Pakalolo profits have yet to light up in Hawaii

Two years after Hawaii’s first medical marijuana dispensary opened on Maui, the legal pot industry has yet to achieve profitability.

Since the start of the year, gross sales have been growing, with $2.3 million in statewide sales and 293 pounds of cannabis sold in July, up from $1.6 million and 203 pounds in January, according to new statistics from the state Health Department.

But the dispensaries are still waiting for a return on their investment.

For Maui Grown Therapies, the state’s first dispensary, which opened in August 2017 at 44 Paa St. in Kahului, gross revenue grew by 84% over the past two years, and the number of active patients increased 180%, the company said.

Maui Grown has invested $17 million since its inception, with startup costs including construction of an off-the-grid production facility that uses solar energy and an independent water system separate from the county’s.

“I don’t believe any of the licensees are profitable at this time,” said Maui Grown spokeswoman Teri Gorman. “It’s a new sector. We’re still experiencing operating losses. We were the first to begin, and it’s taken a long time for this program to get off the ground.”

There are now a dozen pot shops statewide run by eight licensees: five on Oahu, one on Kauai, two on Maui and four on Hawaii island. Maui’s other dispensary, Pono Life Maui, opened at 415 Dairy Road in Kahului in September 2017.

Because of the small number of dispensaries, the Health Department did not provide a breakdown of sales figures by county, for proprietary reasons.

Many of the dispensary operators started in the hole after significant delays. It took Maui Grown more than a year to open after the state allowed the legal sale of cannabis. Dispensaries weren’t able to sell pakalolo until the Health Department certified an independent laboratory to test the potency and purity of the drugs. There also were delays with the department’s installation of a “seed-to-sale” tracking system, which prevented licensees from beginning operations.

“We were already incurring operating losses during that time. It took quite a while before we had a lab fully certified to test the concentrate, so for months we were only able to sell flower,” Gorman said. “The business is not as robust as people might think. It was a sluggish start.”

Hawaiian Ethos, the last of the eight licensees selected by the state in 2016, finally opened in June on Hawaii island. It’s delayed opening was partially due to the lengthy regulatory and permitting process and the building of production and retail facilities, said spokeswoman Kea Keolanui.

Lack of public awareness

The growth of the medical marijuana industry in Hawaii is challenged by the lack of public awareness of the legal market following years of patients and caregivers growing their own plants or purchasing weed on the black market.

Hawaii legalized medicinal marijuana in 2000, but patients had no legal way to obtain the federally outlawed drug. Significant obstacles for the fledgling industry include a state law prohibiting dispensaries from advertising and the fact that Hawaii patients are banned from traveling between islands with their medication.

“The restrictions placed on our industry in relation to advertising and marketing is a significant challenge to reaching our available market,” Keolanui said.

Gorman said she still meets Maui residents who are unaware there are medical dispensaries on island.

“It’s really been an impediment for us to build awareness,” she said. “We’re really fortunate that we have word-of-mouth referrals that’s really driving people to come in. The coconut wireless is still the best social media program out there.”

The statewide market has steadily grown to 26,763 patients as of July 31, from 18,619 in August 2017 when sales began on Maui. Maui accounts for a little more than 20% of the total, with 5,575 patients as of July. Oahu has 11,414 patients; Hawaii island, 7,743; and Kauai, 2,029.

“We’re on track with regard to our internal business plan in terms of us growing market share and where we need to be with regards to product assortment, but now we’d love to see more patients come into the program,” Gorman said. “The more patients come into the program, the more people can share the overhead, so to speak, and that will bring the prices down.”

The retail experience

Only state-certified marijuana patients can enter Maui Grown Therapies’ retail shop in Kahului, which has the look and feel of a medical spa. Patients first enter a waiting room where they must submit a photo ID along with their state-issued marijuana cards to a security guard and patient relations coordinator behind bullet-resistant glass.

Once verified, patients are admitted to a spacious education lounge where they can view the menu of the day on a large video monitor as well as browse shelves of books and publications about alternative and conventional medicine. A patient education specialist is available for scheduled or walk-in meetings. Every Friday the dispensary provides snacks including finger sandwiches, fruit, drinks and chocolates in the lounge.

Another door leads to an ocean-colored salesroom where potted house plants provide green accents. Products including flowers, tinctures and oils are kept behind glass cases at three sales stations. Workers in teal and green polo shirts explain the day’s product choices and help patients choose the right strain or derivative for their condition.

Tie-dye shirts, devices for administering the medical marijuana and books also are available for purchase.

Products are delivered daily from a grow facility in Kula. Labeled and tagged cannabis is loaded into an unmarked vehicle that takes varying routes to the retail shop. Upon arrival, dispensary workers unseal the containers, confirm the contents and enter the inventory into the state’s tracking system.

Among the product offerings are dried flower, oil-based and honey tinctures, capsules and topical serums. Prices range from $24 to $150.

Haiku resident Katherine “Hoku” Volkmann, who began using medical pot in April to relieve joint pain, is hopeful the program will be expanded so that patients have more options.

“We need to have natural alternatives for our health care, at least have options that aren’t having all the bad side effects and the challenges with interactions,” she said.

“I just see for, like, my mom, people getting older, it’s like they give them so many drugs. If they could just make them comfortable and easy with a natural substance, it would be so much better. But there’s still a lot of stigma on it. People older than me have a lot of judgment on it and don’t look at it as medicine.”

Brent Norris, chairman of the Hawaii Patients Union, which represents about 500 medical marijuana users, said affordability is also a big impediment to growing the market.

“Patients I talk to are still relying on neighbors and friends … because they can’t afford it,” he said. “These are very old economic systems that have been operating for decades.”

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FOR MORE INFO

>> Maui Grown Therapies: Call 866-7576, email info@mauigrowntherapies.com or visit mauigrown.com

>> Pono Life Maui: Call 489-9454, email info@ponolifemaui.com or visit ponolifemaui.com

>> State Department of Health Medical Cannabis Program: health.hawaii.gov/medicalcannabis