CENTREVILLE — Just off Centreville Road, in the back row of a business park, is a small medicinal cannabis dispensary called Ash + Ember. It’s got a rectangular white sign displaying the shop name at the top of the brick building and just a few parking spaces cut out in front of the store.
The small business has been quietly operating for a few years, serving a large chunk of the customers on the Mid-Shore. Besides Sunburst Pharm in Cambridge, it’s the only medical marijuana dispensary on the Mid-Shore.
With about 900 products available — from edibles to marijuana flower and even hats, shirts and lotions — Ash + Ember has 18 employees serving hundreds of customers a day since opening in 2018.
“Business is great. We have lots of patients in our roster, and we’re open seven days a week. There’s tons of demand,” said Ashley Colen, co-owner of the dispensary.
At the front of the store, employees check a customer’s I.D. from behind a front counter. Down the hall and through a set of doors is the main shop, lined with shelves fully-stacked with colorful products and packaging. A counter wraps around the back end of the shop, where employees are busy preparing orders.
Ash + Ember, a small business run by Ashley Colen and her sister, Paige — she calls it a “mom-and-mom shop” — is part of a shrinking pool of small cannabis dispensaries in the state and nationally. With full legalization for recreational use expected this year or next in Maryland, that pool could shrink even smaller. Independent as well as and women and minority dispensary owners could face another uphill climb.
Ashley Colen said it’s already difficult to compete with the larger chains and multi-state operators in the state, which can open up to four dispensaries and can vertically integrate their business — grow cannabis, process products, and sell — all within one operation.
“Independents do end up struggling,” she said. “But we work hard and keep our heads down.”
The marijuana industry is growing across the country, with more than a dozen states fully legalized now. The industry has become a boon to Maryland since medical cannabis dispensaries first opened in 2017. The state’s medicinal marijuana industry brought in a staggering $450 million in sales revenue in 2020, double the amount in 2019. Under full legalization, the market could top $1 billion, in some estimates.
Maryland earned more than $10 million in tax revenue in 2020, and is expected to double that revenue under full legalization. According to the current bill in the state legislature for adult-use legalization, Maryland will phase in a 25% sales tax over several years, which will translate into millions of more dollars a year for the state.
While money is certainly a driving factor for full legalization, small dispensaries like Ash + Ember fear they could be left behind. Already, among the 91 licensed dispensaries in the state, only about a third are mom-and-pop shops.
“There’s less mom-and-pop stores now than two or three years ago,” said Tracey Miller, the president of the Maryland Marijuana Dispensary Association, which represents all dispensaries in the state.
The Green Market Report, an online publication and analytics company that studies the cannabis market, estimates that small business dispensaries could be on the way out as more states look to recreational legalization.
“The small operator may not survive in the short term. It could follow the pattern of the beer industry, which was initially known for local beers and breweries,” one author predicted. “Then for years, major brands were the only beers for sale. It’s only been within the last 10 years that craft beers have made a comeback. Craft cannabis will have to fight to hold its place against corporate cannabis.”
Both recently passed laws and proposed bills in Maryland are mostly not designed to support small, local dispensaries.
MMDA came out against a new law in 2019 that expanded the dispensary cap, allowing businesses to open up to four stores in the state, when previously companies had been capped at one. After full legalization, the cap could increase again to meet market demand.
The Maryland Medical Cannabis Commission, the state regulatory agency for the marijuana industry, said it is prohibited until 2024 to decide if more licenses need to be awarded. A higher cap would likely be decided then.
The agency defended its position on the current dispensary cap. William Tillburg, the executive director of the MMCC, said in a statement that other states have higher caps, including Florida with 25.
“In most states a person is allowed to own or control significantly more dispensaries, or there is no limit on the number of dispensaries,” said Tillburg.
The largest hurdle for Colen, however, is competing against multi-state operators that vertically-integrate operations. Since there’s only about 18 growers in the state, Colen said she struggles with that “finite number.”
“As an independent, it’s difficult to source product at times,” she said. “Companies become vertically integrated and have all of the licenses here and wholesale to themselves. Their profit margins are sky high. There definitely are some issues in the industry in Maryland.”
