MJBizMag January 2022 - 52

OPEN FOR
BUSINESS
A factor that could dampen patient
numbers is that few physicians
are interested in providing
recommendations, according to news
reports.
PATCHWORK POTENTIAL
Some municipalities have been very
open and cannabis-friendly, allowing
a relatively high number of licenses.
Others have been restrictive, even
capping the number of businesses to
the legal minimum of one.
While the state can't charge more than
$5,000 for a business license, municipalities
can set their own fees. Some
municipalities are charging less than
$5,000 for a license, while at least one
has proposed $125,000-a fee that would
likely exclude some smaller players.
" Each of the counties and
municipalities can do what they want, "
Horsted told MJBizMagazine. " There are
no clusters of areas that are prohibitive
or open. It's really a patchwork. And
I think that there's some interesting
market dynamics happening right now. "
Horsted said it's not widely known
which municipalities are friendly
to cannabis businesses. His group
developed a " matrix and a spreadsheet "
for members to gauge how many
licenses each municipality allows.
" Right now, I think the little guy has a
chance. It really goes back to what these
localities are doing with their zoning
and licensing caps, " Horsted said.
LOCATION CHALLENGES
Among the " interesting market
dynamics developing " is which
municipalities are opening cannabis
opportunities and which are limiting
them. Just as multistate operators
appear to prefer limited-license
states, Horsted believes that other big
companies will target limited-license
municipalities, which are also likely to
be more expensive. Smaller cannabis
entrepreneurs, meanwhile, will find
opportunity in municipalities offering
more licenses.
52 January 2022 | MJBizMagazine
That dynamic and the number of
opportunities are reflected in how South
Dakota's two biggest cities-Sioux Falls,
population 190,000, and Rapid City,
population 80,000-are approaching
cannabis licenses.
Sioux Falls voted in November to
limit its cannabis licensing to five
dispensaries plus testing labs, but
nothing else. " So, no cultivation or
product manufacturing within the city
of Sioux Falls, " Horsted said.
Rapid City regulators so far plan to
make 15 dispensary licenses available,
but that number could grow because the
regulations link the number of dispensaries
in the city to population growth.
Meanwhile, the Sioux Falls suburbs
of Brandon and Hartford will be less
stringent, while the former gold-mining
town of Lead (pronounced Leed) in the
Black Hills is one of a small number of
towns without any license cap.
" You can do the math there. I think
a multistate operator might be much
more interested in a situation like
Sioux Falls, where they've got a captive
market and a high barrier to entry, at
least in terms of licensing fees. And
then other areas, they probably would
want to stay away from because there
are no caps, " Horsted said.
While it will be relatively easy for
out-of-state operators to break into
the market, that won't diminish the
opportunities for local cannabis
entrepreneurs.
" There's going to be a lot of opportunity
for your typical South Dakota
entrepreneur to get into the business, "
Horsted said.
ROOM FOR BRANDS
The uncapped nature of South Dakota's
market will offer numerous licensing
opportunities. But developing a strong
brand in this new market has the potential
for long-term rewards, Horsted said.
" I think there is a latent brand
opportunity here, but it's going to take
a little while for the market to establish
itself, " Horsted said.
As an example that could indicate the
potential for brand success, he pointed
to Native Nations Cannabis, a vertically
integrated brand launched by the Flandreau
Santee Sioux Tribe last summer
that so far has seen high demand.
" It's been great, " Native Nations Cannabis
President Tony Reider told Sioux
Falls TV station KELO in November.
" Business has been right on spot with
where we projected it would be. "
Native American tribes in states with
regulated marijuana markets have
some autonomy in how they manage
their cannabis industries. This includes
South Dakota, where some tribal areas
launched cannabis markets July 1,
when the medical marijuana law went
into effect.
Horsted predicted there would also
be " significant opportunities on the
ancillary side " and said he is recruiting
packagers, accountants, lawyers and
other ancillary businesses to the
association.
WAITING FOR A REC FUTURE
While South Dakota's medical market
looks promising, many entrepreneurs
are already looking ahead to when
recreational cannabis is legalized.
Although the South Dakota Supreme
Court in November upheld a decision
to invalidate the 2020 recreational
legalization ballot referendum, there
are still two paths to recreational
legalization:
* Cannabis advocates are lobbying
legislators to pass a recreational
legalization bill.
* Activists are collecting signatures
to get another recreational
legalization referendum on the
ballot in 2022.
" A lot of folks are just holding out for
rec, " Horsted said.
Omar Sacirbey is a reporter
for MJBizMagazine. You
can reach him at omar.
sacirbey@mjbizdaily.com.

MJBizMag January 2022

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