Del. pot pioneer plans med market growth

WILMINGTON – While the effort to legalize recreational marijuana may have been defeated this year, Delaware’s first cannabis operator still has eyes for significant growth this year on the back of the state’s expanding medical marijuana market.

First State Compassion (FSC), led by founder and retired state trooper Mark Lally, was Delaware’s first dispensary, or “compassion center,” as it is known in state lingo. Operating out of Germay Drive on the southern edge of Wilmington, the small producer was quickly successful upon opening in 2015, Lally recalled.

“Sussex County patients would travel all the way up and we wouldn’t have the product that they wanted, so they got very upset and lobbied the state to get a center down there,” he said in a recent interview, noting that it led to the 2017 opening of FSC’s Lewes location.

The state’s medical marijuana market has grown considerably since then, counting more than 20,600 registered patients last year, an increase of more than 25% over the previous year. State revenue from fees on patients and providers topped $1 million last year.

At the same time, the provider market is growing now too. The state issued three new licenses early last year, with one operation in Felton opening – bringing the total number of state operators to four with seven dispensaries for now.

While Lally believes there is plenty of market share remaining for the operators, he’s also investing in new offerings.

When Delaware first approved its medical marijuana program back in 2011, officials did not initially allow edibles as a legal form of the drug. Many states continue to prohibit the refined and odorless form of cannabis, citing concerns over the potency and potential to be used publicly in defiance of laws prohibiting such use.

Listening to concerns of medical marijuana patients in recent years, however, state officials wrote new regulations around edibles that allowed their use starting Jan. 1. Such products are limited to five-unit packs with a total limit of 50 milligrams of the psychoactive chemical THC.

“Once we knew that [regulation] was coming, we already started our work preparing,” Lally said. “Our patients have been [making edibles] since we’ve been open, but they’ve had to do it themselves. We now have the machinery and things where we can ensure the proper dosage is in the product.”

FSC turned to its longtime advisor MariMed, a publicly traded cannabis industry heavyweight based out of Massachusetts, to help it prepare to enter the edibles market. Lally opted to license MariMed’s national edible brands, like Betty’s Eddies fruit chews and Buddy’s Baked cookie and brownie bites, to give patients confidence in the products.

“We can’t keep it on the shelf. We’re constantly baking, trying to keep up with it,” he said, noting that one day FSC may launch its own local brands too. “We have older patients who don’t want to smoke, and we have people with COPD and other respiratory problems who can’t smoke, so we have to have other options to help people get relief.”

FSC isn’t alone in offering edibles, as multi-state operator Columbia Care offers them at its three locations and local upstart The Farm in Felton does as well. But Lally sees edibles as a major part of his growth plan, and he promoted former senior extraction process manager Natalie Landolfi to director of production for edibles and Erica Allen to manager of the kitchen.

The company will also soon open a state-of-the-art grow, process and extraction facility in Milford, fulfilling the vertically integrated license it got for its Lewes location, he said. While it won’t offer retail sales there, it will allow dozens of people to cultivate marijuana plants, trim and prepare flower for sale, and extract its oil for other products.

FSC currently employs about 120 people at retail stores in Lewes and Wilmington, and a grow and processing facility in Wilmington. After the new Milford grow and processing facility is up and running, and the edibles kitchen is expanded, Lally said he expects his headcount to go as high as 250, or more than double the current state.

“We survived the COVID by making many adjustments,” he said, noting concerned patients began buying larger quantities of product, forcing him to enact sales limits for a time to ensure inventory lasted. “Now we’re excited for what’s next.”