Multistate operators such as Massachusetts-based Curaleaf (with four Maryland dispensaries) or Chicago’s Greenthumbs (with three dispensaries) have control over a particular flower strain or product through vertical integration. Currently, a company can have one grower and one processor license. Processor facilities create products such as tinctures and edibles.
“Many patients come to depend on a very specific product,” Miller said, “but that specific product, especially if it is a strain, can be very difficult for a dispensary that doesn’t own that grower to consistently — or sometimes it’s just a one-time deal — get that product.”
That has long put them in a position to dominate when more turn to marijuana, like during the pandemic, which has led to skyrocketing cannabis sales. Curaleaf generated $135 million in its third quarter in 2020, a leap from $44 million in 2019, double or triple what Ash + Ember makes.
The MMCC said it does not take a position on vertical integration.
While Maryland is not the only state to have vertical integration, it’s in a position to expand the practice. A bill in the state legislature would allow companies to grow, distribute and sell all on one premise, significantly accelerating operations for bigger chains.
Another bill in the General Assembly, sponsored by Del. Darryl Barnes (D-Prince George’s), would repeal the cap of one grower and processor per business, giving multi-state operators another boost.
Miller, from MDMA, said she’s opposed to the bills and has offered amendments, such as awarding smaller dispensaries a micro-cultivation license to grow on a limited scale, just so they can compete on more even terms.
In the latest bill for full, adult-use legalization in the General Assembly, small dispensaries would receive some support. HB 32, sponsored by Del. Jazz Lewis, D-Prince George’s County, includes micro-grow licenses.
“There’s no cap on the amount of those licenses so there’s more opportunity for folks to enter the industry,” said Olivia Naugle, a legislative analyst for the Marijuana Policy Project, an advocacy organization for legalization. “It would be an opportunity for folks in the existing medical (landscape) to expand.”
Naugle said HB 32’s prospects are good, given that neighbors New Jersey and Virginia both passed laws for recreational use.
“It’s not a question of if, it’s more of a question of when and how,” she explained. “The urgency is real to move forward.”
Colen said the cannabis industry will look a lot different if the bill passes. It would be hard to compete with multi-state operators or chains that will eventually move in, she explained. In Colorado, before it passed legislation for recreational use, mom-and-pop cannabis shops were common. It’s now become expensive, costly and hard to compete in the state as a small dispensary.
“I don’t know how long it will take, but the big tobacco companies are going to move in,” Colen said. “The state legislature needs to listen to all of the people in the state, and not just the most powerful and richest stakeholders. That needs to be ever-present on their mind when forming new policy.”
The MMCC expects significant growth after full legalization.
“Current legislation seeking to legalize adult-use cannabis would establish several new license categories for delivery, transport, and on-site consumption establishments,” Tillburg explained, and “significantly increase the number of licenses.”
He said the bill would also help local and small dispensaries by “establish(ing) license categories targeting smaller businesses with less capital — micro-businesses paying smaller fees.”
The Colens grew up in Philadelphia, Pennsylvania, but their family had farmland out in Rock Hall, so the sisters had strong ties to land on the Eastern Shore.
“We’ve been here in Maryland forever,” Colen said. “My sister and I had a real interest in counterculture, and we lived in California for awhile. But we felt that legalization was moving east, so we moved home to pursue getting licensure on the East Coast.”
Maryland passed legislation for medical marijuana use in 2014. In 2016, the Colen sisters applied to the MMCC for a license (an application fee is about $5,000, and Colen continues to pay an annual licensing fee of $40,000 to the MMCC). Then, Colen had to get funding for the business.
That was an obstacle, since marijuana is still illegal on the federal level and banks typically decline to loan to dispensary owners for startup costs. According to a 2019 study form Marijuana Business Daily, it costs more than $300,000 to start-up a retail dispensary and 80% of owners have to tap into their own savings or personal debt.
“It’s not easy to open a dispensary,” Colen said. “It takes a lot of work, time and money.”
