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Smaller cannabis retailers try to carve place in Santa Fe’s budding cannabis industry

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Ian Aarons has long had a robust fascination with cannabis, but as the state’s long-festering push to legalize the product became a reality last year, it took his interest in a whole new direction.

It once was just a simple hobby; he would grow a few plants during college under a private medicinal grower’s license. Aarons, 26, now plans to make a living with marijuana as managing director of Endo, a full-fledged Santa Fe cannabis business he helped start with a few members of his family.

They are seeking to put the finishing touches on renovations to a two-story building near the corner of Agua Fría Street and Siler Road in which they plan to grow and sell cannabis products. They are among a new crop of entrepreneurs trying to gain a toehold in a fledgling industry where the challenges are many and more experienced operators know the terrain.

 

“The times were changing,” Aarons said of the decision. “It was just a hobby, but we decided, Let’s just go all-in and see if we can make some money.”

The family initially invested $500,000 into the business, but as work continued, it has become increasingly clear to Aarons that plans to open by Friday, the first day cannabis can be legally sold for recreational purposes in New Mexico, would not come to pass.

Aarons blames the tardy opening on difficulty finding a location in Santa Fe’s tight commercial real estate market, plus the remaining work that needs to be done renovating Endo’s facilities and the complicated nexus of state and local regulations.

The storefront and the production area just received state approvals last Sunday, said Stephen Aarons, Ian Aaron’s father and the business’ general counsel.

Though the coming of legalized cannabis has been anticipated since its passage last year by the Legislature, the number of new retailers is small. According to the state Cannabis Control Division’s website, just three have been approved by the state in Santa Fe. Endo is the only one with any plans to open a retail facility anytime soon.

The inability to speed up the process of opening left Endo in a position where it had to decide whether to “roll the dice and get to work” or wait for its licenses to be approved, Ian Aarons said.

“We would have to have 100 things go right and zero things go wrong to open by April 1,” he said.

When legal recreational cannabis sales do officially begin statewide, it’s likely only a handful of “legacy” providers in Santa Fe — medical marijuana retailers that were grandfathered into the recreational cannabis program — will be in a position to start selling the product Friday morning.

But Aarons believes there will be a place in the market for smaller mom and pop retailers like Endo despite having to engage in a game of catch-up.

“There is always going to be the Walmarts,” he said, referring to the 34 larger cannabis retail companies that were grandfathered into recreational cannabis sales. “But it is up to us to be that Marble Brewing Company, that local craft.”

Endo is set to start growing its product in a 10,000-square-foot building at 2903 Agua Fría Street later in the month. The structure will have a space to process the plants, plus a retail storefront.

He said the business’s local flair and desire to provide a consistent high-quality product will help separate Endo further as the market continues to mature.

But he acknowledges the difficulties startups like Endo face just to open the doors, especially compared with the larger retailers that likely have the legal resources and industry wherewithal to complete the process in a timely manner.

He said entrepreneurs are entering a business medical retailers had figured out more than 10 years ago.

“That is the thing, for those mom and pops, it is hard. … You have to find a niche,” he said. “In my opinion, New Mexico is really locally driven. We like to see guys we have grown up with starting businesses; we are not always pumped to see a big New York company roll into town.”

Endo — Latin for “within” — is a decidedly local, family outfit.

After graduating with a master’s degree in business administration from the University of New Mexico last spring, Aarons recruited his mom, longtime Santa Fe resident Doris Valdez, to serve as the company’s president, and his cousin, Alex Costello, to work as technical director.

Aarons’ father, Stephen Aarons, is a criminal defense attorney in Santa Fe. He focuses on licensing and regulations.

Stephen Aarons acknowledged the irony of a criminal defense lawyer stepping into the cannabis business but said since college he has held a more liberal view of the product.

Stephen Aarons said his son first approached him — or as Ian Aarons puts it, “bugged him” — about getting into the medical cannabis field a few years ago, but said it seemed too “political” to get into the business.

