, have a phone relationship with folks like that?” I have not had one company yet tell me no. It’s because the industry gets it.

Most people in this industry understand its history, at least to the point of knowing how difficult it has been on some of our friends and neighbors who may have just had the unfortunate occurrence of getting arrested for having a small amount of what was then illegal on their person, and it’s something that we lean into. I don’t know how else to say it.

On the informing front, for sure, during this time, and COVID, for keeping people up to date, letting them know what we’re up to, it’s never more been true than now for people. They’re just hungry for information, and while everybody’s safe at home or sheltering wherever they have to be, I think not everybody is on everybody else’s email, and I think when it comes to the government or the Cannabis Control Commission communicating with everybody that’s in the pipeline, I think they appreciate a central repository to do the communicating.

Ed Keating: That makes a lot of sense. You touched on a couple of interesting things I’d like to dig into a little bit more. One is COVID. I’m down here in Connecticut not too far away from Massachusetts. If I was keeping up with things correctly, it seemed that there was a bifurcation of how cannabis was able to be sold up in Massachusetts where medical cannabis was considered essential, but a retailer adult was not. What was that like for your members, because I’m assuming it was pretty frustrating.

David O’Brien: Yeah, it was quite frustrating. It, again, I think goes to, if you know just enough about our industry, you can make decisions that are not fully informed. I’ll just say it that way. I think knowing just enough about our industry, when we opened two stores back in, I guess it was November of 2018, there were lines around the block. We were the first stores to open. It was a gross day.

I went to both dispensaries, one in North Hampton, the other in Lester, which is next to Worcester, Madison, Central Mass. It was a really gross day. It was rainy, it was cold. People waited in line for two-and-a-half hours to get in. There are still lines at stores. I think we have 38, or we had 38 open recreational dispensaries across the state – just 38 by the way.

I talked to my colleague who runs the trade association in Illinois. I think she told me they were up to 53, and they started in January of this year. We have work to do to open the doors of opportunity wider to everybody that is aspiring to get into this business.

The frustration is that during COVID, the governor actually said at one of his press conferences about a month ago that he doesn’t want lines around the block, and he doesn’t want big crowds. Well, the argument to fix that is to institute the rules that are in place for medical, which is practicing social-distancing, curbside pickup, pre-ordering, and now with this new line of how we’re going to reopen, obviously practicing safety protocols for both your employees at your business, but also your customers and medical patients.

The frustrating thing is, the Cannabis Control Commission Chairman said last week, he feels badly that we’re the only state in the country that is not open for adult-use and there’s no relief from the federal government. Until recently, there hasn’t been any. There’s no relief on the state level. There is a bill pending for a paycheck protection program.

The Cannabis Control Commission already oversees many of these dispensaries that are open for business with health and safety protocols in place. If they want to amp it up, they are confident that they can amp that up within, like, two days. It’s frustrating because that agency who has the oversight has publicly gone on the record and says, “We can’t do this.”

Ed Keating: Yeah. Well, fingers crossed that that gets straightened out sooner rather than later. The only other data point I heard was that, perhaps not surprisingly, many people in Massachusetts decided that they could deal with having a medical card in their possession if that was going to help them get into the stores that were open. That’s sort of one of those unintended consequences that sometimes public policy creates, sort of the different incentives.

David O’Brien: Yeah. There definitely was an uptick from the month of March to April for medical cards. They made it easier for patients to apply and get it, they didn’t require it, and I believe they’re required in, in-office doctor’s visit, and there was like a 254% increase from one month to the next. So demand found its way. I would argue that customers didn’t stop consuming. They may have gone back to, yet again, the black market.

It’s got to be great to see how this cannabis economy flows if we get a year of uninterrupted sales on the adult-use market. Hopefully, those numbers fly off the charts and it’s done safely, which we fully anticipate it will be, because it had been for as long as it had been open and generates tax revenue both for the state and for localities.

