At least 22 of the 24 companies chosen to grow Ohio’s first medical marijuana plants are also vying for one of 40 licenses to make marijuana brownies, lotions, patches and other products.
Of those, at least 12 also applied for licenses to sell marijuana at dispensaries — the state plans to award up to 57 initially.
Ohio allows for vertically integrated companies that own a business at each part of the supply chain: cultivator, processor and dispensary. But unlike highly regulated legal marijuana programs in other states, Ohio does not limit industry participation to vertically integrated businesses.
That’s good news for big, established medical marijuana companies that want to expand to Ohio, and industry observers say it also leaves room for smaller, mom-and-pop enterprises that might want to specialize in one part of the industry.
Chris Lindsey, senior legislative counsel for D.C.-based Marijuana Policy Project, said Ohio offered enough business licenses so the cultivators can’t have a monopoly on the rest of the program.
“Ohio may very well have the best of both worlds,” Lindsey said. “It’s figured out how to have a highly regulated system and allowed enough latitude for competition.”
The Ohio Department of Commerce announced 104 businesses applied for up to 40 processor licenses. Ohio’s medical marijuana law does not allow for smoking cannabis, but does allow oils, tinctures, patches and edible products to be sold in addition to marijuana plant material for vaping. Processors will make those marijuana products and sell them to dispensaries for retail sales to patients.
All 12 of the large-scale cultivator provisional licensees applied for processor licenses, and at least eight also applied for dispensary licenses, according to business-name and agent lists made available by the Ohio Board of Pharmacy.
But many applicants who didn’t get a cultivator license, including Jimmy Gould and Ian James’ CannAscend, also applied for processor and/or dispensary licenses.
Lindsey said it will be difficult for stand-alone processors to make money. Vertically integrated companies save money because they can get marijuana cheaper than competitors who must buy from someone else and they have a dispensary that will sell their products.
But it can be possible, he said, if stand-alone processors carve out a high-demand niche or develop a popular brand.
Thomas Rosenberger, executive director of the National Cannabis Industry Association of Ohio, said there are differing opinions about the pros and cons of vertical integration for consumers and the price they ultimately pay at dispensaries. But he said Ohio’s approach rightfully allows companies to choose what business model they want to follow.
“With the way dispensaries are dispersed across the state, it’s unlikely we’ll see 12 large conglomerates and a few small guys and it’s likely to be a pretty diverse industry,” Rosenberger said.
State law requires the program to be fully operational by Sept. 8, 2018.