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AZ Growers Find Niche in Growing Premium Marijuana

By Ryan Andazzo, Associated Press

Arizona Grown Marijuana

(AP) — Inside a nondescript block building near Sky Harbor International Airport in Phoenix, workers pack hundreds of vacuum-sealed glass jars with high-end marijuana. They will sell for a steep premium at medical dispensaries across the state.

Nearby, thousands of marijuana plants are meticulously hand-watered, hand-trimmed, and nurtured in a series of growing rooms.

Grow Sciences’ cultivation business, like a few others in Arizona, has found a niche producing high-end marijuana that sells for about double the price of other products on the market, the AZCentral reported.

The company doesn’t have a dispensary license from the state. Instead, it “rents” one from another company that does. Leasing licenses to grow marijuana allows entrepreneurs to break into the cannabis industry without also having to run a retail dispensary.

The operators of some of these farms say the arrangement allows them to focus on growing high-end marijuana that is in heavy demand. Customers pay top dollar and clear the shelves as soon as the products are in stock at dispensaries.

Grow Sciences launched in 2017 when CEO Mike Cuthriell and COO Matthew Blum decided to move into the Arizona market, taking experience they had in other states to what they describe as an open frontier in Arizona.

“I didn’t think patients were getting clean cannabis here,” Blum said, adding that many Arizona marijuana dispensaries focused on growing large quantities of marijuana, rather than quality. “There was a race to the bottom.”

And Arizona offered a good opportunity unlike other states, such as Colorado, where thousands of operators flooded the market.

“Arizona insulated themselves from that,” Blum said.

Because marijuana is illegal federally, all of the plant that is sold in a legalized state must be grown there and not transported across state lines.

For now, Arizona has issued just 130 licenses for dispensaries.

The licensing system for medical marijuana, and soon-to-be recreational marijuana, is extra lucrative for those who get them. That’s because in Arizona they can vertically integrate, meaning they are licensed to grow marijuana, sell it wholesale to other dispensaries and retail it themselves.

Still, some license holders have found it profitable to lease the growing rights from their license to specialty farmers for tens of thousands of dollars a month. The specialty farms sell it wholesale to dispensaries that retail it for $5,000 to $8,000 a pound.

That’s a significant premium, considering many marijuana growers spend just $500 or so to grow a pound of marijuana. While high-end growers can spend more than $1,000 per pound on cultivation, others report expenses as low as $100 a pound.

Grow Sciences has no retail store of its own. It leases its growing license from one of the three Territory dispensary retailers in the state. With three dispensaries, Territory has the rights to develop three farms separate from their stores.

Arizona doesn’t restrict the size of cultivation facilities, so companies that control more than one license often find they can supply themselves with one large farm and lease some of their cultivation rights to others.

Leasing the growing rights was a much less expensive way to break into the Arizona market than buying a license from another operator, considering the asking price for those is now about $15 million, Blum said.

That hefty price tag doesn’t take into account the expenses of running the business, either.

And leasing the cultivation rights frees specialty growers from having to manage a retail store, with all the attendant issues of inventory, labor and licensing. That gives specialty growers the freedom to focus on farming.

Still, Grow Sciences spent close to $10 million getting the business off the ground, he said.

They sold their first product in early 2018, and the company had positive earnings within 13 months, he said. They paid off the personal loans they took out to launch the business and set sights on expansion. The company also has equity investors.

Grow Sciences produces about 400 pounds of marijuana a month, and it has about 100 different strains in production. The company has about 21,000 square feet of space now and is preparing to expand to 65,000 square feet.

When Arizona dispensaries have Grow Sciences marijuana in stock, they advertise it for $50 for one-eighth of an ounce. By comparison, lower-end marijuana sells for $22 for that amount.

The premium-branded company’s pricing comes out to $400 an ounce, or $6,400 a pound at retail prices, although consumers can’t purchase that much at once.

Medical-marijuana consumers are allowed to buy up to 2.5 ounces every two weeks. Those without a medical card can legally possess one ounce following the recent passage of Proposition 207.

Adults age 21 and older will be allowed to purchase marijuana at dispensaries sometime in the late spring or early summer of 2021.

