How to Transition Your Dispensary From Medical to Recreational

Posted on June 8th, 2022 to Cannabis

With cannabis legalization moving forward in more and more states around the country, it’s become a common practice for states to use a medical market as a foundation and even as a sort of test-run for the adult-use recreational market.

Legalization in Washington and Colorado presented significant challenges for many medical dispensaries that were now flanked by bigger, more well-funded competitors. In more recently legalized states like Arizona, Massachusetts, and New Jersey, existing medical providers have facilitated the transition to adult-use, offering a testing incubator for regulations and enforcement, streamlining the rollout of adult-use sales, and even covering early product supply gaps. Other states, like Maine and Montana, fall somewhere in between.

The one thing all these markets have in common? Transitioning from a medical-only cannabis market to a recreational adult-use one is never easy.

We are watching this take shape in our home state of Vermont right now, and having worked with cannabis companies in over 20 states, we’ve seen the different challenges that legalization can bring to your cannabis business. Here are a few things to keep in mind if you run a medical dispensary in a state that is legalizing adult use.

1. Know the rules!

This should be obvious, but it bears repeating. Every state is different. In some states, medical dispensaries are forced to convert their licenses to adult use. Others may allow medical and adult-use licenses under the same roof, while some may have higher obstacles for existing medical providers to get into the recreational market.

Familiarize yourself with the rules and regulations in your state. Know the key dates for legalization, including any application or inspection deadlines. Make sure you understand how adult-use sales will affect your business, and then you can make a plan.

2. Patience is a virtue

Another commonality between markets moving towards recreational sales? It almost always takes longer than planned. Even the best business plans in cannabis are susceptible to the foibles of state and local politics. Whether it’s forming a regulatory body, creating an application process, working through local zoning and compliance, or actually issuing licenses, legalizing for adult-use almost always comes with some headaches and delays.

Have a plan for your business going into legalization, but know that circumstances can and will change and be ready to pivot. This is a marathon, not a sprint, and the businesses that can take the long-view with patience and flexibility will win out.

3. Know your Seed-to-Sale Tracking

Legalization for adult-use sales often brings with it changes to the regulatory framework. For a medical dispensary, one of the most salient changes is often in seed-to-sale tracking. Recreational markets often (and perhaps ironically) have much stricter tracking requirements.

Many states, both medical-only and recreational, use METRC (Marijuana Enforcement Tracking Reporting Compliance) for traceability and compliance. If your state is implementing METRC, it can come with some challenges. For example, unaccounted for changes in inventory require more due diligence to avoid painful audits or inspections. The regulatory eye is often closer for adult-use, so it’s essential to have your operational best practices well-implemented ahead of time.

4. Different customers, different experience

Adult-use legalization can dramatically expand your customer base. However, those customers will likely look and act a lot differently than those in a medical-only market. You’ll need to market and speak to these customers accordingly in order to reach and retain these new canna-consumers.

In newly legalized markets, you’ll have the opportunity to both persuade existing cannabis users away from the black market and reach the ‘canna-curious,’ that is, new or inexperienced consumers. In both cases, education is essential. These new potential customers will have questions about products, effects, quality, consistency, regulations, and more that may go well beyond the therapeutic-oriented advice sought by medical patients. Providing this education is a great way to establish a lasting relationship with new recreational consumers!

5. Investors?

The move to adult-use sales often brings an accompanying green rush. An expanded market is more appealing to investors and large multi-state operators. This can present both challenges and opportunities for existing medical facilities.

On the one hand, more money means more competition, and more competition means you have to be smarter and more strategic to stand out in the market and ensure profitability. Conversely, it may also open the door to investment in your own business that can grow and scale your operations rapidly. If you’re anticipating a capital raise, it’s a smart bet to allocate a spend equal to 10% of the amount you’re looking to raise. Again, this requires taking the long-term view of your business and brand!

Conclusion

The legalization of adult-use cannabis is a powerful force that every state handles differently. Knowing the guidelines and realities in your state are essential to bring the needed patience, foresight and planning needed to succeed in the new market. CannaPlanners can help make sure your brand and marketing strategies are setting you up for success, rather than capping your potential in the new market.

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This post was written by Zach Santarsiero, CMO at CannaPlanners.

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