Jobs, economic spinoff expected from Maryland's new medical marijuana industry

Over lunch years ago, a man who ran a successful marijuana business in California complained to his friend Arnold Heckman about how hard it was to find the right packaging materials.

Heckman thought the answer was simple: “It seems like you could just go offshore and have what you want made.”

His friend replied: “Why don’t you go offshore and have what I want made, and I’ll buy it from you?”

That conversation years ago was the beginnings of Cannaline, which sells custom bags and jars and other containers from its Elkridge headquarters to marijuana retailers in states where the drug is legal.

Now Heckman is poised to take advantage of business in his own backyard.

Maryland is licensing 15 growers, 15 processors and 102 dispensaries for the launch of the medical marijuana industry. Cannaline represents the next tier: the firms to be started or expanded to support the trade.

Analysts don’t expect marijuana to rival the state’s biggest industries, but say it could provide thousands of direct and indirect jobs and hundreds of millions of dollars in economic activity.

Adam Orens is a founding partner at the Marijuana Policy Group, an economic analysis and consulting firm that has studied legal marijuana sales in Colorado.

“There are economic benefits beyond direct taxes,” he said. “There are jobs, and real estate and spin-off businesses. That can have a real impact on a community.”

Oren’s analysis found that the Colorado medical and recreational marijuana market created 12,500 direct jobs and about 18,000 total jobs in 2015 and generated about $1 billion in direct and nearly $2.4 billion in spin-off economic activity. He called marijuana a rapidly growing small industry “that has very high local impacts.”

He said some public costs could offset benefits. His firm did not account for health, energy or enforcement expenditures, for example. And certainly some communities want nothing to do with marijuana, which is still illegal at the federal level.

John Kagia is executive vice president of industry analytics for New Frontier Data.

He said most of the economic benefits and costs of marijuana will be felt locally, because most products and services are produced and offered in-state.

Kagia used Colorado data to assess marijuana’s potential in Maryland. He said Colorado is a good model for Maryland because the populations are similar. About 130,000 people participated in Colorado’s medical marijuana market before recreational cannabis was approved about three years ago.

Maryland has approved medical marijuana only. About 2 percent of the population would be likely to tap medical marijuana products, Kagia found. An estimated 10 percent or more would be interested in a recreational industry.

He said Maryland is an attractive market because government surveys suggest wide acceptance of medical marijuana and the regulations allow for a wide spectrum of qualifying medical conditions, including the relatively broad “chronic pain.” Registration is not as cumbersome as in other states, and Maryland is allowing a substantial number of retail outlets.

Kagia said a low number of participating doctors could hamper access for patients who will need a recommendation to secure marijuana. But he said tele-medicine has made up for low numbers elsewhere.

More than 17,000 consumers in Maryland have registered for medical marijuana. More than 500 providers, including doctors, nurses, dentists and podiatrists, have signed on.

Kagia estimated sales in Maryland could reach some $34 million in 2018, and jump to $494 million by 2025. For comparison, Baltimore-based Under Armour’s 2016 revenue was $4.8 billion.

Nationally, New Frontier estimates the cannabis market was worth an estimated $6.6 billion in 2016, and sales could reach $24 billion by 2025. It estimates there will be 280,000 direct jobs by 2020. Twenty-one states have legalized medical marijuana. Eight more states and the District of Columbia also allow recreational marijuana.

Kagia said Maryland, being a relatively small state, won’t be a national leader in sales, and marijuana won’t likely be among the top industries in the state. But he said there will be measurable economic activity directly and indirectly from lawyers, accountants, security firms and companies that supply equipment required by law.

“The totality of the economic activity is going to be happening beyond retail sales,” he said.

Dr. Jahan Marcu is chief science officer for the advocacy group Americans for Safe Access, which has been training people to work in the field.

Eventually, he said, the federal government will collect jobs data.

Jeremy Schwartz, an associate professor of economics at Loyola University, said a number of factors will limit the impact of the industry in Maryland. First, he said, the unemployment rate is already low at about 4 percent, meaning most industry workers will likely be moving from one field to another rather than entering the job market.

Further, many of the jobs and much of the economic activity likely already exists, though illegally. Eventually, if every state approves a marijuana market, the industry could become saturated, as with legalized gambling.

Still, he said, there will be some new jobs and taxes, perhaps some upward pressure on salaries and even a few more people returned to the job market because their chronic conditions are better managed by medical marijuana.

“It’s hard to imagine this causes some kind of boom” to the Maryland economy, he said. “But a new business opening in a local community won’t be nothing. There will be new businesses and jobs and some kind of economic effect.”

