ALBUQUERQUE, N.M. (KRQE) – In just two months since the Cannabis Control Division (CCD) began accepting applications for producer licenses, there have already been more than 1,500 applications started by would-be entrepreneurs, according to the CCD. Of those, more than 1,000 of the applications are for what are called “microbusinesses,” or smaller cannabis growers who can produce no more than 200 plants.
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“We’re off to a great start,” says John Blair, the deputy superintendent for the New Mexico Regulation and Licensing Department, which oversees CCD. “I don’t know that we could have anticipated what the demand was going to be other than knowing there really seems to be a great excitement across the state.”
To learn more about who wants to enter New Mexico’s cannabis industry, through public records requests, KRQE News 13 obtained copies of every producer application — meaning the applicant will have some sort of grow facility, but may also engage in retail or other aspects. The data isn’t entirely complete — many of the applications are still in progress — but the documents give a unique look into how the industry is developing.
No limit on the number of cannabis producer licenses
As of the end of September, just over 100 different businesses were looking to set up shop as cannabis producers, manufacturers, or retailers. As time goes on, of course, more people will likely apply.
“We don’t have any limit on the number of people that we’ll license for any of the cannabis businesses,” Blair from the New Mexico Regulation and Licensing Department says. “If a million New Mexicans want to get a license, we would license a million people.”
The applications submitted so far show plans to set up production facilities across the state. Albuquerque has the most would-be producers, the documents reveal. While the applications provided to KRQE don’t list all would-be business locations, of the 214 locations listed in the applications, 79 are in Albuquerque.
The applications also show there may soon be cannabis retailers across the city, from a small grow house planned near Central and Tramway to the a planned downtown cannabis retail and hang-out spot.
Facing big challenges, experience helps applicants
Many applicants already have experience in the medical marijuana business but are looking to enter the recreational market. Johnathan LeDuc has been working for a medical cannabis business — and told KRQE he has a personal production license to produce medical cannabis for himself — but is now looking to bring both medical and recreational cannabis to Los Alamos.
“The idea is to bring cannabis to Los Alamos, which doesn’t exist on any level,” he told KRQE. “Patients are tremendously underserved, and it’s one of the only counties without a dispensary at all.” Most cannabis users, he explains, go to Santa Fe or White Rock to get their supply.
There may be demand in Los Alamos, but entering the cannabis business isn’t easy, LeDuc says. The Cannabis Control Division required him to submit a social and economic equality plan, a government ID, a current business license, fire inspection report, zoning approval, proof of premises ownership, a diagram of the premises, a water and energy use plan, and a demonstration of water rights.
“It’s quite a daunting process. The application is very, very thorough, and there’s a lot of steps and requirements,” LeDuc says. “I have basically only been able to submit my application provisionally.”
Blair from the Regulation and Licensing Department says that would-be producers can request a provisional license to convince investors or property owners that they’re likely to be granted a license in the near future. “Provisional license doesn’t mean you can start growing,” he adds, but “what we’ve seen across the state is that sort of paper-in-hand is sufficient for most people to allow someone to enter into a lease or to sell property.”
LeDuc’s plan is to both grow and sell cannabis. But in addition to the licensing process, getting a building to grow cannabis in Los Alamos has been a big challenge, he says. The cannabis application fee was only $2,500, but he expects that a building could cost him as much as $5,000 a month for 1,800 square feet. All told, he estimates it’ll cost at least a million dollars to start production.
On top of that, LeDuc says he’s had trouble finding a bank that would work with a cannabis business. “That’s been nearly an impossible prospect at this point as well. So yeah, currently, we don’t have a bank account,” he says. He doesn’t expect to be able to get a loan to start his business, so he’s planning on raising funds from Los Alamos locals.
“I am an absolute, insane optimist, which is why I gladly threw $2,500 down just for the idea of this,” he says. “It’s gonna take about four miracles for this to happen. But I think we’re down to about two and a half left, so we’re definitely making huge progress.”
Still, the daunting application process and the costs are probably preventing people from entering the industry, LeDuc says. Smaller, low-capital entrepreneurs, in particular, are likely to have issues he explains.
“I think a lot of people will see that first page [of the application], and not even be able to get past that,” LeDuc says. “The barrier for a cannabis business . . . I think, is huge. I think it’s probably a million dollars entry for any level of cannabis business. And that doesn’t seem like a small business.”
Will everyone make it? Or will some businesses fold?
A.J. Sullins, who already owns cannabis businesses in several other states and is now applying for a producer license here in his home state of New Mexico, says that without experience and help, a lot of would-be applicants are likely to have trouble staying afloat. He expects the initial retail price of cannabis to be lower here than in other states, which means producers could see lower revenue.