Ed Keating: Now, earlier you talked about how to be more inclusive as an industry. Just today, I saw a headline that talked about a change in the economic empowerment program where the ownership threshold dropped really low, like 10% from 51%. There seemed to be a lot of concern among those who have been really trying to push this program forward. Any thoughts, comments, or observations on that? Or is that still sort of a breaking news story?

David O’Brien: I won’t say it’s breaking because it actually came up… A notice had gone out from the Cannabis Control Commission, I think at the beginning of April. I had missed it, to be honest, and some folks told me about it last week, I think. It was days before it started to bubble up a little bit more.

The Cannabis Control Commission is meeting monthly right now. They met last Thursday, and it was a topic they discussed. In essence, they’re going to reissue the guidance because the current regulation is still 51%, and they may discuss whether that 51 has any give to it. Whether it’s down to 10%, I’d be very surprised, but in the new regulatory round, they were going to discuss it.

My personal opinion is, and this is informed by people who tell me in the communities of color and disproportionally impacted communities and other folks who are eligible for these programs, if they’re going to create real change and create wealth in their communities, it’s not about creating one millionaire. It’s about letting that person run their company and building it out in their community so that others benefit from it. That’s not me saying it. It’s others saying it.

I think there’ll be robust discussion about it, but I would still support something that gives an equity applicant, social equity, or an economic empowerment applicant the ability to run their business the way they see fit. If part of what they do is, down the road, less than the amount of money or the amount of equity that they have to run their company by, that should be their choice. It shouldn’t be dumbed down, I guess, from the state agency such that all they do is stand up, let’s draw our candidate and say, “Hey, we’re going to put you on as our person of color on our board, but we’re going to make millions of dollars on that.” It’s just not fair.

Ed Keating: Exactly. Exactly. Now, in terms of Massachusetts, one last question I wanted to ask is that, the state really is the only functioning rec program in all of New England. I know that, currently, the governors have been trying to coordinate and harmonize the regulations as they march through this COVID crisis together. I’m curious if you think that may happen with cannabis so that you don’t get people driving across state lines.

A lot of the really booming Mass. dispensaries are across the borders from New York and Connecticut and Rhode Island. Obviously, there’s a lot of pent-up demand in these surrounding states. How long do you think Massachusetts is going to be, if you will, only game in town, and when might that change and have other states come on board with their rec programs in budding states?

David O’Brien: Well, as you know, New York threatened to do it last year, but kind of hung up on, ironically, the very issue we’re talking about, the equity issue and sort of where proceeds would go. I think it was one of the hangups last spring, and then COVID hit this year and they were putting their budget forward. I’ve been in touch with their folks who are trying to stand up the industry in New York. New Jersey is now looking like it might be by ballot.

It’s funny. While states are trying to harmonize… and I know Governor Cuomo led the way on sort of rallying his other Northeast governors to say, “Hey, if we’re going to do this, let’s sort of build it together and not build it separately.” I thought you were going to ask what percentage of people, like you were saying sort of Central Mass. Western Mass. that are getting anywhere from 15, 20, 25, 35% of their sales from out-of-state.

The funny thing is, if we’re doing the protocols correctly under medical through the Cannabis Control Commission, and we get allowed to reopen adult-use, and social-distancing, and non-crowding, and pre-order, and all the rest, why would we need to worry about where the customer who sits in their car to pick up their product and has a mask on? What does it matter where they’re from if we’re not allowing clustering and crowding in parking lots and in stores?

Again, it feels to me like the cannabis industry will roll over when we’re threatened, rather than stand up for ourselves and say, “You’re not asking Walmart to check people at the door and the greeter says, “I’m sorry, sir, you’re coming to Western Massachusetts, and you have a New York ID. We can’t serve you.”

Ed Keating: That’s why they need David O’Brien to protect, promote, and inform for the industry.

Amanda Guerrero: I love that. I love that. Switching gears a little bit here, David, I wanted to ask you, regarding the Trade Association Partnership Program that we run here at Cannabiz Media, being one of our recent members, I wanted to ask, why did you decide to join the program?

