Business & Economy

Gardener’s Supply, Magic Hat founders seek medical marijuana license

Will Raap (left), Alan Newman (center) and Dan Chang are working together on a range of cannabis businesses in the hopes of helping cultivate a new industry in Vermont. Photo by Morgan True/VTDigger

BURLINGTON — Two prominent Vermont entrepreneurs are among the seven applicants for a fifth medical marijuana dispensary license the state plans to issue next month.

Act 65 allows Vermont’s four existing medical marijuana dispensaries to open a second location and creates a fifth dispensary license in an effort to increase patient access. The law also expands the list of conditions that qualify a person to obtain medical marijuana.

For Will Raap, founder and chairman of Gardener’s Supply, and Alan Newman, who started Magic Hat Brewing Co., opening a medical dispensary falls into their larger aspirations for cultivating a new industry in Vermont: cannabis.

“We want to be in the game,” Raap said.

Raap and Newman teamed up with other business leaders and Bill Lofy, former chief of staff to Gov. Peter Shumlin, to form the Vermont Cannabis Collaborative. The group published a 2015 report laying out a vision for legal marijuana that would capitalize on Vermont’s branding to make the state a national “center of excellence” in cannabis research, testing and cultivation.

“How do we make sure that Vermont is known for its high quality and well tested products?” Newman said, framing the approach he and Raap are taking.

With the prospects for a regulated recreational market floundering in Montpelier, the duo said they see medical marijuana as a way to begin shaping industry standards and practices.

Their application includes a production facility in Randolph and dispensary locations in Winooski and Lyndonville. They are the fourth applicant for the fifth dispensary license to be identified in recent reporting. Officials with the Vermont Marijuana Registry have said they received seven applications.

Other applicants have proposals to locate dispensaries in Bennington, Rutland Town and Hartford. The operators of Vermont’s existing dispensaries in Burlington, Brandon, Brattleboro and Montpelier have applied for second locations in South Burlington, Williston, Middlebury and Hartford.

Raap and Newman said they were initially reluctant to apply for a medical license because they assumed the fifth license would go to Bennington. At least one applicant, Bernie Barriere of Vermont Green Grow, has applied to open in Bennington.

Bennington is among the regions that are currently underserved by the medical marijuana program, and Sen. Dick Sears, D-Bennington, was heavily involved in crafting the new law, prompting speculation among close observers that his adopted hometown is a likely pick.

Raap said they decided it was worth applying when they saw the point-based system that the Vermont Marijuana Registry will use to rank applicants and make recommendations to Public Safety Commissioner Tom Anderson, who will make the final decision.

The point system has three major categories: safe and secure communities; overall health needs of registered patients — to include “geographic convenience”; and business plan and facility information.

“We think we have a good application, and if it’s objective that’s fine, but we will ask why we didn’t get it if it doesn’t go our way,” Raap said.

The duo said their application’s strength comes in part because, to this point, they are the only identified applicant to propose a dispensary in the Northeast Kingdom, a region they argue has less ready access to medical marijuana currently than Bennington County.

Though there is already a Burlington dispensary, and existing license holders are eyeing South Burlington and Williston, a Winooski location made sense to the entrepreneurs because a quarter of registered patients are in Chittenden County. Increased competition locally will lead to better prices and more diverse offering for patients there, they said.

Raap and Newman said they have identified properties that comply with local zoning and have negotiated leases, but they declined to say specifically where those properties are.

Winooski Mayor Seth Leonard said Raap and Newman’s involvement make a dispensary more attractive, because of their proven track record in economic development. Having them locate in the Onion City could increase its “vibrancy,” which Leonard said is a particular focus for city officials.

If their application is not successful, Raap and Newman say they will apply for a sixth medical dispensary license the state will issue if Vermont reaches 7,000 registered patients. As of June there were 4,438.

Were that to fail as well, the pair say they would continue to find other ways to be involved with Vermont’s nascent cannabis industry, which they see as the next most likely craft-scale sector to take off in the state.

“It’s time to open the field,” Raap said.

Long road to legalization

Newman and Raap said they were dismayed at the slow progress of marijuana legalization in Vermont. Raap described the approach of legislators and Gov. Phil Scott as “cautious” and “timid” to a fault.

They said the legalization bill that made it to the governor’s desk would have done little to help jumpstart the Vermont cannabis industry because it allowed recreational use without creating a regulated market.

Newman said he is personally against marijuana prohibition for “social reasons,” including the disproportionate impact of enforcement on minority communities and the overall number of nonviolent criminals it has swept into American prisons.

