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The ills of a billion-dollar enterprise: The slow-death of the cannabis industry, and what might be done to reverse the trend
(Source: Greenfield Recorder)
The Massachusetts cannabis industry is a billion-dollar enterprise, with over 700 retailers operating across the state. Yet stores are closing, companies are firing their workers and retail and non-retail licenses are being surrendered by former operators as business owners clamor for regulatory changes to transform an industry they see as unsustainable.
The changes are taking place as the Cannabis Control Commission, created in 2017 to regulate the new recreational cannabis industry, has been at the center of controversy, leading to delays implementing necessary regulations.
House Speaker Ron Mariano, D-Quincy, has suggested restructuring the commission is a priority item. But some industry observers wonder if those changes may be too little, too late.
The CCC’s acting chair defends their recent pace.
“This is a very entrepreneurial industry, and I fully acknowledge that regulators aren’t usually organized and structured to respond as fast as an industry might like, but I think what you’re seeing is a lot of collaboration … and a lot of energy into tackling some of these issues and hopefully doing it this year,” said Bruce Stebbins.
The CCC has introduced regulatory changes throughout every year of its operation, except for 2022. Late last year, it started introducing changes license holders had been requesting for years. These include eliminating the “two-driver” rule, allowing microbusinesses to have retail and transport licenses, and permitting patients to request a telehealth consultation for their initial certification. The CCC has also said it will regulate social consumption in early 2025. This measure has been requested by business owners for years.
Brink of closures
But industry players say key issues remain unanswered.
“When the industry is really on the brink of closures, you need a little bit more speed with which the regulatory agency is implementing things,” said Ryan Dominguez, executive director at the Massachusetts Cannabis Coalition.
The current regulations have placed financial strains on operators, added Jeffrey Herold, CEO of Green Remedies Cannabis, one of the biggest cannabis companies in Massachusetts.
“Stores aren’t just closing because action was slow; they’re closing because the current regulatory environment isn’t sustainable,” Herold said.
As it stands, the current state of cannabis regulation has led business owners to believe operators will continue to close throughout 2025 and beyond.
“We’re going to see more and more of these smaller operators having to close their doors,” Dominguez said.
One of the biggest ills for the cannabis industry is market oversaturation, owners said.
“The state keeps issuing new licenses without evaluating supply and demand. Businesses are struggling because there’s too much competition in a limited market,” Herold said.
The CCC has approved 1,465 licenses as of Feb. 14, while more are pending approval, according to the commission’s data catalog.
The oversaturation has led to prices falling dramatically, industry players believe. The average cost of an ounce of cannabis flower has gone down from $416.09 to $125.47 between January 2020 and January 2025.
Comparatively, the price for an ounce of flower in Michigan — which approved the use of recreational marijuana in 2018 — is $66.50, according to the Michigan Cannabis Regulator Agency. Meanwhile, the price of a half-ounce of flower in California stands at $55.97, according to the state’s Department of Cannabis Control.
“This race to the bottom is hard to survive. That is why we are seeing retail stores closing. They can’t survive with these margins,” said David Logan, director of operations and facilities at Trade Roots.
After recreational cannabis was legalized, investors sought to make their own production facilities and join the industry. However, these facilities came online at the same time other states started approving the legal use of recreational marijuana.
This led to a decrease in demand, oversupply and prices dropping, said Brandon Pollock, CEO of Theory Wellness.
“You’re not seeing a price decrease because people are getting better at what they do. You’re seeing price decrease solely for the fact of people being desperate,” said Angela Brown, CEO of Coast Cannabis Co..
Some business owners, like Herold and Logan, believe it would be best for the market if the CCC stopped approving new licenses.
“Now is the time for the CCC and the Statehouse to put a pause on [new licenses],” Herold said. “By not doing so, you’re creating more hope and dreams for individuals that are probably going to lose it all once they get there.”
The CCC is not currently considering a license cap. It believes the market itself will drive the ability for new players to join the industry, Stebbins said.
Testing
Testing is one of the biggest issues business owners are dealing with.
“The current testing system was inherited from the from Department of Public Health medical marijuana program,” Pollock said, believing it needs an overhaul after years of not being updated.
Tests are not standardized across different labs, leading to different results, increasing costs for businesses and confusion for consumers, Dominguez said.
