Governor Tim Waltz is anticipated to sign a comprehensive, 320-page measure legalizing marijuana in the state, making it the 23rd state in the US to do so. The Office of Cannabis Management website is live, so things are rushing in the state. What, then, is contained in the law’s language? What might we anticipate as Minnesota joins the market for adult-use products?
This blog explores Minnesota’s regulatory & economic landscape and everything you can expect from the legal cannabis program. For assistance with creating a business plan to set your business up for success in Minnesota click here.
What has the landscape of cannabis looked like in the past decade?
The legal landscape for cannabis in Minnesota has undergone significant changes over the past decade. In 2014, the state passed a medical marijuana law allowing patients with qualifying conditions to access cannabis products. However, the law is strict, and only a few dispensaries can operate in the state. Additionally, patients are not allowed to smoke cannabis, and only non-smokable forms, such as oils, pills, and vaporizers, are available.
More recently, there has been a push for recreational legalization in Minnesota. 2019 the legislature introduced a bill to legalize cannabis for adult use. While the bill did not pass, it sparked a renewed conversation about the potential benefits and challenges of legalizing recreational cannabis in the state. As of now, recreational use is still illegal in Minnesota.
Establishing Minnesota’s Office of Cannabis Management:
The Office of Cannabis Management (OCM) in Minnesota will technically be launched on July 1st of this year. However, it has already been hard at work developing its internet presence. The adult-use program, as well as the state’s medicinal cannabis and hemp programs, will all be governed under the OCM’s regulatory framework.
Metrc presently provides the state’s medical program, and we hope it will continue to do so. However, it will take the OCM between 12 and 18 months to effectively build its infrastructure to offer good consumer, health, and safety regulations. The law’s language also specifies the formation of a cannabis advisory board, the need for detailed studies and reports on the effects of legalization, and the establishment of a track-and-trace mechanism.
Market Potential and economic impact of Minnesota’s cannabis legalization
Despite the legal restrictions, the Minnesota cannabis industry is a significant market with enormous growth potential. In 2020, the state’s medical cannabis program generated over $100 million in sales, and the number of patients enrolled in the program has steadily increased. If recreational use were legalized, the market could be worth up to $1.3 billion annually and create thousands of jobs.
The economic impact of the cannabis industry goes beyond sales and job creation. Legalization could also generate significant tax revenue for the state, which could be used to fund education, healthcare, and other public services. Additionally, legalizing cannabis could help reduce racial disparities in the criminal justice system and alleviate the burden on law enforcement.
Challenges facing entrepreneurs entering the cannabis industry in Minnesota
While the potential rewards of entering the cannabis industry in Minnesota are significant, the barriers to entry are also high. The state has strict regulations on producing, distributing, and selling cannabis products; obtaining licenses can be lengthy and expensive. Additionally, the industry is highly competitive, and entrepreneurs must be prepared to navigate a complex and rapidly evolving market.
One of the biggest challenges facing entrepreneurs in the cannabis industry is access to capital. Due to legal uncertainty and potential risks, traditional banks and investors often hesitate to invest in the sector. This has led to many alternative financing options, such as private equity firms and crowdfunding platforms catering to cannabis businesses.
Another challenge is navigating the complex regulatory landscape. Cannabis businesses must comply with various regulations, from packaging and labeling to testing and quality control. Failure to do so can result in significant fines or even the loss of a license. Additionally, the legal status of cannabis at the federal level creates additional uncertainty and risk for entrepreneurs in the industry.
Opportunities for Innovation and Growth in Minnesota’s cannabis industry
Despite the challenges, there are also significant opportunities for innovation and growth in Minnesota’s cannabis industry. As the market continues to evolve, entrepreneurs have the chance to develop new and innovative products and services that meet the needs of consumers.
One potential growth area is developing cannabis-infused products such as edibles, beverages, and topicals. These products offer a discreet and convenient way for consumers to access the benefits of cannabis without smoking. Additionally, there is growing interest in using cannabis for medicinal purposes, such as pain relief and anxiety reduction, which could create opportunities for businesses focused on developing cannabis-based therapies.
Another potential growth area is developing new technology and equipment for the cannabis industry. As the industry becomes more mainstream, there is a growing need for tools and systems to help businesses operate more efficiently and effectively. This could create opportunities for entrepreneurs with software development, logistics, and supply chain management expertise.
Consumer Trends and Behavior in the Minnesota cannabis market
Understanding consumer trends and behavior is essential for entrepreneurs looking to enter the cannabis industry in Minnesota. While the market is still relatively new, there are some emerging trends that businesses should be aware of.
One trend is a growing interest in products high in CBD, a non-psychoactive compound found in cannabis. CBD has been shown to have a range of potential health benefits, including reducing anxiety and inflammation. This has led to many products, such as CBD oils, tinctures, and lotions.
Another trend is a growing interest in sustainable and eco-friendly products. As consumers become more aware of the environmental impact of their purchasing decisions, they are increasingly seeking out products produced using sustainable practices and materials. This could create opportunities for businesses focused on developing environmentally friendly cannabis products and packaging.
Marketing and branding strategies for cannabis businesses in Minnesota
Marketing and branding are essential for any business, but they can be particularly challenging in the cannabis industry. Due to the legal restrictions, cannabis businesses cannot advertise and promote their products. Additionally, the industry is highly regulated, and companies must carefully comply with all relevant regulations.