But the biggest challenge was finding a location on the Mid-Shore. Queen Anne’s County was making it difficult for them to open a location, and they had to get annexed into Centreville.
“We had to do a lot of begging and pleading. Queen Anne’s County Commissioners did not want us, so we came here to Centreville and they worked with us,” Colen said.
Jim Moran, a county commissioner, said the sisters wanted a spot on U.S. Route 50, but residential neighborhoods nearby disliked the idea of a medical marijuana shop. He said about seven other locations would have been suitable.
“When medical marijuana came along, there wasn’t really any county in the state of Maryland that was ready for that,” he said.
Colen opened Ash + Ember on Feb. 14, Valentine’s Day, in 2018. For the past three years, the dispensary owner said her store has been a “great asset to the community” and she would be interested in working with the county to change some of the local ordinances in Queen Anne’s with adult-use legalization around the corner.
“We would love to come back to Queen Anne’s and have cannabis be welcomed here at large,” she added.
Ash + Ember’s motto is “Shake the Stigma,” on cannabis use, and Colen is a huge proponent of supporting the medicinal drugs’ therapeutic benefits for patients. And partly because of the pandemic, Colen said many are growing to accept cannabis. A recent poll showed more than two-thirds of Marylanders support recreational use in the state.
“2020 broke down a lot of walls for people, who are more willing to say, ‘Yeah I use cannabis, I don’t think it’s weird or bad,’” she said. “People are really trying to focus on what is important and what makes them happy. I feel really good about myself and very proud of what I do. So many stories (I hear from patients) are remarkable and some of them make me cry.”
For all its local charm and patient support, the small dispensary could be facing even more hurdles after full legalization.
Ash + Ember opened during a time when minority and women owners were found to be disadvantaged in the marijuana industry, after a 2018 study ordered by Gov. Larry Hogan was released to the public.
“Minority and female entrepreneurs earned substantially and significantly less from their efforts than similarly situated non-minority male entrepreneurs,” the report concluded, which found similar disparities in all aspects of the industry, including that the MMCC was largely awarding licenses to non-minority owners.
The Maryland General Assembly passed a law that year forcing the MMCC to create additional licenses, and requiring that applicants demonstrate at least 51% of ownership interest is minority or women owned to earn diversity points and ultimately get approved.
Tillburg said 11 licenses awarded last year were handed to women and minority owners. And 41% of all licenses in the state are minority and women owned, including 61 of 91 dispensaries.
Still, only four of 26 companies with a grow and process license are owned by a women or person of color, Capital News Service reported in 2020. The MMCC continues to face lawsuits about its lack of diversity in approving minority and female applicants.
HB 32, the current bill for full legalization, includes several provisions for “social equity.” It would give small businesses a head start on applications for cultivation and manufacturing licenses, and no-interest loans and grants for start-up costs.
Throngs of dispensaries and intense competition could be the future of the industry under recreational use — even on the Mid-Shore, which has just two dispensaries.
Miller, from MDMA, said business owners will have to pivot to survive in the new climate. She owns a dispensary in Rockville called Peak ReLeaf. Montgomery County has three dispensaries, and Miller is “surrounded by three districts that have three dispensaries in them,” including Prince George’s County.
“You have to have a different kind of business model,” Miller said. “I think businesses can thrive in areas where there are lots of others ... but you’re going to have a different business model to ensure the success of your business.”
For now, it’s still quiet at Ash + Ember, though extremely busy. During the pandemic, sales have skyrocketed, and all of Colen’s employees are filling up online orders as fast as they come in: weighing flower, scooping the product into tiny brown bags with white slips on the front marking the customer’s name and the strain of cannabis, and placing them on a table stacked with the orders.
“Sales during COVID have been really good ,” said Colen. “It’s all cannabis, guns and booze.”
When a customer pulls up to the small parking lot in front of Ash + Ember, employees take the order bag out to the patient’s car for delivery. It’s a simple process, said Colen, but important for the hundreds of patients a day she serves. And it’s a business she intends to keep around.
“We’re not going anywhere,” she said.