Marijuana was first legalized in Alaska thanks to a successful 2014 ballot measure, but it wasn’t until 2016 that the first cultivators and retailers got their licenses and opened for business. In the three years since that time, the Kenai Peninsula has become home to 61 licensed retailers, cultivators, and manufacturers, according to the Marijuana Control Board’s list of active and operating licenses.
Now that the industry has had a few years to take shape, local business owners are experiencing the ups and downs standard to any other industry. Whether they’ve been in the industry from the beginning or just opened their doors in the last year, the peninsula growers and sellers have high hopes for the future of marijuana in the state.
Greatland Ganja, a local cultivator based in Kasilof, is owned by brothers Leif and Art Abel. Their business was the second cultivator to obtain their license back July of 2016, and boasted the first harvest in the state. Back then, there was only one retailer open to purchase Greatland’s harvest, and it was all the way in Valdez. Fast forward three years and Greatland is now selling to retailers all over the state, including several on the peninsula.
Now that Greatland has been in operation for three years, Leif said that his company is dealing with the growing pains of any small business. Leif said that they have been focusing on building their team and refining the different departments within their company, from human resources to the cultivation crew to the packaging team. Lief has also put a lot of energy into research and development and expanding their product line beyond just bulk plant material, or “flower.” Art noted that going forward, a key to continued success will be developing a strong brand for their company.
“We always want to have the next best way to consume cannabis,” Leif said.
When it comes to the industry as a whole, Leif believes that it has matured since it began and has become more reliable and dependable for the businesses operating within it. According the Marijuana Control Board’s list of active licenses, 280 marijuana businesses are currently operating within the state. Leif said that the number of businesses is high enough that everyone in the industry has more freedom in choosing with whom they do business. And while Leif says that there is still plenty of room for more businesses on every side of the industry, it is not a guaranteed success.
“Any small business has a high chance of failure when they first start, and it’s no different for this industry,” Leif said.
Small farms and some larger operations have gone under over the past three years, and Leif noted that many transfers of ownership have taken place as well.
Leif noted how important it is for local cultivators to work together to stay successful.
“Raw material producers are always in competition with each other,” Leif said. He went on to say that cultivators will often work together on areas such as transportation or buying packing and fertilizer in bulk. Cultivators also meet regularly to discuss their standard operating procedures and any changes in regulatory practices that affect their business models, he said.
Leif sees plenty of room for growth on the retail side, noting that there is still only one retail location currently in operation in Homer and only a handful outside of the Kenai-Soldotna area.
As far as challenges go, Leif said that the biggest burden for cultivators comes from the current tax structure. Currently, cultivators have to pay a flat tax of $800 for every pound of flower harvested, and this tax is collected monthly, sometimes before the product is actually sold to retailers. Leif explained that this creates an artificial cash flow demand for cultivators that is especially hard to meet as the market price fluctuates. Leif said that some in the industry are pushing to change this structure, and he suggested percentage-based sales tax as a potential alternative.
Patricia Patterson is the owner of High Bush Buds, which was one of the first 10 retail locations in the state. After two years of operation, Patterson said that marijuana retail tends to experience the same sales trends as any other retail product. Patterson also owns Lucky Raven Tobacco, and said that her marijuana sales are not comparable because at Lucky Raven she sells an addictive product. Patterson described recreational marijuana as a “discretionary-income product,” meaning that people buy it when they want it and when they have the money to spend.
Winter months, specifically January and February, tend to see a reduction in sales because people have less discretionary income after the holidays. Summer months bring tourists to the peninsula, which translates to higher sales for marijuana retailers. Patterson experienced some issues with suppliers early on, simply because the number of cultivators was limited, but since early 2017 that supply has no longer been an issue, she said.
Patterson said that retailers are immensely affected by regulations and owners have to stay on top of changes as the industry evolves. She noted that small regulatory changes can significantly impact her ability to run her business, and used as an example the MJ-25 form that retailers were required to fill out as of this January. Filling out that form takes time and money, Patterson said, which directly affects the success of her business.
Overall, Patterson sees some room for growth on the retail side of the industry, but also feels that things will level off soon. With a relatively low population, retailers will be able to meet the demand on the peninsula quicker than somewhere like Anchorage. Patterson went on to say that the real growth on the peninsula will come from cultivation. Patterson and others believe that the peninsula has turned out to be a good place to grow marijuana effectively, and that the practice has not been a nuisance to neighbors for the most part.
Ryan Tunseth just recently opened his retail establishment, East Rip, in September of 2018. Tunseth agreed with other business owners that marijuana retailers face challenges similar to any other retail businesses. Tunseth said that a big hurdle was the time that it took to obtain his license and open his doors. If people looking to open a cannabis shop aren’t prepared to wait up to a year to go through the process of obtaining the license and the location, Tunseth said it can stop some operations before they get off the ground. Tunseth said that once he was actually open for business, he was able to breathe a sigh of relief, at least briefly. Tunseth highlighted the importance of accountability for marijuana retailers. One of the most important aspects of sales is checking I.D. and doing everything they can to prevent selling the product to minors, and Tunseth says that maintaining a high standard there is key to maintaining a good reputation in the community.
Tunseth expressed some concern about the fate of the marijuana industry on the state level and pointed to a recent appointment by Gov. Mike Dunleavy to the marijuana board as a potential reason to worry. Dunleavy’s appointee, Vivian Stiver, has been criticized by Tunseth and others in the industry for her previous experience pushing for marijuana prohibition in the Fairbanks North Star Borough. Even though some uncertainty exists on the state level, Tunseth said that growth here on the peninsula is strong.
“I feel like I see a new cultivator every day,” said Tunseth, and noted that it is a big positive for the industry to see new businesses starting up and how that translates to dollars for the city of Kenai, the city of Soldotna and the Kenai Peninsula Borough. Tunseth also pointed out that the Kenai Peninsula Borough has one of the highest concentrations of cultivators in the state. Forty eight cultivation licenses are currently in operation on the peninsula, according to the Marijuana Control Board’s list of active licenses.
The general consensus among peninsula retailers and cultivators interviewed is that there is plenty of room for growth, as long as the state remains friendly to the industry. On-site consumption was recently approved in the state by Lt. Gov Kevin Meyer, which means that later this year a whole new sort of cannabis business may start cropping up around the peninsula.
