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LI entrepreneurs, growers see opportunity, risk in legal marijuana

David Falkowski, owner of Open Minded Organics, a

David Falkowski, owner of Open Minded Organics, a licensed grower of hemp and seller of hemp products, with some of his crop at his farm in Bridgehampton. Credit: Gordon M. Grant

Long Island entrepreneurs see opportunity and risk in the budding marijuana industry if its recreational use in New York becomes legal next year.

Local growers of industrial hemp — cannabis grown to have 0.3 percent or less THC, the psychoactive ingredient in marijuana — and makers and retailers of products infused with cannabidiol, or CBD, a non-mind-altering compound derived from the plant, said they are energized by Gov. Andrew M. Cuomo's call on Monday to "legalize the adult use of recreational marijuana once and for all" in 2019.

But they see hurdles ranging from competition from big corporations, to restrictions on where such businesses can be located, to high costs and limited access to capital because banks are blocked by federal law from lending to or taking deposits from marijuana enterprises.

"Right now, it's a wait-and-see situation. It's definitely exciting, but there are still many unknowns," said David Falkowski, 41, a Bridgehampton farmer licensed by the state Department of Agriculture and Markets to grow hemp and sell hemp-derived products such as CBD oil.

"What will regulation for the production and sale of recreational marijuana look like in New York? What will compliance costs look like? Those are very important determining factors in whether or not it would be feasible for small farmers like myself to get a piece of the pie," he said.

Some health researchers are asking New York to slow the rush to legalize marijuana, saying that its effects aren't fully understood; barring that, they want restrictions on its use (21 or older, no indoor smoking) and funding for impairment tests and increased enforcement.

The District of Columbia and 10 states — Alaska, California, Colorado, Maine, Massachusetts, Michigan, Nevada, Oregon, Vermont and Washington — have legalized marijuana for recreational use.

In those states, legalization led to the creation of jobs in fields including accounting, compliance, chemical engineering, retail, marketing and technology, among others, boosting the local economy and creating new tax revenue.

The legal marijuana industry in Colorado in 2015 created more than 18,000 new full-time jobs and generated $2.4 billion, according to a study by the Marijuana Policy Group, a Denver-based economic consulting firm.

In California, nearly 38,000 jobs were created in the legal cannabis sector this year, its first since the legalization of recreational marijuana use, according to cannabis market research company BDS Analytics in Boulder, Colorado. It brought in around $74.2 million in tax revenue during the second quarter of 2018, up 22 percent from the first three months of the year, the California Department of Tax and Fee Administration reported.

In Massachusetts, data from the state Cannabis Control Commission showed that in November, customers spent more than $2 million on marijuana products during the first week of recreational sales alone.

The great moneymaking potential of legal marijuana is not lost on big corporations. Anheuser-Busch Inbev (Budweiser's maker), Molson Coors and Constellation Brands (owner of Corona) have bought stakes in Canadian marijuana companies. Craft brewer Lagunitas launched Hi-Fi Hops, a “THC-infused sparkling water,” in June, making parent company Heineken the first big beer brand to enter the American cannabis drinks market.

Coca-Cola and Pepsi haven’t made moves yet but have said they are closely watching how the marijuana market evolves.

Charles Wagner, co-owner of retail store CBD Central and of Silver Laboratories, a manufacturer of CBD products and of liquids used in electronic cigarettes, both located in Farmingdale, said he also wants to sell and manufacture marijuana products.

"It would attract a very different consumer base to the business," he said. "And could double our clientele. I think the key would be to jump into it as early on as possible so as of now, it's top of mind."

Others like Jennifer Babaian of Old Brookville, owner of 7LeafClover, a hemp and CBD product business with stores in Westbury and Brooklyn, said the decision to venture into the recreational marijuana sector is not one she'd take lightly.

"For a lot of people this is the sexy new thing," she said. "But what they fail to realize is that business is business and business is always hard."

Babaian said she's cautious about entering the "capital intensive" and "fiercely competitive" industry.

Charles Germano and his brother Tom Germano, owners of Green Island distributors, a Riverhead business that supplies "everything except the plant" for greenhouse growers, believe the legalization of recreational marijuana could lead to a rise in sales.

"We would probably benefit from hobbyists initially," said Charles Germano. "But there's also the potential for million-dollar contracts with large companies needing high-tech systems to control the growing environments in their greenhouses remotely."

Brother Tom adds: "Just think about this: You can grow one pound of tomatoes, which can go for about $2, or one pound of marijuana, which can go for as high as $2,000. Which would you rather grow?" He also thinks ornamental growers will move to cannabis production: "There's no money in flowers, but there's money in bud."

"The overall interest in marijuana — consuming it, learning about it, talking about it, growing it, selling it — that's undeniable," Charles Germano said.

"But whether or not we [small-business owners] can bear fruits from it as a business in a way that's sustainable in the long term — right now, we have to wait and watch what's gonna happen, happen."

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