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Converting from Medical to Recreational in the Retail Cannabis Space

By January 11, 2017Articles
Converting from Medical to Recreational in the Retail Cannabis Space- Island Stage Magazine


Oregon officially launched its OLCC-regulated recreational cannabis program last fall, and while some Oregon Liquor Control Commission (OLCC) licensees are new businesses, many have converted from the medical program. With most states enacting medical programs for years before adult use was legalized, this process of medical licensees becoming recreational licensees will soon repeat as other states bring recreational programs online.

At Pure Green, my dispensary in Portland, Oregon, we activated our OLCC recreational license last December. The process was smooth at times, and bumpy at others. But now that we are through the looking-glass, here are some tips for those for those of you converting your business from medical to recreational.

Be Prepared

I know this may sound obvious, but it is incredibly important to be prepared, beginning with the application process. While Oregon allows medical businesses to convert to recreational licenses, these businesses must first undertake the same application process as any new business. This will be true in most other jurisdictions.

Start by familiarizing yourself with the application process. Make certain that you meet all qualifications and requirements, and that you can provide all documentation in a timely manner. It helps to assign someone to be responsible for the application. This person can make sure everything is done correctly and on time. Even if your attorney is handling most of the application, I recommend assigning someone internally to supervise the process.

Once you have dealt with the application, there are two more sets of rules for you to study around transitioning from medical to recreational, and rules for operating in the recreational system. We’ll begin with the latter.

I recommend doing a full assessment of your operations to determine what will need to change in order to comply with the new regulations. Consult your attorneys, your in-house compliance staff or anyone else who advises you on compliance matters. Next, make a plan to implement any needed changes. Make sure you assign someone to be accountable for each item on your list.

Then, peruse the rules related to the transition process. Can you transfer medical inventory to the recreational system? Are there limits on what kind or how much? Do you get to choose when you surrender your medical license and activate the rec permit or must you follow a set schedule?

Each jurisdiction will have different requirements here. For example, Oregon allowed us to convert some medical inventory, but only certain items and only if we followed very specific procedures.

I would also suggest talking to others who have been through the process already, if this is an option. Reading the rules is both helpful and necessary, but you can always learn a great deal from talking to people who have actually completed the conversion process.

Expect the Unexpected

Once you have completed your preparation, execute your plan. If you have prepared adequately, you shouldn’t have too many surprises, but there are bound to be a few. You need to anticipate issues around the “known unknowns,” which are the things you already realize that you don’t know. But be ready for a few “unknown unknowns,” the issues you never in a million years would have expected.

Bracing for the “unknown unknowns” can be challenging. How do you prepare for something that you can’t anticipate? You cannot prepare for these specific problems, but you can take a few steps to mitigate the damage that they can cause.

For starters, leave yourself extra time. If you have to do some data entry to convert your inventory from medical to rec., leave yourself a few extra hours. Even if you don’t wind up needing it for that project, you’ll find another use for that time.

You can also leave yourself some flexibility around staffing. Put employees on call during the transition process and immediately afterward. That way you don’t pay employees to sit around doing nothing, but you have extra help available if you really need it.

At Pure Green, our daily sales are up about 30% since we switched to the recreational system. But we converted in mid-December, just before we typically see a holiday sales spike. Since sales typically slow down a bit in January, we don’t really know how much of the change in sales is temporary (due to the holiday season) or more permanent (due to our conversion to rec.). Rather than change our entire schedule prematurely, we have staff on call, especially for days we expect to be a little extra busy.

Seed-to-Sale Tracking

All jurisdictions where cannabis is legal have some regulations for tracking products. In Oregon, the medical and recreational programs use very different tracking systems. On the medical side, businesses self-report, subject to auditing and enforcement. Recreational licensees must use METRC, the state cannabis traceability software, which tracks every product from the time it is a seed or clone until it reaches the end-user.

Implementing METRC was by far the biggest challenge in activating our recreational license. It’s not that METRC itself was so hard to use, although there’s a bit of a learning curve; the challenge came from the fact that we were accustomed to adjusting our inventory freely with no real consequences. If the computer said we had 100 grams but we only found 90, we could adjust the computer and move on.

With METRC, it’s a bit more complicated. It’s not so much the process of making the adjustments. Rather, it’s the fact that now someone is watching and too many adjustments can lead to us getting audited and inspected. The stakes feel a bit higher.

All I can tell you about seed-to-sale—and this advice holds for many of the other issues that you will face—is to stay calm. This is an agricultural commodity, which means it changes weight regularly. This is also retail, where products reappear and disappear with alarming frequency.

The people running these programs, for the most part, understand this. Utilize customer support as often as you need to. Within the first week of using METRC, three different people at their support desk knew me by first name. Make sure to document any contact with customer support. That way if you have any compliance issues, you can show that you have been working on them.

The transition from medical to recreational is yet another step on the pathway toward the full legalization and normalization of cannabis.

It can be challenging, even grueling at times. But if you prepare thoroughly and leave yourself a margin of error, you can make the transition seamlessly and continue to move your business forward.

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