David O’Brien: Well, in part, because I met you and I met Ed, and you were so welcoming to come and join into the program.

Amanda Guerrero: You’re so kind.

David O’Brien: I know you guys have tremendous reach in the industry, and you know what’s working in other states in your work with other associations. I will tell you the sort of funky thing about the timing, again, leave it to COVID, I was due to onboard, I think in March, and I think I checked the date out a little bit, and then COVID hit, so I am not fully onboarded yet.

Once we come out from this cover of darkness that is having us all trapped in, and I can get a little bandwidth and not be fighting with one arm tied behind my back to open the industry, we are going to make full advantage of our membership with you all. I’m looking forward to that.

Amanda Guerrero: We’re definitely looking forward to onboarding you guys here within the Cannabiz Media platform as well as providing our current subscribers with some easier access to the Mass. CBA team, as well as helping our out-of-state license holders connect with other Massachusetts license holders.

Now, for yourself, David, what would you say is the biggest achievement that you’ve had within the last 12 months, either corporate or personal?

David O’Brien: Honestly, on the corporate front, and again, it goes to sort of one of our pillars of what we’re trying to be as an association, which is inclusive. I had to chase the Cannabis Control Commission for the list of social equity and economic empowerment applicants so that we can include them in everything we’re doing. It was like breaking into Fort Knox, but their reason was legitimate. They didn’t want the list going out to just anybody. They wanted to sort of not have equity applicants be approached and be preyed upon, quite frankly.

Now, the ironic thing is, many in the equity applicants had told me, “Oh, that’s already happening.” People find us and they say, “Hey, for a million bucks, can I have your company?” Building the trust in the social equity and economic empowerment, as well as among women, veteran, LGBT licensees, as well as general applicants. We’re about the aspiring company.

There’s another organization that serves the sort of up and running vertically integrated legacy players. We’re about the aspiring companies and we’re really gratified that they have relied upon us, cheekily now during these tough times, to inform them and tell them what we’re up to and what’s happening that’s impacting them and their businesses in real time.

Ed Keating: David, with that framework of supporting and providing, let’s say scaffolding to those kinds of applicants and license holders, I’m curious, what trends do you see at that part of the industry or that level of the industry? Earlier, we talked a little bit about microbusinesses out in California. Do you see that as a thing or an opportunity in Massachusetts?

David O’Brien: It’s a piece of it, Ed. The other piece of it is the delivery licenses that are about to come out. The Cannabis Control Commission spoke about that last week and they hope to have pre-certification, I think they called it, by the end of May. This is the timing they had planned in the last regulatory round, was to put delivery out during this spring.

The idea is that delivery licenses will have a two-year exclusionary period for just social equity or economic empowerment applicants, and they have to all be approved. You have to apply for that through the Cannabis Control Commission and basically get on a list as, “I qualify for this. Now, I want to open up a delivery license.”

In particular, they did that because a lot of the sort of general licenses for cultivation, for manufacturing, and for dispensaries, sort of the big three were not being awarded as of yet in proportional numbers to even the representation in the population to candidates of color, or women, or LGBT, or veteran-owned businesses.

It’s frustrating when you look at the math and you’re like, “We are by intent, and the legislation, the valid question, the regulations, the commissioners talk about it all the time, the staff talks about it all the time, the industry talks about it a bit, and we just haven’t gotten there yet.”

Our hope is, if any delivery licenses are given out, they’re given out to equity and empowerment applicants, and our hope is to see more and more licenses be awarded to applicants from both of those pools of applicants, the equity and empowerment applicant pools.

Ed Keating: David, is there any restrictions put on what happens after that license is granted? I think down to Florida where they had some funky rules when they were giving out those medical licenses, that you had to be a nursery in business consecutively for 30 years, et cetera, et cetera, but a lot of people just sat on the license and then flipped it as soon as they could for 30, $40 million overnight, or they’d wait a bit, but they never ever put seeds in the ground. Are there any restrictions on those delivery licenses, or are they granted and then somebody could just go in and buy it from them?

