Is it time for mainstream retail to get into the legal weed business?

Discussion
MedMen’s product selector, Venice, CA - Photo: RetailWire
Nov 05, 2020
George Anderson

Many politicians across the U.S. no longer see the legalization of marijuana for medical or recreational issues as a red or blue issue. The only color they see is green — the prospect of dollars rolling into state coffers at a time when the pandemic has siphoned off tax revenues.

Voters in Arizona, Montana, New Jersey and South Dakota this week gave the thumbs up to measures legalizing the sale of cannabis for recreational use in their states. That brings the total of states with legal recreational weed up to 15.

“This historic set of victories will place even greater pressure on Congress to address the glaring and untenable conflicts between state and federal laws when it comes to cannabis legalization,” said Steve Hawkins, executive director of the Marijuana Policy Project, a political advocacy group lobbying for the legalization of cannabis on a national level.

Politico reports that one-third of Americans, around 93 million, now live in states where cannabis is legal for sale to adults 21 and older. It remains illegal under federal law, which has posed a number of legal and banking challenges for companies operating in the category. The same report spoke to the expected domino effect from states that have legalized cannabis. New York and Pennsylvania, for example, are expected to follow New Jersey’s lead in changing their laws, as well.

The pandemic has played a role in boosting the sales from dispensaries, medical and recreational, with many states labeling the businesses as essential retail as citizens were asked to stay at home. Online ordering, curbside pickup and delivery have all grown substantially this year.

Chris Mellilo, vice president of retail for Curaleaf, the largest integrated legal marijuana grower and retailer in the U.S. told RetailWire in July that the pandemic “has absolutely changed everything we do. The silver lining there is it has fast-forwarded everything we needed to do, which is catch up to more traditional expectations of retail.”

Curaleaf currently operates 93 dispensaries in 23 states with 22 cultivation and 30 processing sites across the country. The company, whose initial focus was on medical marijuana, has made changes to its dispensaries to make them feel less clinical and warmer to customers as states have approved cannabis for recreational use.

Mainstream retailers have so far stayed away from legal marijuana, although as Esquire reports, some brewers have begun exploring the potential entries into the category with non-alcoholic THC drinks.

DISCUSSION QUESTIONS: Do you think it is time for mainstream retail store operators and/or consumer brands to get into the marijuana business? What companies or types of companies do you think make the best fit?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"The over-arching challenge is the federal banking laws. Once that hurdle is jumped, it will be high time for this new market."
"Look, I fully believe that marijuana is far, far, far less harmful than alcohol. But there’s a process that has to happen and, until it does, this is a moot conversation."
"This smells to me like more of a “buy” opportunity than a “build” opportunity for mainstream retailers."

Join the Discussion!

17 Comments on "Is it time for mainstream retail to get into the legal weed business?"


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Neil Saunders
BrainTrust

There is a big opportunity here, especially as more states move to full legalization. However, regulations and federal legal obstacles are still significant and act as a deterrent to national firms. As such, what we have seen so far is a gentle and partial entry into this space by big retailers and CPG firms. It’s also why a lot of innovation and growth in the cannabis and CBD space is coming from smaller and niche firms.

Mark Ryski
BrainTrust

It is only a matter of time. This will happen just as Prohibition ended. Canada legalized recreational marijuana over a year ago and the rollout for the most part went well. Societal issues, including crime and unrest, didn’t happen. That said, this is a highly regulated retail category (as it should be) and operators getting into the business should be very aware of these before launching. In Canada the market is dominated by cannabis-only retailers, but I do expect that distribution will expand in the future.

David Weinand
BrainTrust

Until the federal laws fall into line with the state laws, it will be difficult for mainstream retail and brands to enter the fray. However regional plays in the “vice” categories like liquor (think BevMo) would be a natural fit for a rollout of marijuana products.

Richard Hernandez
BrainTrust

The election saw more states legalize weed because they were wise to see the income that can be garnered from it. It’s an easy equation. My question is: where is the line? Oregon decriminalized possession of small amounts of hard drugs including heroin and cocaine. While that doesn’t allow for its sale at retail, there are a lot of entrepreneurial folks out there that can definitely see $$$. Heroine laced potato chips anyone? While I don’t mind the legalization of weed, there still has to be a line that shouldn’t be crossed in retail. I don’t know what that, is but I know there has to be one before it goes off the rails.

Paula Rosenblum
BrainTrust

Let’s take things a step at a time, shall we? First let’s get federal legalization so that these purchases can be made with credit cards, and so that operators can actually put the proceeds in a bank.

We lose track of the fact that retailers like Trulieve are already in multiple states. So think of it as a specialty store. Should you be able to buy pot at a grocery store? I suppose if you’re willing to buy a cigar there, or a bottle of wine there, it’s fine enough.

Look, I fully believe that marijuana is far, far, far less harmful than alcohol. But there’s a process that has to happen and, until it does, this is a moot conversation.

Xavier Lederer
BrainTrust

Good point indeed: it is not only the retailer’s choice; other aspects of the business infrastructure need to adjust as well. Among others financial institutions need to accept the concept and enable marijuana-linked payments, including across state borders. Not so long ago, as we were investigating marijuana-based chocolate manufacturing, it was made clear to us that our bank would probably view such a step negatively (“Are you a serious business or are you doing marijuana?”).

