Businesses gift marijuana with snacks within State Law

Wednesday, January 23, 2019 - 3:40pm

The Department of Licensing and Regulatory affairs has not yet allowed for the opening of recreational dispensaries.

The Department of Licensing and Regulatory affairs has not yet allowed for the opening of recreational dispensaries. Buy this photo
Alexis Rankin/Daily

Though marijuana is now legal in Michigan, the Department of Licensing and Regulatory Affairs does not yet provide commercial licenses for recreational marijuana dispensaries. Following the Dec. 6 legalization, local and out-of-state businesses have identified a gray area in the law, allowing them to gift marijuana with the sale of other products such as sweets, snacks and even art.

Smoke’s Chocolate, an Ann Arbor-based business created by Marc Bernard, has capitalized on the period between legalization of marijuana and the opening of recreational dispensaries in Michigan, according to Jack Groom, Business senior and head of development at Smoke’s Chocolate.

“On the day after legalization (Bernard) put his website up, just taking advantage of the way the law is written and how it exists, relying on precedent out of several different states where people have employed a similar business model,” Groom said.

According to the Michigan Taxation and Regulation of Marihuana Act, gifting of marijuana is permissible in a restricted amount and manner.

The law, passed Dec. 6, says “giving away or otherwise transferring without remuneration up to 2.5 ounces of marihuana . . . to a person 21 years of age or older” is legal "as long as the transfer is not advertised or promoted to the public."

Groom said Smoke’s Chocolate strictly sells non-medicated chocolate products but hires drivers who are medical marijuana patients. The drivers may choose to give gifts upon delivery of the chocolate completely at their discretion.

“We sell chocolates currently and we deliver them to people’s homes in the Ann Arbor area,” Groom said. “The reason why we’ve gotten so much media attention is not because of the chocolate, but because the chocolates are delivered by medical marijuana patients. We give them the option to present a free gift and most of them choose to gift cannabis.”

According to Smoke’s Chocolate’s website, customers are only eligible for a free gift if they are 21 or older.

Groom said Smoke’s Chocolate does not interact directly with the cannabis plant  itself.

“We hire independent contractors who source their own cannabis, and they sell their own stuff. We don't buy it, we don't touch it. The only thing we buy or sell is chocolate,” Groom said.

On High Road, a Boston-based company, has found similar success in Ann Arbor selling snack packages as well as “High Art,” with free gifts, according to owner Brandon Anthony.

Anthony said the art is the main focus of each bag of product they sell.

“You can not value art at a certain cost, so we make sure that we’re following the law precisely,” Anthony said. “We add a print per bag along with the muffin or the candy, you don’t want to be selling a $150 muffin or a $55 muffin so we make sure the focal point is the art we sell in the bag.”

Business senior Adam Rosenberg, founder and executive director of the Green Wolverine, a student organization focused on the cannabis industry, said the marijuana gifting model has been seen in other cities around the country.

“It’s not a new model, it’s existed in Washington D.C. for a few years,” Rosenberg said. “They have a situation similar to what Michigan has temporarily, which is legal possession and consumption without legal sales channels, so the idea is simply that if you purchase something else and someone gifts you cannabis along with it that is a transfer without remuneration.”

Rosenberg anticipates these businesses may face challenges as advertising their gifting services is illegal under state law

“The transfer is legal in Michigan unless the transfer is advertised or promoted to the public,” Rosenberg said. “That is the challenge with these businesses that are arising in Ann Arbor. In order to build a client base and to have a business, they have to market, and by marketing, by the letter of the law, that is illegal because it is an advertisement or promotion to the public.”

Though Smoke’s Chocolate had early success with their business, Groom said once recreational marijuana dispensaries open in Michigan, it will be difficult to maintain sales.

“The big thing about our business model is once dispensaries open up in a year, people won't need to use us as one of their sole places to get chocolates,” Groom said. “Because any dispensary will be allowed to sell cannabis. This really for us is only a cash grab for about a year and we’re trying to make the most of it.”

Rosenberg agrees that over time, the gifting business model will lose relevancy and use once recreational dispensaries are opened.

“It will take time for sufficient supply to reach the market, it’ll take even more time for that supply to lower in price to where most consumers are willing to go legal as opposed to keeping with their current distribution network,” Rosenberg said. “So absolutely, when there is sufficient supply and cannabis will have a reasonable price, these businesses will struggle to exist.”

Because the legality of owning, using and gifting marijuana is new to Michigan, Rosenberg said time will tell if consequences will emerge with a gifting business model.

“It’s like the speed limit is set at 70 miles an hour. If you're going 75 and you pass by law enforcement, does that necessarily mean you're going to be pulled over?” Rosenberg said. “Right now with where this gifting system is, how new it is, no one knows the answer to that, no one knows what the enforcement action will be but I do think we’re going to find an answer very soon.”