When legislators got together to develop the language that would comprise Minnesota's recreational cannabis framework, they added a unique wrinkle that our team saw, identified, and targeted immediately. That is, they explicitly allowed small cannabis businesses to vertically-integrate while preventing larger license tiers from expanding beyond one category. So, for instance, if you agreed to stay under 5,000 square feet of canopy and one retail location, you would be allowed to grow and sell your own flower directly to the end customer. You could even add extra endorsements to extract, process, and package your product, allow consumption on your property, and host cannabis-centered events. The sky is the limit as long as the sky stays in Earth's atmosphere, so to speak.
On the contrary, if you elected to run a large operation - up to 30,000 square feet or up to five retail locations, you were only allowed that one piece. Only the grow, none of the transport or extraction or retail, etc. This isn't a small advantage, rather a massive loophole, and that's ignoring the fact that all product has to be transported by a licensed transporter unless it's grown and sold at the same address.
Backdrop all that with a major supply-side shortage. If there's nobody growing in the state, and recreational flower has to come from in-state, then there's going to be a glut of demand and no supply, at least initially. That's where we are right now. Wholesale prices for flower in Minnesota are higher than retail prices for flower in Michigan. Not to mention, it's simply not available. Stores reach out to me almost every day asking if we're selling any of our flower on the wholesale market. The problem is the answer is no and that was never part of our plan because I was so focused on the advantage laid out in the first paragraph.
According to OCM, the expected demand for cannabis in Minnesota requires about 1.5-2 million square feet of grow canopy. Right now, there are 29 licensed cultivators in METRC (the state's database for cannabis inventory) and all but four are microbusinesses. That's approximately 200,000 square feet of canopy allocation. So, we're maybe at 10% of licenses in terms of what is required to hit equilibrium in pricing. If this ratio of small:large stays roughly the same, we'll need over 200 microbusinesses with cultivation endorsements operating fully to hit demand and we currently have 25.
So, how long until dispensaries have steady supply? We're still missing an important piece of information: how quickly is OCM licensing new cultivators? The answer is not quickly. Since our store became licensed on Halloween, less than ten new cultivation licenses have been issued. So, the current rate is perhaps one new cultivator per week. Those will be more likely to be large businesses right now - only three have been licensed so far and all of them (47) paid a lot to get where they are. However, at the current rate of licenses, we won't have "enough" in the year 2026. And that means an extended period of time with very low supply, gradually improving by a few percent per month ramping until equilibrium maybe some time in 2027. Beyond that is anybody's guess.
There's basically only one way to prevent a very long product shortage and that's to license a bunch of giant producers while simultaneously allowing currently-licensed cultivators to expand. This will sound like lobbying if I keep typing so I'm going to shut up now. But it's true. We have an uphill battle with supply shortage that is very likely to sustain for a long time - at least a year. It takes at least four months to go from a new license to a harvest and there won't be enough licenses for at least a year. If you are an approved micro, find a grow location and get it approved yesterday.