Current tests look for yeast, mold, heavy metals, pesticides, aerobic bacteria, and bile-tolerant gram-negative bacteria. However, business owners feel tests should be tailor-made for every different strain of marijuana used and looking for different harmful elements in them.
“The total yeast and mold [test] is not an accurate one because of the fact that it doesn’t really get into the things that are harmful pathogens for consumers, like Aspergillus,” Dominguez said.
The CCC has taken note of this problem. Commissioner Ava Callender Concepcion has been assigned to address the problem in depth and a newly appointed director of testing has already started working on the subject, Stebbins said.
Agent registration cards
Another struggle affecting the industry is agent registration cards.
Any person working in any marijuana establishment must obtain registration cards from the CCC. Applying for these cards costs $500 for medical agents and $115 for recreational agents. Cards must be renewed annually at first and on a triannual basis afterward, industry sources said.
A person working at multiple facilities needs a separate card for each locale, inflating costs.
“Our general managers need to have access to all three of our dispensaries, which hold medical and recreational licenses. This means their badges cost $1,845 to renew,” said Samantha Woodman, manager of sustainability and regulatory affairs at Green Remedies.
The costs these cards carry is made more severe by the high turnover rate the industry faces.
“You’re going to be spending money for people who may never show up to the job, or people who stay for a week or two and then leave,” Dominguez said. “Things that they can be putting towards making their businesses more viable if they’re spending on inefficient processes like this one.”
The current system leads to thousands in costs for operators. Industry players believe only one card should be required, Dominguez said.
The CCC is already analyzing this problem.
“We know this is an issue that kind of is impacting everybody in the supply chain, from retailers all the way up to cultivators, even out to testing labs, even out to even some of our roadside drug testing trainers. So, we’re looking at that,” Stebbins said.
Purchase limits
Another struggle currently affecting the industry is purchase limits. Customers can only buy up to 1 ounce of cannabis flowers, 5 grams of cannabis concentrates and 500 mg of THC in edible products. This has led to stores overstocking products.
Meanwhile, neighboring states have more permissive restrictions. In Maine, customers can buy up to 2.5 ounces of cannabis per store visit and up to 10 grams of concentrates per day. In Connecticut, the limit goes up to 1.5 ounces of cannabis flower and 12 grams of concentrated cannabis.
“We turn away customers every single day,” Pollock said. He believes increasing the limit is the No. 1 one regulatory change needed to help the market stay afloat.
The daily limit mostly affects people who come from out-of-state to purchase the product. People on vacation to Massachusetts, or who were loyal customers and come back to the state to visit their store of choice, are not expected to go to a retailer a second day to buy the original amount they wished to purchase, Pollock said.
“A lot of people are not selling a lot of product,” Herold said. “A lot of people are selling for below cost right now, because they’re so desperate to keep the lights on.”
Herold believes this has a floor, though, which may hit the industry in less than a year’s time and will lead to a larger wave of companies going out of business.
The CCC does not have the authority to change the one ounce limit put in place by local laws without legislative involvement.
Advertising
Another issue business owners struggle with is existing advertising restrictions.
According to CCC regulations, advertising through television, radio, internet, mobile applications, social media, billboards and print publication is restricted unless at least 85% of the audience is expected to be 21 years of age or older.
“The issue is we can’t attract new customers,” Brown said.
After the ballot question legalizing recreational cannabis was approved, there was an expectation from the industry that it would be treated in the same way as liquor is nowadays, Brown said.
However, cannabis stores cannot promote prices going down in their websites and cannot send newsletters to interested subscribers about new deals being offered.
“You can’t even cross out a number and say we’re offering it at a lower price, because that would be considered sales and discounting,” Dominguez said.
Store owners feel like their business is still being treated as an illegal activity, Herold said.
The CCC is aware of the changing cannabis industry landscape and the need for an updated regulation. The commission looks to modernize the current framework and give Massachusetts the intended results while complying with public health and safety standards, Stebbi ns said.
“There’s a lot of talking, but there’s not a lot of action that we’re seeing,” Brown said.
MA small businesses say they're drowning in high costs. How they say state can help
Average weekly wages per county in Massachusetts, 2021 (Source: U.S. Bureau of Labor Statistics)
More than half of Massachusetts small business owners said they were likely to close or sell their enterprise in the next five years, citing high costs across their businesses as a driving factor, a recent study from UMass Donahue Institute showed.