Haeley Star weighs and jars marijuana buds on Dec. 23, 2020, at Grow Sciences in Phoenix.

Other business use the same model, including Abundant Organics, another high-end grower that has no dispensary of its own. Abundant Organics sells wholesale to dispensaries from a farm in Camp Verde.

The company prides itself on being 100% organic, with no chemical pesticides or herbicides.

And like other high-end cultivators, Abundant Organics’ products sell out quickly when they hit shelves, even though they are some of the highest-priced products in the market.

“I’m embarrassed. I have family members who ask, and I can’t tell them where to get it,” co-founder Jake Young said.

Young and his good friend Jud Burke launched the business in 2016, first running the cultivation for a Tucson dispensary, then moving to Camp Verde, where they operate under one of Curaleaf’s licenses.

Wakefield, Massachusetts-based Curaleaf is one of the largest marijuana companies in the nation, with dispensaries in multiple states, including eight in Arizona.

“They are not going to invest in eight different grows,” Young said.

Leasing a license might be easier than buying a license outright, but it’s still difficult to break into the industry, he said.

“I get asked all the time, how do I get into the market?” Young said. “There are a lot of other growers who are good at what they do who didn’t get their chance. We got very lucky to get a chance to get a foot in the door. We feel blessed to have the opportunity.”

The company operates from a 15,000-square-foot building with about 27 workers and is preparing to hire as many as 50 new employees and add about 55,000 square feet of space in an adjacent building, he said.

That should help the company meet more of the demand.

“Unfortunately a lot of dispensaries we have to turn down,” he said. “With the new building we are hoping to reach throughout the state and feed that demand.”

He said the business partners have discussed getting a dispensary license, but they aren’t really interested in expanding that way.

“We have a lot invested in being the wholesale side of things,” he said. “Everything derives from the garden. It’s nice to be in the background doing our thing.”

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Arizona Laws for Legally Cultivating Marijuana

You might think that because Arizona and Colorado are neighbors, that Arizona might adopt the same laws as Colorado when it comes to marijuana. However, this is not the case. Arizona has some of the strictest laws in the country. In November of 2016, there was a measure that would have legalized marijuana. It was called Proposition 205. It failed by a narrow margin, and Arizona still has some of the strongest laws known in the United States.

Rules for Possession of Marijuana

The only way that you can legally grow marijuana in the State of Arizona is if you have a medical marijuana ID card. This must be given only by a licensed MD., DO, or N.D. in Arizona. When you have a medical card, this will allow you to possess 2.5 ounces of medical marijuana (the dried flower, mixtures or preparations, such as resin or hashish, made from 2.5 ounces of dried flowers) every 2 weeks, and you will be allowed to grow up to 12 plants as long as you do not live within 25 miles of a dispensary.

Arizona marijuana is also known as cannabis. It is labeled as a Schedule 1 controlled substance. This law also includes all the different forms of marijuana, including concentrates and edibles. If you are caught with any form of cannabis, you will face a felony charge under the ARS 13-3405. The charges for possession of marijuana will depend on how much you have, and what the specific charge is.

Medical Marijuana in Arizona

Proposition 203 was first defeated in 2002 but the Arizona Medical Marijuana Act eventually passed in 2010 by the voters in Arizona. If you want to use medical marijuana in Arizona, you will have to be registered with the Arizona Department of Health Services, and have a registry identification card. To qualify you must:

  • Be 18 years old.
  • Have a government-issued ID.
  • Be an Arizona state resident.
  • Medical records for the past year must be provided to the doctor.
  • Must have a debilitating medical condition like cancer, severe chronic pain, severe nausea, post-traumatic stress disorder, HIV, and glaucoma.

Consumption of Marijuana

The current law states that only those with a medical marijuana ID can consume marijuana. If you are allowed to smoke medical marijuana, you can only do it privately. In the state of Arizona, it is prohibited on public transportation, and in any public place. It is also illegal to use it at a dispensary. Not only could you get into trouble, but you could also get the dispensary in trouble as well, they could even lose their license to sell.