“There’s going to be quite a few people who have received licensure and their costs are outweighing their revenue because they didn’t plan for a low-cost production. And they’re going to start to get consolidated or washed out within a three-year period,” he predicts. “I saw the same thing happen in Arizona,” he says. Even with millions of dollars in investments, the competition can be tough, he adds.
“There’s about one or two large players out there who are absolutely dominating the market,” he says. “I hate to use the word, but almost ‘monopolizing’ the market. So competition is definitely steep at the top.”
Smaller producers looking to support each other
Michael Sanchez, who’s planning to start the cannabis-focused Electric Café in downtown Albuquerque, applauds the Cannabis Control Division for opening up the application process. However, Sanchez says he expects the industry to be “highly competitive.” He wants his café to be the go-to spot for small growers.
“The Electric Café will be a space for micro-producers to come and network,” he says. “We can talk about best practices and trial new products before they hit the market.”
Sanchez still needs to submit more documents to the Cannabis Control Division to get his café licensed. Despite the challenges he and others have had completing an application, each of the would-be producers that spoke to KRQE seemed eager to enter the industry. John Blair from the Regulation and Licensing Department says that the department is willing to work with applicants to make the process as doable as possible.
“We’re happy to jump on the phone and talk with folks,” he says. And “the fees that are being charged to get into the adult-use cannabis business are significantly less than what it was to have gotten into the medical cannabis business,” he adds. While large grow operations have to pay a per-plant fee, the CCD does offer a microbusiness license starting at a flat fee of $500 to grow up to 100 plants.
Despite efforts to welcome all backgrounds, applicants skew white and male
The CCD says it is trying to make sure the industry is diverse. But so far, of the 236 people named in the applications provided to KRQE, nearly 70% self-identify as white. Only about 6.8% identify as Native American, either alone or combined with another race. A fair number of applicants — 14.4% — noted that they’d prefer not to give their race.
The application also asks for ethnicity. Just over 48% self-identified as “Not of Hispanic, Latino, or Spanish origin,” while 31.8% identified as being of “Hispanic, Latino, or Spanish origin.”
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Interactive Slider: The applicants so far skew white and male. Note that data does not add up to 100% due to missing values. Data from applications submitted to CCD.
“Like a lot of the other states that do cannabis, we’ve seen our own license applicants skew white, [and] skew male,” Blair says. “We are committed to doing all we can to ensure that this is as diverse of an industry as it can be, and that it lifts up all New Mexicans and not just a handful of wealthy white men.”
The Cannabis Regulation Act, which legalized cannabis use in New Mexico, stipulates that the CCD helps encourage participation in the new industry. In particular, the CCD is supposed to encourage people from communities that have been “disproportionately harmed” by cannabis arrests as well as people from rural communities. The law does not specify exactly how the CCD is to do that.
Blair says the CCD is taking several steps towards promoting diversity. For example, the CCD has been working with the New Mexico Finance Authority to try to bring financial assistance to would-be micro-producers. In October, a suggested $5 million in publicly-funded financial assistance was opposed by some state legislators.
At the same time, Blair points out that each applicant hoping to receive a cannabis production license must include a plan for social and economic justice within their business. Right now, however, the CCD is not rejecting any applications based on an insufficient social justice plan, Blair adds. In the future, the CCD plans on providing more stringent guidelines on what those plans should include.
So far, a little over 65% of the applicants are male, while only about 27% identify as female. Jasmine Castillo, the production manager of Cranium Extracts, a female-led cannabis business in Albuquerque, says that on top of the usual challenges of bringing products to market, she and her partners have faced some additional challenges in the industry.
“Just being a women-owned business — people thinking that we’re not as knowledgeable as men when it comes to the industry,” she says. “So they’re really surprised when we can actually, you know, talk about the trichomes and the solventless extraction process and stuff like that.”
Jennie Lury, part-owner of Cranium Extracts, says that the industry competition and the doubt some producers might face can be overcome. “Coming into any type of industry, you’re going to have some sort of competition,” she says. “But I think that it’s important for a lot of Mexicans and especially women getting into this business knowing that if we work together we can definitely develop this community.”
Most of the applicants that spoke with KRQE are awaiting license approval. Retail sales are set to start no later than April 1 of 2022. So, if producers hope to have products ready to go by then, they need approval as soon as possible.
In the meantime, the CCD is currently working on creating the rules for cannabis manufacturing, retail, and couriering. They recently held a public hearing, and are planning on having more meetings where members of the public can give their input to help shape this burgeoning industry.