Of the 584 small business owners surveyed, 76% claimed costs were rising faster than sales since 2019. Likewise, 44% of businesses said profitability had decreased since 2019. Only 24% said profitability went up.
When asked what the Massachusetts state government could do to help small businesses increase their sales, the study found respondents suggested a reduction of taxes and regulations would help increase profits.
“Public policy leaders in Massachusetts have to do a better job at understanding the dilemma of small Main Street businesses,” said Jon Hurst, president at the Retailers Association of Massachusetts. He believes the Legislature is not doing enough to help small businesses stay afloat.
“I think one of the challenges with a question like this, and one of the reasons why there can be a disconnect sometimes between policymakers and the reality on the ground, is there's a lot of different costs that come from different places,” added Doug Howgate, president at the Massachusetts Taxpayers Foundation.
Health care costs, paid leave, energy and workforce policy have increased in the past eight years due to legislative initiatives, he said.
If legislators do not keep track of how different costs are piled onto each other, they can “lose the forest for the trees” when it comes to aggregated impact and end up generating more problems for employers, Howgate believes.
Rising health care costs have big impact
Hurst believes the biggest impact on small businesses today is health insurance costs.
Massachusetts ranks 36th nationally for average employer contributions to health insurance, the 2024 Massachusetts Competitiveness Index Report by the Massachusetts Taxpayer Foundation stated. This puts Massachusetts in the bottom half of states for employer health insurance cost.
The reality is leading small businesses to try alternatives they believe will reduce costs while being effective.
“My last renewal … was a 29% increase, and at that point, we decided we have to try something new,” said Jeanne Bell, financial controller at Holyoke-based Westside Finishing, a family-owned business that specializes in powder coating and metal finishing services with a staff of 50 workers. “Rather than the normal Blue Cross insurance, … we’re using a partially self-funded plan, and hoping that's going to reduce our cost.”
Bell’s sentiment is echoed by other small businesses throughout the state.
“We're an unusual small business in that we pay a very large percentage of almost 50 people's health insurance, and those health insurance costs are rising exponentially,” said Lisa Gozashti, co-owner of Brookline Booksmith. “That's epic in terms of costs and things that affect our bottom line.”
Gozashti said the store was being conservative when hiring new staff and feared incoming additional costs related to tariffs could lead the business to be reduced to a core team and the business to run as a “shoestring operation.”
Electric Time Company, a Medfield company specializing in large-scale, custom-made clocks, is hesitant to hire more because of rising health care costs despite having grown from a small team of around seven to 30 in the past 20 years.
“Family plans can cost the company up to $20,000 or $30,000 a year," said company President Thomas Erb. "That is a huge obstacle to hiring people in the state."
Two bills that seek provide aid to small businesses
Two bills are looking to provide aid to small businesses when it comes to the health care system.
State Sen. Adam Gomez, D-Springfield, filed a bill that looks to add small business representation to the decision-making process behind health care costs. It aims to introduce three new seats onto the Massachusetts Development Finance Agency Board of Directors. Two of these would go to microbusiness and small business owners respectively.
MassDevelopment provides loans, grants and bonds to small businesses.
State Sen. Michael O. Moore, D-Millbury, filed a measure looking to create incentives for small businesses to buy insurance as groups, as well as offering rewards to businesses based on their size.
The bills are in the Legislature’s Joint Committee on Community Development and Small Businesses and the Joint Committee on Financial Services respectively.
When the National Federation of Independent Business attended a Joint Committee on Labor and Workforce Development hearing in April to bring to legislators’ attention the need to change regulation surrounding small businesses, the chairs mentioned actions would be taken to help employers.
Another pesky cost: unemployment insurance
Another cost small businesses are looking to see changed is unemployment insurance.
“It's been a problem that's compounding … with very little action from the Legislature,” said Christopher Carlozzi, state director at NFIB. “Massachusetts really ranks toward the bottom, if not dead last.”
Average UI taxes in Massachusetts are a competitive disadvantage nationally and among competitor states, the Massachusetts Taxpayers Foundation report found. It is seven times the tax of Florida and 60% higher than California, the report stated.
