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Massachusetts may become Nation's 2nd Largest Marijuana Market

Massachusetts may become Nation's 2nd Largest Marijuana Market (after California) - and companies are flooding into the state to establish a foothold.

A major marijuana accessory company from California is looking to build a distribution center in the Worcester area, a step toward expanding its presence on the East Coast. A Boston-based consultant recently started a new business selling vaporizer equipment. Marijuana-related companies on the West Coast are beginning to seek customers in Massachusetts.

"Massachusetts at this point could be a really big state for this industry," said Kris Krane, president and co-founder of the Boston-based 4Front Ventures, which runs a cannabis consulting company and operates dispensaries. "I believe it will become the largest state market in the U.S. outside of California."

A 2016 report by Arcview Market Research estimated that the legal cannabis market in Massachusetts will be a $1.07 billion business by 2020. That does not take into account all the businesses likely to crop up outside of direct sales - from consulting to accessories to software.

At a trade show last year, people sold pipes, lighting equipment and legal services, all tied to the marijuana industry.

Kush Bottles is one example of the businesses expected to spring up around the marijuana industry once legal sales begin in Massachusetts this summer.

The company started in 2010 in Southern California selling child-resistant, food-grade packaging for marijuana products. It later expanded to sell vaporizer products and other accessories. A publicly traded company, Kush Bottles reported $8.85 million in revenue last quarter. It has 6,000 clients.

The company has distribution centers in California, Washington and Colorado. It is looking to open a hub in Massachusetts to serve the Northeast.

Nick Kovacevich, CEO of Kush Bottles, said the company is looking for a 25,000- to 35,000-square-foot distribution center in the Worcester area. It plans to hire around 15 people in sales and distribution.

"We're looking to establish ourselves as the dominant provider for auxiliary products for the cannabis industry in the Northeast," Kovacevich said.

Kovacevich said having a local distribution center will let the company offer same-day or next-day delivery or pickup, and having staff in Massachusetts will give the company better insight into the market, the regulations and the customer base.

"It's hard to be ahead of the curve in the Northeast if you're only on the West Coast," Kovacevich said.

Several business owners say Massachusetts is an appealing market because it is densely populated and has the potential for sales both to Massachusetts residents and to visitors from the surrounding states, which have not legalized recreational marijuana.

Other states with legal marijuana, such as Colorado and Washington, are not as densely populated as the Northeast.

Chris Michaud, a marijuana consultant based in Boston, incorporated Be Green Supply a few weeks ago. Michaud is taking his consulting services and incorporating them into a business that also sells vaporizer equipment. Michaud, the CEO, is working with a chief financial officer and 10 outreach consultants around the country. He hopes to bring three of them on full-time as the business ramps up.

Michaud's background is as an engineer building international supply chains. He said he saw an opportunity to build up a supply chain for marijuana products on the East Coast, in an industry that is currently dominated by large West Coast companies.

He noted that in a state know for its technology companies, cannabis technology is one area where Massachusetts might be able to develop a strong share of the market.

"There's a lot of opportunity in different portions of this space," Michaud said.

Smaller local companies, however, will have to compete with established out-of-state firms, which are now starting to turn to Massachusetts for potential customers.

Alan Lien is founder and president of Solis Tek, which manufactures and sells lighting technology for cannabis growers. The company was incorporated in 2009 and is based in California with sales staff in seven states.

Lien said as states legalize marijuana, he is seeing the market change. He has shifted from small retail sales to small-scale growers to sales of hundreds or thousands of lights for a single large warehouse.

Solis Tek plans to attend Boston-area trade shows. A sales representative in Michigan is available to travel to Massachusetts, although the company does not plan to hire staff in Massachusetts. "Any licensed or legal state is an opportunity for us," Lien said.

Brett Roper, co-founder and chief operating officer of Denver-based Medicine Man Technologies, said he already has two Massachusetts clients and anticipates taking on others.

Medicine Man Technologies was established in 2014 as a consulting firm to help marijuana cultivators and dispensaries. The firm might provide design documents to a local architect or review plans for a new facility. Medicine Man provides expertise and connects clients to retailers who can sell them crop-feeding systems, lamps or other growing technology. It offers training and sends teams to help new dispensaries when they open. As of late last year, the company had 61 clients.

Roper said with a population of nearly 7 million and a robust tourist industry, Massachusetts could be a "substantial marketplace" for marijuana. He cautioned that as more states legalize marijuana, businesses will have to rely on the in-state population rather than the tourist market.

But for now, Roper said, "Massachusetts will have a nice little market share for itself."

Massachusetts may become Nation's 2nd Largest Marijuana

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