Revenue from retail cannabis sales in Rhode Island off to slow start

PROVIDENCE, R.I. (WJAR) — The green did not quite come rolling in as expected during the first few months of legalized retail cannabis sales in Rhode Island, but the sales numbers are starting to grow.

Some in the industry point to an unfair advertising advantage for shops across the state line as a reason for a slower than anticipated start.

Analysis of early returns can depend on who you talk to.

“I think it's been the surge kind of people expected. It hasn't been overwhelming, but it's been very steady. But I think the best is still yet to come,” said Joseph Dilley, director of postproduction at Hangar 420 in Warwick.

Hangar 420 is one of dozens of cannabis growers in the state, selling products like marijuana flower and gummies to dispensaries.

“It’s showing returns, and we're very happy about it. But like I said, what we're most happy about is getting our products out to the people who need it,” Hangar 420 owner Octavius Prince said.

Another grower, Jason Calderon at Bonsai Buds, told WJAR that before the Dec. 1 start of retail sales that he expected significant growth.

“It was not what everybody expected it to be. Definitely expected it to be a lot bigger, a lot quicker,"Calderon said.

Ed Dow, who just opened his third Solar Cannabis dispensary in Massachusetts, and first in Rhode Island a few weeks ago, said at the opening of the Warwick location, “I don't think everyone saw the spike in sales they thought they would, but I think it's coming.”

Solar is the seventh hybrid medical-retail shop to open in Rhode Island, and apparently the last for a while, as two others are on hold.

Matt Santacroce, deputy director of Rhode Island’s Department of Business Regulation, who oversees the state's Office of Cannabis Regulation, says of the first few months of retail cannabis sales: “I think it's a good news story. And I think we've got a good thing going here in Rhode Island.”

Here's what the retails sales numbers for the first three months show: $3.4 million during the December launch month, $3.5 million in January, $4.2 million in February.

Compare those numbers to the state's projections last year, which estimated $41 million in retail sales during the first seven months, which would be an average of just under $6 million a month.

“I think that those projections are exactly that, projections. And they were based on everybody's best, sort of estimate, based on the experience of other states,” Santacroce said.

The state gets 17% of cannabis sales in taxes, which was estimated to be about $1 million a month in the projections. While not a huge amount in the grand scheme of things, the state's cut for those first three months has been a few hundred thousand dollars a month less than that.

At that rate, tax proceeds in the 2023 fiscal year would now meet the state's projected first year regulatory start-up costs.

But the March sales numbers, just in, show a big jump, to nearly $5.4 million, which is closer to the expected pace.

“I think that in the long run this is a market with upside on the retail side. How much is not clear at this point,” Santacroce said.

One thing industry folks would like to see to help grow their business is the ability to advertise.

While dispensaries in Massachusetts can put up billboards in Rhode Island, and have done so abundantly, Rhode Island retailers are not allowed to advertise under current state regulations.

“I think fairness is the first and foremost thing we're looking for,” Dilley said.

“While it is certainly logical, and I get it, it just doesn't really pass common sense that we've got Massachusetts cannabis companies advertising here on billboards with Rhode Island companies not able to do that. We find ourselves, unfortunately, with our hands tied a little bit on that front,” Santacroce said.

Rules like that fall under the state's cannabis commission, which does not yet exist, even though the law legalizing cannabis sales signed by Gov. Dan McKee last May called for him to nominate commission members within 40 days.

Now nearly a year later, the governor's office said in a statement that McKee’s selections will be announced when required extensive background checks are complete for all the potential candidates.

Meanwhile, Calderon said sales numbers are growing now, and he expects a big boost with summer tourism season on the horizon.

“It definitely seems way more traction now, and it's definitely coming around to what we thought it was going to be. It just took a little bit more time,” Calderon said.

But Dow also has a word of caution, as he's seen cannabis prices and store revenue drop in Massachusetts. He said it's because the Commonwealth approved way too many dispensaries.

“For now, yes, I think Rhode Island will be a great place for the next couple of years. If you look at what's happened in Massachusetts, it's just saturated right now,” Dow said.

Rhode Island could have up to 24 retail-only dispensaries added to the current mix, but they have to be approved by the cannabis commission, which again, does not yet exist.