“The high level of UI taxes speaks to a theme of MA’s competitive position: a major outlier for costs that disincentivize location and investment in the state,” the report said.
Carlozzi argued eligibility for UI is too lax. He also argued legislation that dictates the length of time workers are covered is outdated, dating back to 2003.
In late April, state unemployment coverage went up to 30 weeks from the previous 26 when the Springfield area hit an unemployment rate of 5.2%.
“We have an earnings test, but we don't have a time worked test,” Carlozzi said. “Those are all things we should have in place to make it a little more stringent, to make the system a little more difficult to qualify for, a little more manageable.”
The unemployment insurance trust fund will be insolvent by 2028, going $51 million in debt by the end of the year, the Massachusetts Office Executive Office of Labor & Workforce Development said in its April UITF quarterly outlook.
Changing UI is a politically complicated issue due to how reducing costs for one side negatively affects the benefits workers receive, Howgate said. But he believes a conversation must happen to make the system sustainable for both businesses and residents, however. Massachusetts is an outlier nationwide when it comes to benefits, Howgate said.
In February, Gov. Maura Healey tasked Administration and Finance Secretary Matt Gorzkowicz and Labor and Workforce Development Secretary Lauren Jones with leading a comprehensive review of the state's UI system.
“What everybody has to understand is we are not opposed to expanding unemployment benefits at all,” said Vladimir Zarkhin, president of Right at Home Boston Metro West. “What's problematic in this case is that our state government places the financial burden on the shoulders of small businesses, just like mine.”
Study finds state has nation's third-highest electicity costs
Another factor driving up costs for small businesses is energy.
Massachusetts has the third worst price in cents per kilowatt hour in the country. It has gone up to $.021, increasing 19% in the past five years, the Massachusetts Taxpayers Foundation 2024 report stated.
Some small businesses, like Electric Time Company, use automated machinery to reduce labor costs, making them competitive. With rising energy costs, the company is looking at the Legislature for solutions.
“Paying attention to energy costs would be the best thing (the Legislature could do),” Erb said. “Our (energy) generation is very expensive, and the distribution is really expensive, too.”
Erb said other business owners already left Massachusetts because of the rising energy costs.
“I remember talking to somebody who did powdered metal products, where energy was a big part of their business,” he said. “They were moving out because the energy costs were just so high.”
To offset rising costs, Erb started using solar energy, installing LED lighting and reducing heat in furnaces when not in use. However, he worries costs may continue to rise.
Other businesses, like Westside Finishing find it impossible to move to other states due to the uncertainty it carries. Bell said there's no guarantee other states will have the necessary pipelines to provide the gas needed for its operations.
Carlozzi believes part of the problem with rising costs is related to green energy mandates by the state.
“This is something that was approved and advanced by the Legislature each session," he said. "And, for our members, once again, it just makes it harder to operate and keep their business running."
For Howgate, the costs are putting Massachusetts’ long-term energy goals in peril.
“If people can't afford to meet their energy costs in the near term, you're not going to have the political will necessarily meet those long-term goals either,” he said.
Healey announced plans to file an energy affordability and independence bill during a press event on March 10.
What small businesses are waiting for
Currently, more than 200 bills look to change regulations that would impact small businesses one way or another in Massachusetts.
While some look to reduce costs by lowering certification fees, others look modify business excises, propose relief on property tax and a credit against their tax liabilities, among other solutions.
Carlozzi believes tax packages do not have enough effect on small businesses, however.
“They talked about a $1 billion tax reform package last year," he said. "How much of it actually impacted small businesses? Not very much. For small businesses, we need grand, sweeping gestures to help provide some relief.”
Hurst thinks cutting taxes for consumers would help increase sales for small businesses.
“One thing that government could do to help these small businesses is to first help out the consumers by cutting their taxes,” he said. “That would help the disposable income of the consumers, they would have more money to go out and spend with these small businesses.”
Hurst also believes the state needs to take on an educational role, teaching consumers about the importance of buying local.
Carlozzi also believes the Legislature could help employers by not implementing the reforms it's considering.
Increasing the minimum wage to $20, as has been suggested, would only increase labor costs, leading to small businesses reducing jobs, hours and increasing prices for consumers, he said.
Carlozzi also said the NFIB is currently in talks with the Healey administration to find solutions to the pain points currently afflicting small businesses.