ANCHORAGE, Alaska (KTUU) – Alaska’s marijuana industry is booming more than seven years after legalization. But, according to industry experts, federally legalized marijuana could put local pot growers, manufacturers and shops out of business.
This week, Alaska’s News Source examines the impact of the marijuana industry in Alaska since legalization, and reports on who benefits from taxes, threats from outside, growing concerns about the number of retail stores and the fairness of prison sentences and convictions of legal versus illegal pot.
“There are challenges. There are things we need to prepare for and there are fundamental issues that I think we need to address now,” said Jana Weltzin, an Anchorage marijuana attorney.
Weltzin says local mom and pop stores are at risk if large Lower 48 corporate marijuana businesses are allowed to open in Alaska under federal marijuana legalization.
“Unless we do something now to protect licenses, give them value, and protect our state’s industry, you’re probably going to see at least 60% of them disappear,” Weltzin said. “Because you have to think, if we don’t, then we’re just letting the competitors waltz here, like we’ve done with any other industry. It will destroy small businesses.
Currently, there are no limits on the licenses that can be granted by the state and the requirement to be locally owned would no longer come into play if pot were legalized nationwide.
“If we do nothing and the residency restriction goes away – we have an unlimited licensing system – what’s to stop these huge Canadian IPO companies coming in, setting up shop right next to your local marijuana pot store and undermining for 10 years, operating at a loss because they can and driving you out of business,” Weltzin said. “There’s no reason why they shouldn’t.”
Enlighten Alaska co-owner Evan Levinton said he doesn’t want additional competition from big business.
“I want this to not happen very quickly,” Levinton said. “I want us to be really established so that we can actually be like a kind of craft business in town versus a Costco producer coming in and taking over and buying big warehouses.”
Marijuana became legal in Alaska after voters approved a ballot initiative in 2014 that fully legalized marijuana as of February 2015. Alaska was the third state to legalize the drug after Colorado and Washington. In 1975, the Alaska Supreme Court ruled in Ravin v. State that the right to possess, grow, and consume small amounts of marijuana in the home was protected by the state constitution’s right to privacy.
It is a complex, young and constantly evolving industry.
Most industry insiders agree that vertical integration is one of the keys to business success. An example of vertical integration is Enlighten Alaska, which grows, manufactures and sells its own marijuana.
“It’s really unique in this industry,” said Winston Montecillo, with Enlighten Alaska. “So we grow our own product, we extract it into oils, we make other products with them – like cookies, capsules, tincture – and we sell them all here.”
Since legalization began, there have been complaints about the tax structure, store locations, number of licenses issued, and the consumer’s habit of buying marijuana with the highest concentration of THC compared to to the quality of the plant. THC is what gives someone a “high”.
Lacy Wilcox, president of the Alaska Marijuana Industry Association, says there is a need for an education campaign that teaches consumers what makes a good quality product in relation to the impacts of THC. She compared the goal of finding the highest THC to finding a drink with the most alcohol.
“It’s not like you walked into a bar and ordered Everclear,” Wilcox said. “You walk into a bar and order a good wine or a good beer. Sure, IPA hunters may be looking for the highest alcohol content per IPA, but they always look at the flavor profile of what they’re drinking.
She said this trend hurts local growers and means good quality marijuana is left on the cutting room floor.
There is also the question of the number of retail stores, especially in Anchorage. In parts of downtown Anchorage, marijuana stores are stacked next to each other.
“I think what we are going to see, some businesses will close. You can’t imagine them holding each other together when there are so many of them, crammed together,” Wilcox said.
According to reports from Politico, Alaska has more retail stores per capita than any of the other Western states with recreational sales.
“Saturation is definitely on everyone’s mind,” Wilcox said. “There are a lot of products out there. There are many retailers. The price drops, which makes people a little nervous at the wholesale level. There’s a lot of talk about taxes and I think that’s something we need to understand before we can really have a healthy, sustainable, sustainable industry.
Taxes are collected at the crop level at $50 per ounce or $800 per pound.
The funds are supposed to be split between the state’s general fund, recidivism reduction programs, and drug treatment and marijuana education programs.
In 2020 alone, more than $24 million was collected in taxes from the industry, according to the Office of Alcohol and Marijuana Control.
Alaska earns millions in marijuana taxes. And, almost every year, these revenues have increased. Taxes collected rose from $10.8 million in fiscal year 2018 to $24.2 million in fiscal year 2020, according to the Office of Alcohol and Marijuana Control.
When marijuana became legal here, there was a rush to set up shops and grow ops. But, in the end, people who were passionate about pot but lacked business skills couldn’t survive the rush.
Levinton, whose store is one of the first, says it’s a tough industry to join. He also predicts consumer trends will shift from smoking and vaping to edibles.
“Very, very tough,” Levinton said. “It’s not for the faint of heart.”
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