David O’Brien: We don’t know yet because we haven’t issued any. I don’t mean to be smart ass about that, but that’s true. The other thing is, the commission thought ahead that if you get one of these licenses and you have it, the two-year starts when you open the business, not when you apply for it. You can get up to another 12-month extension, so it’s effectively a three-year license if you play it right.

I would be shocked if someone gets the license but doesn’t open it, because if you open it, it’s worth more than if you’re going to bring on partners, or other investors, or expand, or sell it. It really is a window of time that an applicant can make the most of it and hopefully be super successful and scale up.

Ed Keating: I guess if I had an asset, and I could say, “Hey, I’ve got a 36-month runway, not 24-month. That makes it a heck more valuable if I do choose to sell it.” Hopefully, it will be successful and they’ll be able to run it and make money and be a part of the cannabis economy.

David O’Brien: Yeah. I do think if someone were to get it, not open it, flip it in six months, I think the commission would be wise to that, because it’s supposed to stay with a 51% owner of that application category.

Ed Keating: Makes sense.

David O’Brien: Remember, the commission renews your license every year, so if you don’t still meet the criteria 13 months in, it’s sort of like, well, you got it under… Not under false pretenses, but I think they’re watching, I guess it’s the way to say it, because they would like to see more licensees from equity and empowerment come through the process, be awarded and be successful.

Ed Keating: And they only need to make one example, and then everybody else will fall in line. That’s usually how that works.

David O’Brien: Exactly. Yeah. I explain it to people in the industry, if you don’t think that we have all eyes on us, it’s not just the people, the 46% of the voters who didn’t vote for this in 2016, there are people that are rooting for us to fail. It’s trite now during COVID, but we are truly all in this together because if someone does something wrong in Southeastern Mass., or the North Shore or Western Mass. or Boston, it gets played in the press like it happens everywhere.

When there were lines at the beginning of the opening of the industry, people thought there would be lines everywhere for years and years to come. Now, there are lines, but if you had 38 of anything open up in a state that people wanted, you’d have lines. If there were 38 gas stations in Massachusetts, I think there’d be lines.

Ed Keating: Brilliant.

Amanda Guerrero: Yeah, David, you’ve given us so many fantastic pieces of information and just great anecdotes that I think listeners that will get to dive into this podcast will definitely take away. Not only that you’re incredibly informed and you have the best interest of the Massachusetts market, but also too the Massachusetts license operators are probably very grateful to have you in the Mass. CBA on their side. Thank you so much for joining us today.

David O’Brien: Thank you. This has been fun. Let’s do it again.

Amanda Guerrero: Oh, we will definitely. Hopefully, this time, in person in a few months when this whole thing blows over. Right?

David O’Brien: Excellent. I’d love to do that.

Amanda Guerrero: Awesome. Well, Ed, let’s take a look ahead and see what news we have to look forward to from the data vaults.

Ed Keating: Looking forward, we’ve been trying to get more hemp data in as the season really gets underway. Right now, we’re in process with Wyoming, Arizona, and Virginia, and then we just got some information in from Florida to only cultivators. It’s the beginning of their program down there, so a lot of people are looking at that.

And then on the Cannacurio side, I’m looking ahead to the one to write this week. I think I’m going to dig into some licenses that really haven’t seen much visibility through Cannacurio year to date, which are things like testing licenses. The type of license that’s not quite as prevalent, not every state has them, but just to see where those new licenses have cropped up so far this year.

Amanda Guerrero: I’ll be very interested in seeing what you and the team uncover regarding the licenses, because that definitely is something that we haven’t highlighted too much on Cannacurio, but looking forward to the future and seeing what you guys are able to present.

Thank you everyone for joining us today on the Cannacurio Podcast. We’re your hosts, Amanda Guerrero and Ed Keating. Stay tuned for more updates from the data vaults.