But he said Vermont is also missing out on an industry that’s tailor-made for its existing craft branding, and one that could create as many as 5,000 jobs, the kind that would help attract and retain young people — the holy grail for economic development in an aging state.

Newman compared Vermont lawmakers antipathy toward legal pot and a local cannabis industry to their attitude toward craft brewing in the 1990s. At that time, the now valorized industry was a “bastard stepchild,” he said, overregulated and maligned as a potential source for high alcohol content brews that teens would get ahold of and abuse.

“I’m shocked by the prevalent 1950s attitude toward marijuana that has emerged from otherwise smart people who seem terrified that legalization will lead to some kind of madness in their kids,” Newman said.

Both Newman and Raap said they’re not concerned about Attorney General Jeff Sessions or the Trump administration taking a hostile stance toward pot, and both believe that local intransigence is temporary.

“At some point the politicians will follow the people,” Raap said. Opinion polling in Vermont and nationally consistently shows support for legalizing marijuana, he added.

In the absence of legal pot, Vermont turns to hemp

One of the ways they’re already involved is through hemp. To be considered hemp and not marijuana, the plants must have very low level of tetrahydrocannabinol, or THC, the primary psychoactive chemical in cannabis. Hemp, originally cultivated for fiber, contains cannabidiol, or CBD.

Hemp extracts, which concentrate the CBD, can be turned into tinctures, pills, patches and used in food or beverages. CBD products are touted as a treatment for a wide array of symptoms and conditions, though the Food and Drug Administration prohibits supplement companies from marketing health claims.

Raap said his 90-year-old mother takes CBD to help manage symptoms from arthritis and that nothing else has proven as effective.

In the absence of marijuana legalization, cannabis entrepreneurs in Vermont are turning to CBD products with alacrity. Hemp-based CBD products fit with Raap’s larger interest in “medicinal botanicals,” they said, noting that the pair is interested in supporting the growth of businesses making herbal remedies from elderberry, dandelion root and other plants. (Raap predicted the rise of a local medicine movement analogous to the local food movement, citing the success of Burlington-based Urban Moonshine as an early indicator of that trend).

Vermont Public Radio reported in October 2016 that Ever Green Management — a company that Raap and Newman created with Lofy to “get the capital flowing in the right direction” on cannabis — would make a $250,000 investment in Hardwick-based Green Mountain CBD.

That deal fell through, Newman said, adding that he believes it was “prematurely reported.” They didn’t say specifically why it didn’t work, just that it “wasn’t a good fit.” Green Mountain CBD’s operations continue apace.

Instead, Dan Chang, Lofy’s partner in the consulting firm Kria Group, is growing about 2,000 hemp plants on a property in Charlotte under the auspices of Ever Green Management. The plan is to extract the hemp for CBD and sell it to local businesses.

They’ve provided CBD extract to Zenbarn in Waterbury Center which is hosting a series of events with CBD-infused cocktails. The Wednesday events are meant to serve essentially as cannabis industry mixers.

They’re also sending some of their hemp crop for testing at the PhytoScience Institute in Waterbury Center, a laboratory affiliated with the Vermont Patients Alliance, the medical dispensary in Montpelier.

PhytoScience describes itself as a “center of excellence in cannabis science, testing, research and education,” and both Raap and Newman said it’s an example of how Vermont can distinguish itself nationally in the cannabis industry.

Cultivating what’s to come

The Vermont Cannabis Collaborative’s report laid out more than just a vision for how the state can lead in cannabis research and cultivation. It laid out a regulatory framework for legalization that included four large-scale industrial licenses to grow, test, sell and research marijuana and marijuana products.

Newman and Raap said they were aware of a perception that those licenses were intended for well-financed members of the collaborative, but they said the primary goal of its framework was to meet the demand for pot in Vermont without opening the door to large out-of-state companies.

A study by the Rand Drug Policy Research Center found that Vermonters consume 33,000 to 55,000 pounds of pot annually. Other states where marijuana was recently legalized, such as Nevada, have faced supply issues, showing the value of having some pre-existing infrastructure and a few large-scale operations, they said.

Raap pointed out that their framework also called for unlimited craft growing licenses allowing for between seven and 99 marijuana plants — “It’s a way to keep the family farm alive in Vermont,” he said — and three co-op licenses that would allow craft growers to band together to test, refine and wholesale their products.

However, they didn’t deny having an interest in holding one of the industrial licenses contemplated by their report, but Newman said their businesses have “always been responsive to the community.”

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