New York Dispensary Guidelines Say No to MSOs

Late Friday afternoon, New York‘s Office of Cannabis Management released a 27-page set of guidelines for adult-use dispensaries.

While not the final regulations, it seems the OCM realized that it was about to award licenses to the first applicants who had no idea how to be in compliance with a program with no rules or regulations.

Many of the guidelines mirror those of other markets, including a prohibition on any images that would be attractive to people under the age of 21. This includes cartoons, bubble-type or other cartoon-like font, and bright colors that are “neon” in appearance.

That doesn’t bode well for the Cookies logo.

In addition, the guidelines restrict “any imitation of food, candy, soda, drinks, cookies, or cereal, in labeling, packaging, advertising, or marketing (with the exception of cultivar names or the licensee’s name, entity name, or doing business as name; this does not preclude retail dispensaries from offering permissible forms of cannabis products with compliant packaging.)” This could affect an infused chocolate bar that has a cookies & cream flavor or birthday cake sprinkles on them.

No MSOs

At the very end of the guidelines, the OCM notes that retail licensees “cannot have any interest in any business anywhere that cultivates, processes, or distributes cannabis.”

(Licensees) cannot have any interest in any business anywhere that cultivates, processes, or distributes cannabis.

Most MSOs grow their own cannabis for their stores and often sell them to other dispensaries as well, effectively banning them from obtaining a retail license in New York.

This also calls into question the companies that currently have medical cannabis operations in New York. For example, Etain grows its own medical cannabis and also sells that product to other medical dispensaries.

The guidelines go on to say, “Applicants with an interest in such a business, no matter how small that interest is, will not be approved. A licensee who, themselves or through their True Parties of Interest, passive investors, or any management service providers, holds a prohibited interest risks their license being cancelled, suspended, or revoked or other enforcement actions being taken.”

For MSOs like Green Thumbs Industries (OTC: GTBIF) that have already invested thousands of dollars to build cultivation sites to supply its Rise dispensaries … oh well.

Product

It’s also unclear how cultivators and producers can demonstrate their products to distributors or retailers. The guidelines ban giving something of value to retail dispensaries to induce that dispensary to buy something from the cultivator, processer, or distributor. That includes free product of any kind, except as permitted in regulations or guidance.

Licensees are also prohibited from representing their business as producing or selling “organic” or “craft” products until such a definition is authorized by the OMC. That isn’t likely to go over with all those promoting their craft cannabis cultivation.

Other elements include:

• Dispensaries can be open until midnight, which makes sense, especially for those in the city.
• Retailers must have a brick-and-mortar store, so no ghost dispensaries.
• Physical stores may have a drive-thru window.
• Delivery is allowed.
• Standard security systems must be in place to prevent theft.
• Retailers are restricted to two signs outside the dispensary.

Owners also must own their own vehicles to transport cannabis products and maintain a manifest record. The shipping manifest has to be sent to the OCM before any product goes from the distributor to the dispensary.

Location

The location of the licensed premises must be approved by the OCM as part of the dispensary’s site plan and comply with any local zoning ordinances. A dispensary cannot be on the same road and within 500 feet of school grounds, nor can it be on the same street or avenue and within 200 feet of a building occupied exclusively as a house of worship.

Before being issued a license, applicants must follow the local notification procedure pursuant to cannabis law. However, that procedure has yet to be defined, and the OCM is asking that dispensaries not do this until it is.

Licensees are also only allowed to buy cannabis products from authorized distributors. Distributors must sell cannabis products to any adult-use retail dispensary licensee willing to pay cash. Distributors can accept orders on credit, but they have to report those customers to the OCM. The buyer has 90 days to pay up, and if they don’t, they will be reported to the OCM.

No Merch or Discounts – Kind of

Dispensaries can only sell cannabis products and accessories. No merchandise can be sold unless it is the licensee’s brand. In other words, no Zig-Zag T-shirts. The product has to be locked behind the counter. Anything on the shelves is for display only.

Licensees cannot give away any cannabis products. They can’t advertise giveaways, discounts, price reductions, points-based reward systems, or customer loyalty programs including, but not limited to, use of the words “sale,” “free,” “price drop,” or “discount” on a menu, in any communications to customers, or elsewhere. Loyalty programs are huge in retail, but the OCM says New York dispensaries can’t do this.

However, in the next breath, the OCM says that this does not prohibit licensees from changing the price of cannabis products or otherwise “discounting” products. Basically they can cut the prices but not promote it.