Legalization of medical marijuana in the South on the rise

Medical marijuana legalization efforts are advancing through several states in the southern U.S., and if successful, they promise tens of millions of dollars of opportunities for cannabis entrepreneurs searching for markets that potentially offer lower costs and fewer barriers to entry.

Marijuana businesses looking to launch in the region could benefit from:

• Lower real estate and labor costs than are seen in other regions of the United States.
• Possible government incentives if cannabis firms locate in areas that are experiencing economic hardships.
• Potentially less competition if fewer license applicants exist in the area.

The generally conservative southern region of the country – a cannabis industry latecomer – remains a work in progress, and it could take time for some markets to materialize and mature.

Coronavirus outbreaks in the region also could delay potential advancements.

For example, Alabama and South Carolina lawmakers were considering MMJ bills. Those legislatures have indefinitely suspended proceedings, but they are expected to focus on top business priorities when they reconvene.

However, there are clear signs of progress overall, and here’s what you should know:

• Arkansas is a visible example of the advancements around medical marijuana in the South. The state’s first medical marijuana dispensary opened in May 2019, and sales have steadily increased since. Revenues in the first six weeks of 2020 alone topped $10 million.
• A small medical cannabis market in Louisiana kicked off in August 2019.
• Medical cannabis sales were legalized in Georgia through legislation that was signed into law in April 2019, but it remains unclear as to when that market will actually launch.
• MMJ legalization also is making headway in Alabama, Mississippi and South Carolina.
• Florida, which has about a half-billion-dollar-a-year market that kicked off in 2016, is the regional leader. A law that went into effect in 2019 repealed a ban on smokable medical marijuana products, providing more market opportunities and a larger profit potential. Some industry watchers said that might help rebalance the Florida MMJ market that one company has largely dominated.

Southern MMJ business opportunities

“All in all, the South is generally making great strides,” said Sally Peebles, partner of Vicente Sederberg’s office in Jacksonville, Florida. Peebles keeps a close eye on the region.

Experts said some southern states could offer cost advantages for cannabis businesses looking to set up shop.

Some of these states are “certainly more affordable” in terms of real estate than many other areas of the country, Peebles noted.

Financial incentives and extra application points also could become available to applicants who locate operations in economic-hardship communities, she added.

Whitt Steineker, co-chair of the Birmingham, Alabama-based Bradley law firm’s cannabis industry team, said Alabama “would be an attractive place by both the cost of plant (facilities) and the cost of labor.”’

He’s heard interest from local businesses as well as multistate operators that want to include the region in their nationwide footprints.

Steineker also noted some of the state’s hemp growers are acquiring real estate and making capital investments in equipment that could enable them to set themselves up as attractive medical cannabis applicants.

Experts advise caution

But medical marijuana businesses should remain cautious not to jump the gun.

“If people really want to get into the South, I would wait and see” whether states pass measures and licensing is determined, Peebles said.

For example, if a state requires vertically integrated operations, marijuana entrepreneurs would find that market more expensive to enter.

Or take Mississippi, where a business-friendly initiative with no license caps made the November 2020 ballot.

But the state’s Legislature countered and voted to place a more restrictive measure on the ballot to compete with the pro-business one.

“I was very excited about Mississippi but now very disappointed with the Legislature,” Peebles said.

Jamie Grantham, communications director for the Medical Marijuana 2020 Campaign, which leads Mississippi’s business-friendly measure, couldn’t agree more.

“The whole intent behind the (legislative) alternative on the ballot is to confuse voters,” Grantham said in a recent interview.

Grantham accuses the Legislature of “playing political games” with Mississippians who need medical cannabis to relieve chronic pain and treat other conditions.

She said the campaign backing the voter initiative doesn’t have a lot of money, but its mission over the next seven months will involve trying to persuade voters that a free market is the best approach.

Where some areas of the south stand on MMJ

Here is a roundup of the current medical marijuana legislative activity in the southern U.S., including more detail on the competing ballot initiatives in Mississippi:

Alabama: A state Senate committee advanced a bill that would create a limited medical marijuana program with 34 dispensaries licensed statewide. It’s uncertain whether the state House will pass the bill, and the Legislature currently is suspended because of the coronavirus pandemic.

Arkansas: The state last year licensed 32 dispensaries, but only 17 had opened their doors as of early February. Regulators, frustrated with delays, awarded a 33rd license to the next-highest-ranking applicant in the Pine Bluff region to meet demand. That triggered a lawsuit and a temporary halt to issuing additional MMJ licenses. But a judge recently sided with the state on the issue. The Marijuana Business Factbook projects Arkansas will hit $105 million in MMJ sales this year.

Florida: The state has become one of the most robust medical cannabis markets in the country, with close to 330,000 qualified patients and 234 dispensaries as of March 27. Sales have boomed since smokable products were allowed last year. The Marijuana Business Factbook estimates that 2019 sales totaled $450 million-$550 million.

Georgia: Lawmakers last year passed a limited medical marijuana program, and a commission was formed to develop rules. It’s uncertain when sales will begin. Only six producer/processor licenses are available, and pharmacies rather than independent dispensaries are expected to sell the products, which must adhere to a 5% THC potency limit. In addition, flower, edibles and vaping are banned.

Louisiana: The state’s long-awaited medical cannabis market launched last August, with THC- and CBD-rich liquid tinctures sold at nine dispensaries across the state. Smokable flower and vape products are not permitted. A second cultivator is expected to come online soon. The market was constrained because of limited products and high prices. The Marijuana Business Factbook estimated 2019 sales at only $1 million-$1.5 million.

Mississippi: Voters will see two initiatives on the ballot in November: A business-friendly MMJ initiative that would prohibit the state from capping the number of licenses and a much more restrictive measure put forth by the state Legislature. The wording of the state Legislature’s proposed constitutional amendment is vague, but the initiative appears to call for limited products and licenses, with “treatment” overseen by doctors, nurses and pharmacists.

Grantham of the Medical Marijuana 2020 Campaign described the citizen initiative as having a “free-market approach” but emphasized the group “took the best parts of all the programs (around the country).” She said that when she speaks to groups about the measure, she usually has several people come up afterward who express interest in the program, including applying for licenses.

South Carolina: Lawmakers have discussed medical marijuana legalization, but it’s unclear whether a measure that’s been introduced – the South Carolina Compassionate Care Act – will advance this year. The bill would set up a commercial market with a 6% retail sales tax but prohibit smokable products and inhalation. Legislative proceedings have halted because of coronavirus, and only pressing issues will likely see consideration when the legislature reconvenes.

Jeff Smith can be reached at [email protected]