“There have been some jokes about how I have been in criminal cases with drugs and now I sort of joined it,” Stephen Aarons said with a laugh. “But my son got an MBA so he wants to do business, and this will be a hot business and should be profitable for him. They have really worked hard.”

Marijuana Business Daily, a Colorado-based cannabis business website, estimates cannabis sales in New Mexico will jump from $125 million in 2022 to $400 million a year by 2026.

About 40 percent is expected to be derived from out-of-state purchasers — namely Texans, Duke Rodriguez, CEO of Ultra Health, the state’s largest cannabis company, told The New Mexican last year.

Stephen Aarons said having a lawyer on the team is an obvious boon to Endo, especially when it came to traversing the complicated network of local and state regulations; each municipality was able to set up their own rules guiding recreational cannabis.

“Your average guy trying to start a business is going to have a heck of a time doing it,” he said.

To get approved by the state, a business must obtain a license from its local jurisdiction or prove it will have one prior to the start of operations. It also must adhere to local zoning ordinances.

The city of Santa Fe has a cannabis business license, but before someone can apply for it, a state approval letter must be obtained — along with city zoning approvals. A business also has to provide a water budget, as well as details on how waste will be discarded and expected energy use.

The state also requires retailers to provide a social and economic equity plan, proof of age for every controlling person, a background check authorization form and a premise design.

Ian Aarons said the process at times felt almost circular, and city Land Use Director Jason Kluck acknowledged the tricky interplay between state and local governments — noting an almost “chicken and an egg” sort of back and forth between the two entities.

“They are not beholden to our process, and we are not beholden to theirs,” he said, referring to the state. “We are trying to work with them to get that process cleaned up, and so is every municipality in the state.”

“It’s not a Santa Fe problem,” he added. “It’s a state problem.”

Kluck said the city has approved about 23 retailers, most legacy entities. The city has also been issuing a “ton” of approvals for producers and manufacturers as well, he said.

Stephen Aarons questioned whether the process has delayed others from jumping into the cannabis business.

“I do criminal defense, so I am not exactly a business lawyer,” he said. “But I do have a big advantage over someone who doesn’t have a law degree or something. Just putting together what they want, that is where it is so hard to get things approved.”

Heather Brewer, spokeswoman for the Cannabis Control Division, was on vacation Friday and did not respond to an email seeking comment.

Ian Aarons said a lack of available locations in Santa Fe that fit the zoning requirements — combined with the stigma cannabis businesses carry for some landlords — made finding the right building “almost impossible.”

“It’s actually very impressive we have found a building,” he said.

Ian Aarons said he expects to start selling the company’s own product at least four months after the facility’s four grow rooms are done (a cannabis plant can take anywhere from four to eight months to mature). The expectation is Endo will have to lean on wholesale cannabis sellers after the storefront opens, but Stephen Aarons said he is concerned about the amount of available product.

Stephen Aarons added he believes wholesale cannabis growers are holding on to more of their supply to see how the market takes shape over the first few weeks, which will likely affect the amount of product retailers can buy.

In an interview last week, Kristen Thomson, director of the state Cannabis Control Division, said the state did not have any concern about the amount of available product, claiming there are more than 1 million mature plants in the statewide tracking system designed to calculate plant growth.

The figure has been criticized by some of the state’s larger cannabis growers.

But the Aarons are confident that despite a few roadblocks and a few concerns about available product, their business will welcome customers come May 1.

Right now, it’s just the family and a few contractors working on the building, but Ian Aarons hopes to hire at least 10 employees to help stand up Endo once everything gets going. There will be a few staffers to work the grow sites, a few people to handle the storefront and a security guard.

He said he likely could run Endo with fewer people but didn’t want to place too much on the shoulders of a smaller staff.

He expects to pay at least $15 an hour and said people have already reached out to him about employment opportunities.

“I want this to be the kind of job where people are happy with their work,” he said. “I want this place to be a benefit to the community.”

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