If you choose to consume marijuana in edible form, there is no law stating that you cannot do this in public. However, you cannot operate a vehicle, or do anything that might constitute negligence when consuming marijuana products.

Driving Under the Influence of Marijuana (THC)

Even if you get marijuana legally in the state of Arizona, ARS 28-1381 states that you cannot control a vehicle while you are under the influence of any type of drug. You will not be found guilty just because you have marijuana in your system. If you are driving recklessly or dangerously, you will be charged. A DUI for Marijuana can be a misdemeanor for the first offense. You could face a license suspension, jail time, or fines.

Getting a Medical Marijuana Card

If you have one of the above ailments, and meet all of the qualifications for a medical marijuana, you will need to schedule a visit with your doctor to get a Physician Certification form. You will want to visit your doctor, and then you will have to pay a $150+ application fee. Once you have your doctor submit your application, you will get your card within five days. You must renew your card once a year.

Where to Purchase Medical Marijuana?

Once you have your card, you will be free to purchase marijuana, or grow your own. To grow your own, you will need to get approval from the ADHS. There are several state-licensed dispensaries that will be able to help you. You will need to remember that you can only possess 2.5 ounces of the dried flower, mixtures or preparations, such as resin or hashish, made from 2.5 ounces of dried flowers if you are a legal medical user. If you are caught with more, you could end up in trouble, and may even lose your medical marijuana card.

What are the Rules for Marijuana Cultivation?

You can only grow “weed” under two conditions. If you are a medical user, you can grow up to 12 plants in your home. This is only allowed if you do not have a dispensary within 25 miles of your home. The plants can only be grown in a locked facility. Somewhere like a greenhouse, closet, or room that is completely enclosed. It will have to secure with security devices and locks. The only person that can be in the room, is the licensed cardholder. You will also need ADHS to license you as a medical marijuana cultivator. In some cases, the ADHS may also allow you to be a caregiver. As a caregiver, you will be able to grow marijuana for 1-5 patients.

The Penalties for Marijuana Possession If You Are Not a Medical Recipient

If you do not have a medical card, and you are caught with marijuana in your possession, you will face some pretty stiff consequences. Here are some of the consequences that you may face:

  • 2 Pounds and Less
    If you are caught with less than 2 pounds of marijuana, you will be charged with a Class 6 felony. This will have you facing a minimum sentence of 4 months with a maximum of 2 years. You will face a fine of $1,000 or more. If you are giving probation, you will also face serving 24 hours of community service.
  • 2-4 Pounds
    If you are caught with 2-4 pounds, you will be charged with a Class 5 felony. You will face a minimum of 6 months in jail, with the chance to serve up to 2.5 years. You will face a fine of over $1,000 with this, and you may have to serve in community service.
  • 4+ Pounds
    If you have more than 4 pounds of marijuana in your possession, you will face a Class 4 felony. The minimum sentence is 1 year, and you could face the maximum of almost four years. The fine for this is over $1,000, and you may have to serve community service as well.

Penalties will also increase if you are found to have been trafficking marijuana, selling marijuana (see: possession of drugs for sale ARS 13-3407), or if you have in your possession the tools to grow marijuana. Edibles, and other consumables will face the same charges as having marijuana in your possession. The punishment can be severe in many of these cases. If you have a medical card, and you are caught not following the laws, you could be charged with a crime, and face the same punishments as a non medical ID user.

What to do if Charged for Cultivation or Possession of Marijuana Illegally

If you find yourself charged with possession of marijuana, you will want to get legal representation as soon as possible. A good legal team should be able to help you get the charges reduced. In some cases, especially if it is your first offense, you can go to a drug treatment program where your charges will be dismissed upon the successful completion of the program.

Here at DM Cantor, we have helped many people charged with Arizona marijuana crimes get their drug charges reduced or dismissed altogether. We can help you to have a defense that will help protect you, and get back on good terms with the law. We offer a free consultation, so call our office today so that we can help you face your charges.

Legally grow marijuana in Arizona only if you have a Medical Marijuana ID Card says Drug Crimes Lawyer and Criminal Law Specialist David Cantor.