Patrick Jameson, executive director of the Maryland Medical Cannabis Commission, estimates the industry will add between 700 and 1,000 jobs to Maryland initially. The law requires certain positions to ensure quality and security for users.

Sales are expected to begin this year, but Jameson said it’ll be another six months or more before store shelves are well stocked. He said the commission has no plans to assess economic impact.

“We have one mission and it’s medical marijuana,” he said.

Philip Goldberg, president of the Maryland Cannabis Industry Association, said the industry could create more than 2,000 new jobs at the outset, with up to 1,000 employed by growers, up to 75 by processors and up to 1,100 by dispensaries. All will also need support and services.

Goldberg, who is CEO of the Frederick grower Green Leaf Medical, said he’s received resumes from roofers and even an X-ray technician who wanted a new career with growth potential. One online job post drew 268 responses in 12 hours.

Goldberg said many believe in the mission of providing medical marijuana.

Some have agreed to take pay cuts for one of the 50 or so jobs he expects to initially create. He said pay starts at $30,000 with benefits for the people who tend the marijuana plants, rising to $80,000 for scientific positions.

“It’s not hard to find applicants,” he said. “We probably could have gotten away with paying $10 an hour, but we’re investing a lot in training and don’t want people to leave. We want people to see upward mobility and feel good about their careers.”

Shad Ewart, a professor at Anne Arundel Community College, is training entrepreneurs. He said plenty of people are seeking to benefit from the industry without actually working in the industry.

His course focuses on “the picks and shovels part of the gold rush,” meaning ancillary jobs necessary to start up an industry.

Some students are aiming for entry-level jobs as a grower, processor or retailer. Others want to expand their accounting or legal practice. But many want to understand how to supply the parts to grow hydroponic crops indoors or the display cases or even the T-shirts with logos on them.

He said his course begins with a review of the state regulations. They outline what is needed.

Students already have been creative, Ewart said. As a class project, one student bought hundreds of cheap cannabis leaf-themed stickers in colors of the Maryland flag and sold them for $5 a piece. Another student was working to transform his limo service into a cannabis transport business.

“These businesses won’t be game-changers for the state, but they will be game-changing to individuals and communities,” he said. “T-shirts may end up being where the real money is.”

Most initial jobs will be at dispensaries, processors and distributors. Timonium-based Curio Wellness has licenses for all three business and expects to hire 69 people. The positions range from hourly retail jobs to highly skilled scientists.

Wendy Bronfein, a founder of Curio Wellness and a marketing and product development executive, echoed Goldberg’s desire to provide good career opportunities. The company offers benefits such as health care and profit sharing plus a “living wage” for everyone.

Curio has received 16,000 resumes and has filled key management positions already, she said. Just a handful of the new hires have come from out of state.

“It almost sounds a little hokey, or old school, but when we were forming the company we decided we wanted it to be one of those places where people would say they worked at this company for 40 years and got the watch,” Bronfein said. “At the same time, it’s a brand-new industry. A parallel would be the dot-com industry, where people could come into an entry-level position and maybe rise up at a faster pace to become a senior vice president in charge of the Ohio division.”

Bronfein said the company has sought to do business with as many local companies as possible. That includes commercial Realtors for assistance buying its 56,000-square-foot former factory building, local construction contractors for upgrades, and local distributors for equipment and even the coffee in the break room.

One local company that hopes to get some of that kind of business is SOS Technology Group in Baltimore County, which provides cyber and physical security services. Scott Hall, a technical sale engineer, said professionals at the firm already have studied the regulations so they can add medical marijuana to their roster of health care, government and other clients.

Hall predicted many will want the business. That will be good not only for those that get deals, he said, but for the state generally.

“I think there is potential for a far-reaching economic benefit,” Hall said.

Heckman at Cannaline said he’s already seeing business. The Elkridge office has had to accommodate walk-in customers for the first time.

Heckman and his partner recently invested in a $10,000 label maker that can produce a foot of labels a second so they can customize and fulfill orders more quickly. He said he’s also invested in child-resistant packaging and plastic innovation, improving his bags’ ability to moderate air and moisture.

The business, he said, already has moved far beyond its origins in his partner’s basement. Cannaline now employs seven people, and revenue has grown 10-fold in less than a decade. Local business will only help it expand.

“This is going to be nothing but good for the economy,” he said.

meredith.cohn@baltsun.com

twitter.com/mercohn

Copyright © 2017, The Baltimore Sun, a Baltimore Sun Media Group publication | Place an Ad
45°