Growers don’t see initial big bucks in medical pot

Central Florida commercial plant growers such as Kerry Herndon, Heather Zabinofsky and Bruce Knox expect fierce competition over who will legally grow medicalmarijuana in Florida.

Yet, most expect little or no profit under the current law.

“There is kind of a consensus that the first guys in can’t make any money,” said Herndon, who owns Kerry’s Nursery in Apopka.

There are as many as 98 nursery companies in Florida, including 25 in Central Florida, that could qualify to bid for five regional medical marijuana licenses that Florida expects toissue later this year. The licenses give right to grow a non-euphoric strain of marijuana, process it into a medicine best known by the brand-name “Charlotte’s Web” and sell it to patients suffering from a limited number of ailments including severe epilepsy.

None of them can know for sure what the start-up, production and marketing costs will be like until a state committee meets in Tallahassee Wednesday and Thursdayto write the regulations.

After months of contentious attempts to establish the rules, the state formed the committee made up largely of interested businesses. It will negotiate regulations such as growers’ minimum qualifications for production, quality control and where dispensaries could be located.

Some in the business like Herndon fret that low standards that allow for low production costs could make the already relatively small patient market leery. High-end standards meant to assure quality and reliability could bolster confidence, yet also force high costs.

“The regulations are in such limbo … it’s really difficult to project out with any kind of certainty,” said Pete Sessa of the Florida Cannabis Coalition, a business group. “One slight, little change can mean exorbitant costs or enormous savings.”

Herndonand other growers say they believe they already have production infrastructure in place to begin growing marijuana almost immediately, while others say they plan to invest heavily in state-of-the-art facilities.

Knox, a member of the rule-writing committee, is owner of Knox Nursery in Winter Garden. He said “the cost will depend on the regulatory requirements,” some of which will be guided by the committee, and some by the Florida Department of Health.

“There is no doubt that the cost to start growing and dispensing could be very high,” Knox said.

Production costs could be vastly different from most greenhouse crops.

“We’ve talked to people with large operations in Colorado, California and Canada,” said Cerise Naylor executive director of the another business group, the Florida Medical Cannabis Association. “They’re all saying you’re going to be spending hundreds of thousands of dollars a month just on your lighting costs. And then you’re going to have to keep your air conditioning on constantly … because those lights produce so much heat.”

Estimates vary widely on the potential customer market, from a few hundred willing patients to hundreds of thousands.

Another committee member,Jill Lamoureaux, is a past president of the National Cannabis Industry Association. She is a lobbyist for a Colorado-based quality-control lab company called CannLabs, and helped write regulations in Colorado and Washington state.

Based on what has happened in other states, she said Florida should expect a small market. Connecticut, for example, has only four licensed growers, and its law allows for more products and more illnesses to qualify than does Florida’s, but “the purchasing market is not big enough for the four.”

“Prices are exorbitantly high,” she said. “The prices are double the black market.”

And no health insurance will pay for marijuana medicine.

Among other critical issues that the committee must settle is where the companies can sell their products. Initially there was the expectation that they would have to sell the medicine directly from their production facilities, meaning only five dispensaries in the state, most likely located in semi-rural areas.

“That was the clincher in getting a better idea of what the revenue is going to be,” Naylor said. “You would lose so much of your qualified and likely patient base if they had to drive two hours to the middle of nowhere to pick up their medicine. With retail facilities, more patients are going to be interested in using this low-THC cannabis because it’s significantly more accessible.”

So why all the interest in the competition?

Zabinofsky, who heads a Sanford-based company called Maser Growers that intends to partner with the Baywood Nurseries in Plymouth, calls the five licenses the “golden tickets.”

If Florida fully legalizes medical marijuana, estimates suggest that the Florida industry could see hundreds of millions of dollars in annual revenue. Zabinofsky said she thinks that is a very low estimate; she calculates a potential market worth billions a year.

The growers already set up in business would be most ready.

“All I have to do is change the strain if I get the golden ticket,” Zabinofsky said.

smpowers@tribune.com or 407-420-5441.