One strategy that has been successful for some cannabis businesses is to focus on education and advocacy. By providing consumers with information about the benefits and risks of cannabis, companies can build trust and establish themselves as experts in the industry. Additionally, by advocating for the legalization of cannabis, businesses can position themselves as thought leaders and advocates for change.
Another strategy is to focus on building a solid brand identity. By developing a distinctive brand image and message, businesses can differentiate themselves from their competitors and create a loyal customer base. However, companies must carefully ensure their branding and marketing efforts comply with all relevant regulations.
Legal and regulatory considerations for Minnesota’s cannabis industry
As with any highly regulated industry, understanding the legal and regulatory landscape is essential for entrepreneurs in the cannabis industry. In Minnesota, cannabis businesses must comply with various regulations, from production and distribution to packaging and labeling.
One of the most significant legal considerations for cannabis businesses is the risk of federal enforcement. While cannabis is legal for medical use in Minnesota, it is still illegal at the federal level. This creates significant legal and financial risks for businesses operating in the industry. Additionally, companies must be careful to comply with all relevant state and local regulations, such as zoning laws and licensing requirements.
Another legal consideration is the risk of lawsuits and other legal disputes. Businesses must clearly understand their legal rights and obligations and be prepared to defend themselves in court if necessary. As the industry becomes more competitive, there is a growing risk of litigation over intellectual property, product liability, and contract disputes.
What will be the cannabis possession limits?
Any person 21 years or older may possess or carry up to two ounces of marijuana flower in public, up to two pounds in their private houses, and up to eight plants (four mature ones) in their home. Indoor and outdoor home cultivation is legal, but it needs to be done in a private, sealed area away from the public eye. Additionally, people can possess edible goods containing up to 800 milligrams of THC and up to eight grams of cannabis concentrate. These rules will take effect on August 1st.
What will be the Minnesota cannabis program’s tax structure and fees?
Cannabis goods will be subject to a 10% tax rate, with no taxes levied for medical use. The Minnesota Department of Revenue will keep this rate the same for four years. Retail sales would also be subject to state and municipal taxes. However, local governments cannot impose a separate sales tax on cannabis items. A cannabis farmer must pay an application price of $10,000, an initial licensing charge of $20,000, and a renewal fee of $30,000, depending on the type of license they hold. The $10,000 application and license charge is followed by the $20,000 renewal fee for manufacturers. A microbusiness would only have to pay a $500 application charge and $2,000 to renew, compared to retailers who must pay $2,500 for the license fee and $5,000 for renewal.
How much revenue is anticipated to come from the program?
According to the Minnesota Department of Income, adult-use sales are expected to bring in $107 million in annual taxable income for the state and $21.5 million for local governments. The Department predicts that between 2024 and 2027, state and municipal governments might receive more than $300 million in tax income. This tax money will go to state organizations regulating the cannabis business, law enforcement activities, and legislative grants.
Grants & priority for social equity applicants in the application process:
Within the Office of Cannabis Management, there will be a Division of Social Equity, and candidates who identify as having social equity will not only be eligible for special legislative funding but also have priority in the application process.
The social equity applicant criteria include some clauses that we have previously seen in other states, such as those who have been found guilty of selling or possessing cannabis, the family members of those found guilty of these cannabis-related offenses, and citizens of communities that have been disproportionately affected by cannabis prohibition. However, growers from underrepresented areas and veterans or active military personnel who lost their honor owing to a crime involving the use or sale of cannabis are also considered in the social equity requirements.
Resources for Entrepreneurs in Minnesota’s cannabis industry
For entrepreneurs looking to enter the cannabis industry in Minnesota, a range of resources are available to help them navigate the legal and regulatory landscape. These include industry associations, legal and accounting firms with expertise in the cannabis industry, and business incubators and accelerators focused explicitly on cannabis businesses.
Additionally, online resources are available, including blogs, podcasts, and forums, where entrepreneurs can connect with other cannabis business owners and industry experts. This can be a valuable source of information and support for entrepreneurs looking to enter the industry.
Conclusion and future outlook for Minnesota’s cannabis industry
Minnesota’s cannabis industry is a dynamic and rapidly evolving market with enormous growth potential. The industry presents a unique opportunity for entrepreneurs to enter a new and exciting market. However, navigating the legal and regulatory landscape can be challenging.
For consumers, the legal cannabis market offers a range of benefits, including access to safe and regulated products, tax revenue for the state, and potential health benefits. However, with the industry still in its early stages, there are risks and uncertainties to consider.
Overall, the future of Minnesota’s cannabis industry looks bright. As the market continues to evolve, entrepreneurs and consumers must stay informed and adapt to an ever-changing landscape. By working together, we can build a thriving and sustainable cannabis industry that benefits everyone.
How we can help?
At Cannabis License Experts, we provide you with the guidance to plan your cannabis business, acquire funding, navigate the legal requirements, and acquire the appropriate cannabis license for your operations. As the United States and Minnesota specifically develop, more and more licensed microbusinesses will be needed to meet the demands of consumers.
Cannabis License Experts offers support from day one of starting your cannabis business, including strategic planning, floor plan preparation, site audits, SOPs, Preventive Control Plans (PCPs), and more.
Our Edibles Compliance division can provide you with a solid plan for your edibles business to help get your products on store shelves.
Contact us today to discover how we can license and legalize your cannabis business to meet federal or provincial regulations.