Industry in Flux

Santa Fe’s cannabis dispensaries are growing as the new industry develops, with new locations and plans to add recreational offerings and establish consumption areas.

But businesses are facing challenges, too, including an anticipated supply shortage and a wait for state regulators to establish retail rules.

Under New Mexico’s legalization scheme, the state Regulation and Licensing Department’s newly formed Cannabis Control Division took over authority to administer the medical cannabis program from the state Department of Health on June 29.

Some business owners say it makes the most sense for them to participate in both the medical and recreational markets because following that transfer of power from departments, the state has offered “legacy” producer licenses that cover both.

The folks at Fruit of the Earth Organics, Keyway Marketplace and Ultra Health all tell SFR they plan to jump in the recreational game in addition to serving patients in the medical program, which all three businesses have been doing for years.

Although the legacy status gives businesses a head start, there are still plenty of hurdles, owners and managers tell SFR.

Adding to 14 existing dispensaries shown on a map from the health department, a couple of new locations are popping up around town.

New MexiCann Natural Medicine was one of the bigger players in the city, occupying two buildings in Santa Fe. But the health department revoked the company’s license in May in response to an explosion and fire last year at its headquarters on San Mateo Lane.

R. Greenleaf moved into New MexiCann’s old West Cordova Road building last month and Keyway Marketplace, formerly Shift New Mexico, will soon be opening at San Mateo Lane. Keyway already has one location south of the city limits.

Keyway general manager Bob Johnson says the location has been cleared by the city and is awaiting licensing from the state. He estimates the site will be open in the next two to four weeks.

“We definitely want to reach more of the marketplace, and it’s kind of an iconic location in Santa Fe,” Johnson says. “It’s also very secluded, easy in and out because it’s a dead end, and it makes it very easy for people to get their medicine.”

On top of location expansions, some businesses are hoping to open consumption areas—spots where customers can smoke or otherwise enjoy cannabis; the state hasn’t yet established rules for those, either.

Next to Fruit of the Earth is Paradiso, a venue that hosted live music and other events before shutting down early on in the pandemic. While it remains closed to the public, Fruit of the Earth general manager Elisha Weisman says the company hopes to use the space as a consumption area.

All the plans for growth aren’t without concerns and challenges.

Duke Rodriguez, president and CEO of prominent cannabis company Ultra Health, has long warned of a supply shortage and says it’s now too late to avoid.

“We’ve had a shortage in this [medical] program for over a decade. All that adult use is doing is exacerbating a long-term problem,” Rodriguez tells SFR. “I’ve told people before, if the plant is not in the ground today, it will not be available come April. That reality cannot be avoided.”

Rodriguez says based on data from other states including Colorado, businesses will swiftly run out of product when recreational sales begin next April, and recovering from shortages could take 18 to 24 months. Part of the problem, he says, is the Regulation and Licensing Department has been slow to issue new producer licenses.

The department—which began accepting producer applications on Aug. 25—has issued 33 legacy producer licenses but has not yet issued any new licenses, according to spokeswoman Heather Brewer, who adds that the state has 90 days to act after receiving a complete application.

In anticipation of a shortage, Fruit of the Earth is considering how best to prioritize medical users.

“We’re going to do everything in our power to make sure that our medical patients, number one, don’t run out of medicine,” administrative manager Micah Helman says. “Whether that be enforcing certain restrictions on how much people can buy, or even offering an exclusive two to three hours in the morning for medical patients to buy, we’re not exactly sure what that’s going to look like yet but we’re taking it into consideration.”

At Keyway, Johnson says they’re producing more cannabis than they’re selling retail, so they also sell to wholesalers. When demand increases in April, Johnson says the company’s priority, like Fruit of the Earth’s, will be medical patients.

“I’ll adjust wholesale but I’ll take care of the medical patients first and then what rec business comes to us,” Johnson says.

The state statute requires producers to devote 25% of their product on a monthly basis for use in the medical program.

Meanwhile, businesses are waiting for retail rules, which the state must finalize by Jan. 1.

“It’s been challenging,” Johnson says. “It would be good to know sooner rather than later to be able to gear up.”

Rodriguez agrees that the process should’ve been faster.

“What the industry is asking for: Just simply publish the regulations,” he says. “We’ve had nearly a year to get it done.”

Weisman at Fruit of the Earth says complying with producer rules the state established in August, particularly infrastructure requirements, has been a hurdle.

As an example, he points to security system requirements, including cameras. Weisman says more than a month passed from the time he received a quote from a security company until parts arrived. The delay and others like it have made it impossible for the company to quickly be in compliance with the state’s new rules.

“This is just the basic, very beginning of what we’re talking about,” Weisman says. “It seems simple in their mind but if somebody is already established, it’s more complicated than just making something new all of a sudden when before it was already fine.”