Vt.'s Medical Marijuana Dispensaries Corner The Market. The Biggest Wants Competition.

Oct 19, 2017

Vermont's handful of medical marijuana dispensaries have exclusive permission to grow and sell marijuana in the state.  If and when lawmakers legalize non-medical weed, they will likely have a head start on a very profitable industry.

From the outside, Shayne Lynn's 2,800-square-foot building in Milton looks more like an insurance company's headquarters than a marijuana production plant.  Inside, thousands of marijuana plants grow under artificial light. Some are secured behind glass windows, others obscured inside shipping containers.

"We've been here probably roughly two years in this building now," Lynn says as he walks upstairs. "So I would say every month there's something new going on." 

Near a commercial kitchen, people assemble vape pens and place lozenges into packaging. Lynn's 50 employees take cannabis from tiny clones and get it into customers' hands.

That is how lawmakers and officials wanted it. State law allows five dispensaries to grow, process and sell medical marijuana. Each is assigned to a region, and patients have to commit to one dispensary. There is virtually no competition outside of the black market and home growing.

"That would be an oligopoly," explains Sara Solnick, chair of economics at University of Vermont, in response to a description of the current system. An oligopoly is a market controlled by just several businesses.

Marijuana clones grow behind glass in Milton, Vt., at the headquarters of Champlain Valley Dispensary/Southern Vermont Wellness, run by Shayne Lynn.
Credit Emily Corwin / VPR

Lynn has by far the biggest share of the oligopoly. He applied for and received two of the the state's five certificates, and operates dispensaries in populous Burlington and Brattleboro. Five years in, Lynn has an exclusive relationship with about 3,000 people — two-thirds of the state's medical marijuana patients.

In the meantime, demand for medical marijuana is growing. Every two years for the last decade the number of patients in Vermont has about doubled.  

Thanks in part to lawmakers, Lynn has a solid corner on the market many believe is about to explode.

In a 2015 report, the Rand Corporation estimated Vermonters spend about $165 million a year on weed from the black market. That's a third of the value of Vermont's dairy industry and more than half the value of the state's beer industry.

If and when lawmakers legalize recreational marijuana, there will be profits to be made.

"I see it as a huge opportunity," says Matty Kuhnell, a Wolcott vegetable farmer. "I'd probably liquidate up to half my farm to try and make it happen."

Kuhnell is helping with the harvest at at his buddy Kyle Gruter-Curham's hemp farm in Irasburg. Here, the plants grow in rows like small flowering Christmas trees.

Marijuana and hemp come from different varieties of the same plant family, and are similar when it comes to cultivation. Vermont legalized hemp farming in 2013. As of earlier this month, 93 people are registered to grow hemp in the state. These growers could be well positioned to cultivate marijuana as well, should outdoor cultivation of that variety become possible.

Kyle Gruter-Curham, background, and Matty Kuhnell, foreground, at Gruter-Curham's hemp farm in Irasburg.
Credit Emily Corwin / VPR

Gruter-Curham extracts cannabinoids from his hemp plants, and sells it in vape pens and kombucha drinks. The plants take up 6 acres of his 100-acre farm.

Gruter-Curham says if lawmakers allowed it, he could add marijuana to his crops as early as next spring. If lawmakers require cannabis to be grown indoors, he says, "then we can look into investors."

Until and unless lawmakers decide on new cultivation laws, farmers like Gruter-Curham and Kuhnell are stuck in a holding pattern. In the meantime, dispensaries are building infrastructure, capital, clients and inroads at the Statehouse.

Still, these two farmers say they are certain they will grow better weed than the dispensaries.

"They might have a jump on us," says Kuhnell, "but they're gonna be Budweiser and we're gonna be Heady Topper."

One might expect Lynn — who runs the two dispensaries — to be worried about competition from ambitious small farmers. He's the biggest beneficiary of Vermont's state-sanctioned oligopoly, after all.

Instead, Lynn asks of the farmers, "How could we get them in?"

Shayne Lynn is executive director of Champlain Valley Dispensary and Southern Vermont Wellness.
Credit Emily Corwin / VPR

It turns out Lynn's biggest fear isn't losing customers to legal competitors, but rather it's running out of supply and losing customers to the black market. There the market is flexible, business is unregulated and the product is cheaper.

Plus, Lynn says, "It can be a little lonely."

He fears if recreational cannabis is legalized and only dispensaries like his are prepared to sell, Lynn says, the nascent industry could suffer a major setback.

"We couldn't do that on our own," he says. "Hey, if adult usage comes to Vermont, the amount of cannabis that needs to be produced is kinda staggering."

Lynn hopes lawmakers will issue farmers licenses so they can grow medical marijuana now, before recreational legalization. That way, farmers like Gruter-Curham and Kuhnell can get started — and they say they're ready for it.