Local hemp producers, sellers eye budding ‘Vermont brand’ recreational cannabis market

By Cherise Madigan
©2020 Telegraph Publishing LLC

Although Vermont’s recreational cannabis market will not open until 2022, the budding CBD industry may be poised to pave the way for new and expanding businesses in the region.

While questions remain as to the size of Vermont’s future cannabis industry and the scope of its economic impact, existing CBD growers, processors and retailers are optimistic that a “craft cannabis” marketplace awaits, one that emphasizes “local.”

The state’s CBD market is thriving. CBD  — cannabidiol — is the non-psychoactive ingredient in cannabis derived from hemp and marijuana plants that, according Harvard Health Publishers, can treat conditions such as pain, insomnia, childhood seizures and anxiety, among others.   It can be used orally in food and drink or as rubs and salves.

Meanwhile the state legislature is working toward a freer recreational cannabis marketplace. Currently, a single adult can possess 1 ounce of marijuana and two mature plants and four immature ones. And the state is opening it up to larger growers and processors.

For towns, however, the state legislation is prompting discussions surrounding retail operations and tax revenue — decisions that will likely rest in the hands of voters, and may shape the regional landscape for a cannabis market.

Local landscape remains hazy

Towns will receive no revenue from the 14-percent “cannabis excise tax” and the 6 percent sales and use tax, according to the cannabis legislation passed into law this past October (S.54, Act 164). A 1-percent option tax, which only 16 Vermont towns currently have — including Winhall, Stratton and Manchester — is the only mechanism for local revenue, with a 70/30 split between town and state.

While local voters will be able to decide whether retail establishments will be allowed in their communities by “opting in” at Town Meeting or in special sessions, towns will have no control over whether growers, manufacturers or other related businesses will be permitted.

Additionally, if a town does opt into a retail market, the law only grants them control over signage, nuisance ordinances and some zoning provisions relating to cannabis, which they already have a right to, according to the Vermont League of Cities and Towns. Individual towns will not have the right to adopt local ordinances that “regulate the time, place, and manner of cannabis operations as part of local licenses and permits.”

At their March 2020 Town Meeting, Londonderry voters struck down — 75 to 44 — an article that would allow an option tax, but simultaneously signaled their openness to the recreational cannabis industry. Then, at its Nov. 2 meeting, the town’s Select Board agreed to revisit both issues now that recreational cannabis has been legalized in Vermont.

“If down the road there were to be a retail operation in town, we would not be able to participate in any tax revenue from that because we do not have a local option tax,” said Londonderry Select Board Chair George Mora. “I think it makes sense for the town to revisit that.”

In Chester, Select Board Chair Arne Jonynas hopes to evaluate how residents feel about retail cannabis at the March 2021 Town Meeting, adding that he has received little feedback from community members so far. Like Londonderry, Chester does not have a local option tax that would allow the town to receive revenue.

“It’s going to be regulated by the state and, in their infinite wisdom, they’re going to be keeping all the tax revenue … unless you have that local option tax,” Jonynas said. “I think it would have been the perfect time for the towns to reap some of the benefits of legalizing marijuana, but I don’t see that happening.”

A budding CBD market: Will cannabis follow suit?

Following adoption of the U.S. 2018 Farm Bill, which allows for the sale of cannabidiol, a handful of hemp growers sprung up in Southern Vermont. Since then, products infused by CBD have also appeared at retail operations throughout the region, from gas stations to specialty stores.

Now that the sale of recreational cannabis has been legalized, many of the region’s CBD retailers, growers, and processors hope to see a similar trajectory.

“We certainly have a vibrant hemp community here in Southern Vermont,” said Carl Christianson, a Ph.D. in Natural Product Chemistry and co-founder of Northeast Processing, a Brattleboro company that does analytical testing, extraction and complex product formulation for CBD businesses both locally and nationally. “I expect a lot of people working with hemp to transition into the recreational space and create products and businesses in the cannabis industry.”

One of those businesses is Taylor Farm Hemp Co., which grows and processes CBD products for retail sale throughout the region and at its farmstand in Londonderry. Going forward, co-owner Mollie Wright hopes to enter the cannabis market as well.

“We’re starting up a good customer base here and I think that we could … flow into that market eventually as well,” Wright says. “The locals we sell to appreciate that it’s grown right here.”

Scott Blair, co-owner of Chester’s Southern Pie Cafe, has encountered a similarly positive reception to his retail CBD offerings, saying that local interest in the industry has been substantial since Southern Pie began selling such products in 2018.

“You’d be surprised by how many people in Chester are into the industry already,” he said, adding that he regularly receives questions regarding when cannabis will be sold in Vermont stores, how it can be grown and what the laws surrounding both CBD and cannabis are. The majority of his customers, Blair says, are 55 and older.

The disconnect between state and federal law regarding recreational cannabis will likely be a challenge for new businesses, however, alongside other regulatory challenges, says Bob Flint, executive director of the  Springfield Regional Development Corp.

“Not every product has the regulatory challenges that CBD and cannabis do,” says Flint, describing the industry as a sort of “wild west” that’s still “shaking out.”

“Usually a product is legal everywhere, and is treated the same way by all of the different entities that touch it. That isn’t the case here,” he adds.

Bob Flint. Telegraph file photo.

‘Not every product has the regulatory challenges that CBD and cannabis do. … Usually a product is legal everywhere,
and is treated the same way by all
of the different entities that touch
it. That isn’t the case here.’

Bob Flint
Springfield Regional
Development Corp.

 

Though Flint argues that it’s still too early to know what Vermont’s cannabis industry will look like, some limited economic impacts of the recreational cannabis market — primarily short-term gains in employment — will likely be seen ahead of its projected opening.

“We’ve been working closely with a lot of the hemp folks,” says Brattleboro Development Credit Corp. Director Adam Grinold. “As they step into the legalized marijuana space, they may start to make investments in the next months or years ahead that could result in more employment.”

‘Brand Vermont’ eyed for recreational cannabis

Once recreational cannabis businesses begin operating in Vermont, Christianson and other CBD businesses anticipate a locally focused industry compared to the more corporate cannabis landscapes found in other legal states.

“Look at the different craft beer and cheese producers in Vermont— people are winning awards nationally for the quality of the goods that they’re producing locally,” Christianson says. “I think that cannabis will be the same.”

“There are people who thought that Vermont had a chance, and maybe still does, to have a niche in a larger national and global market using the Vermont brand, ” Flint agrees.

Blair says he has already seen excitement for Vermont-grown cannabis products among visitors to the Southern Pie Cafe. Once the recreational market opens up, Blair anticipates that local products will be a big draw for tourists.

“I’m hoping that this stays small, with local growers and farmers who are able to benefit from the industry but also produce high-quality, small-batch products,” Blair says. “Just like the craft beer industry in Vermont.”

“In a lot of other states, corporations push out the smaller businesses,” Wright says. “If we could keep our local vibe here that would be great.”

Emphasizing Vermont producers, Christianson says, could be particularly beneficial to the southern portion of the state.

“Any new agricultural market is a really good thing for Vermont, and in particular Southern Vermont,” he adds. “Where Burlington has really grown over the years and has a much larger economic center in that area, in Southern Vermont we really are still a strong farming community. I think that this provides a great opportunity.”

“Small farms, micro-growers… if you want to help the people in the state, that’s the way to do it,” Jonynas says. “From the bottom up.”