The first cannabis company in Massachusetts to deliver to adult-use customers is rounding out a three-year journey towards profitability, while battling underground market competitors and scrounging for capital investment.
Freshly Baked manufactures and delivers cannabis-infused gummies, as well as other edibles and flower products from partner companies. The founders, Philip Smith and Jenny Roseman, are military veterans, thus allowing them to qualify for the state’s social equity priority licensing for microbusinesses.
Massachusetts microbusiness licenses allow a small company to either cultivate up 5,000 square feet of canopy or obtain up to 2,000 pounds of cannabis flower for manufacturing. The business is also allowed to seek a delivery license to deliver to adult-use customers’ homes. A separate license would be needed for that business to open a storefront dispensary.
“It’s been a three-year-process just to get operational,” said Smith. “It doesn’t happen in a day.”
Based in Taunton, in southeast Massachusetts, Freshly Baked started working with the City of Taunton in January 2019 before initiating the state approval process. Two years later, the state Cannabis Control Commission finally issued a final license on January 14, 2021. Final approval for delivery came two months later.
Smith said he and his partners had to put up about $800,000 to get the business operational.
“And even that was the bare minimum for manufacturing and home delivery,” said Smith.
Smith’s team is currently licensed to manufacture edible products and deliver to customers’ homes. They have a license to cultivate, but have yet to raise funds to finance that part of the business.
“A few months ago, we actually hit $1 million in revenue,” he said, adding that he expects to hit $2 million by the end of year. More notably, he also said that the company recently became “cash flow positive.”
Although part of their business model requires them to compete for shelf space in established dispensaries, most of their competition comes from the underground market.
“I think there is plenty of business in the industry for everybody,” he said. “Our main competition is definitely the black market. It’s not the legal market.”
Smith said that before adult use was legalized in the state, he already had some experience with cannabis and respects the aspect of the culture where individuals might grow at home and share.
“I’ve grown at home in the past. I’m totally fine with the neighbor who grows in his basement and shares with his friends and family,” he said. “I’m against people that want to take it a little further.”
Specifically, he said there was a problem with larger-scale underground market operations that traffic their supply from the West Coast and boldly present themselves as legal delivery operators.
A large portion of Freshly Baked’s customers discover the company through web searches, but Smith said his company regularly shows up in results close to illegal delivery schemes.
“I get the opportunity, but there are folks like me that put everything on the line,” he said.
Advertising is another barrier for newcomers to the legal market. Smith said that while some illicit operators will post online advertisements, or hang flyers and stickers in public places, his company is bound by tight state advertising regulations. Cannabis companies are forbidden from advertising in spaces where less than 85% of those exposed to the advertisement are over 21.
“All of my delivery vehicles are totally unmarked,” he said. “There are certain places where we cannot advertise in the community.”
Smith said that the company would begin raising money in January to finance a cultivation site. Until then, they have been specializing in their own manufactured gummies. The company has also been able to partner with other small suppliers to sell flower and other edibles through delivery.
Smith said that through the process of developing an edible product and attempting to secure a place for it on the shelves of dispensaries, he learned that some larger companies are better than others at following through on their professed dedication to social equity.
“There’s definitely a lot of lip service out there,” he said.