Gene Detroyer
BrainTrust

I think we can all be assured that mainstream retailers and consumer brands are already putting plans together on how they might approach this. The key of course will be how to navigate the legal side as different states determine how to implement different retail rules (read Pennsylvania and alcohol). The over-arching challenge is the federal banking laws. Once that hurdle is jumped, it will be high time for this new market.

Lisa Goller
BrainTrust

While marijuana was once associated with Cheech and Chong and excessive use of the word “dude,” attitudes have changed.

Even Martha Stewart has launched a cannabis brand, proving the category’s getting mainstream.

Whether it’s used for medical, therapeutic or relaxation purposes, marijuana appeals to more consumers. Especially during a stressful pandemic.

Food and beverage companies make a terrific fit as consumers seek fun products that allow them to unwind and stay social, even if it’s from a distance. Beauty and personal care brands are also a good fit as consumers seek natural products free from chemicals.

Despite the sales potential, retailers remain reluctant to sell cannabis due to the complexity of having a patchwork of states in which it’s legal rather than federal legalization. Notably, Canada has federal legalization but sales remain controlled through licensed dispensaries rather than mainstream retailers.

Gene Detroyer
BrainTrust

Funny you mention Martha Stewart. She is from my generation. Like many of our generation, I am sure she enjoyed an occasional puff. I always am compelled to smile when I hear about the evils of pot. If those evils were true, every one of my fraternity brothers would be drug addicts today. Today sometimes we drink too much, but there’s not a druggie among them.

Bob Amster
BrainTrust

To answer the question as asked, we must first decide, as an industry, in what category or categories of the retail spectrum this happy product fits. Every retailer should not be and probably won’t be selling marijuana in its stores. Pipe tobacco sells in few venues, prescription drugs sell only in pharmacies, and cigarettes in convenience stores, supermarkets and news stores. I heard many decades ago that major cigarette company Philip Morris had already registered trade marks (Acapulco Gold) for marijuana in the eventuality that it would some day be legalized. We can safely guess who is going to market it when it becomes legal and where it is going to sell.

Steve Montgomery
BrainTrust

Main stream retailers may see the opportunity but when they start to enter the retail cannabis business they will find a whole new level of regulations at state and local levels.

True there is no question the current banking laws make it difficult, but so does the current federal classification of cannabis as a class 1 drug. That means it cannot be transported across state lines. State regulations include how much of the various forms can be purchased at one time and in a month. State by state and municipality by municipality regulations makes the learning curve steep. These can include the requirement that only certain tracking software can be used, etc. etc.

Lee Peterson
BrainTrust

Grocery, at the very least, should jump all over this — and what’s stopping them? I mean, after all, you can pick up a prescription for a LOT worse product than this in their pharmacies. I’d at least be in line for a medical license for their pharmas, drug stores too — I realize the legalities are restrictive, but now’s the time to explore and solve vs giving it all to the next “Starbucks of pot” on the horizon.

Tony Orlando
BrainTrust

It won’t happen for me anyway, and other stores can choose what they want to do. I speak in schools doing reality days, and mock interviews in the entire county for over 30 years. This initiative goes against what I try to teach kids about being responsible, and drugs always come up in the conversation. I partied in college, and I know today’s weed is way stronger than the ’70s. I’m grateful my two sons chose not to smoke it, which is great. If you choose to venture into this, make sure no one underage can get their hands on it, and that is the best you can do, because once they leave the store, they could sell it to underage kids. I’m curious about the laws regarding this.

Mel Kleiman
BrainTrust

Go where the demand is and get ahead of the market. C-stores can be the winner in this space.

Craig Sundstrom
Guest

RetailWire seems to have a weird (to me) fascination with this fringe topic that I neither share nor fully understand: we regularly discuss companies that “take a stand” — and by the enthusiasm of some of the comments seem to endorse such — and yet here the goal seems to be to encourage business involvement with something that will most certainly alienate (or worse) a large segment of the population. The idea that “people don’t have to buy it if they don’t want it” overlooks that many who don’t want if for themselves don’t want others to have it either … right or wrong, but it would seem to exclude “mainstream” almost by definition.

Kai Clarke
BrainTrust

No, it is still too early. The taxing, packaging, distribution and sales of pot needs to be decriminalized, like alcohol, in the majority of states, before it can be even considered for mainstreaming. Furthermore, the controls that are required to protect each business needs to be more robust and protective than any other in order for the retailer to safely sell and distribute this pot.

James Tenser
BrainTrust

National retailers may aspire to add cannabis as a new profit center, but as others note here, legalization at the state-level is not enough to make this realistic. Here in Arizona, where the sale of non-prescription weed was just approved by voters, the business is likely to be controlled by a few “homegrown” specialty retailers with medical marijuana heritage who are able to tolerate federal banking restrictions and other hurdles.

The product will be highly taxed and regulated, like alcohol and tobacco, and there are product safety considerations to be worked out. As a cash-only business so far, it’s downright scary to deal with bank deposits — if they are even accepted.

I can imagine secret strategy sessions taking place at retail headquarters, but most will probably take it slow and track (or even back) upstart cannabis retailers for a couple of years while the rules get sorted out. This smells to me like more of a “buy” opportunity than a “build” opportunity for mainstream retailers.

wpDiscuz
Braintrust
"The over-arching challenge is the federal banking laws. Once that hurdle is jumped, it will be high time for this new market."
"Look, I fully believe that marijuana is far, far, far less harmful than alcohol. But there’s a process that has to happen and, until it does, this is a moot conversation."
"This smells to me like more of a “buy” opportunity than a “build” opportunity for mainstream retailers."

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