SIOUX FALLS, S.D. (KELO) — It’s been 895 days since the vote was taken to legalize both medical and recreational marijuana in South Dakota. That vote passed, but of course, we know what came next. A legal challenge to the vote was taken to court, and the recreational marijuana provision was overturned, deemed unconstitutional.
Now, in 2023, the medical marijuana industry continues to pick up steam. These are somewhere in the range of 25 operating state licensed dispensaries operating in the state, as well as a medical program operated by the Flandreau Santee Sioux Tribe, and recreational and medical programs run by the Oglala Sioux Tribe.
Per the latest update by the state on April 17, there are 8,997 approved patient cards issued in the state, and 212 practitioners approved to recommend medical cannabis use.
Recently, we’ve reached out to a handful of cannabis operations across the state to get their views on how the industry has grown, and where it’s going.
Dalton Grimmius – CEO, Dakota Herb
Dakota Herb opened their 4th medical dispensary facility in Aberdeen, South Dakota on Tuesday, April 18, joining their facilities in Brandon, Vermillion and Huron.
“It’s going well,” said Grimmius, who was on-site at 3307 7th Ave SE in Aberdeen for the opening. “The plan was to open at 2:00 but we had people waiting to get in at about noon and figured, what the heck, let’s turn the open sign on.”
The Aberdeen store is the company’s smallest location thus far, but it appears it will be busy. “The amount of phone calls we’ve received over the past 6 months asking when we’re going to be open in Aberdeen definitely was a motivating factor,” Grimmius said.
Looking back at the past few years, Grimmius gave a brief overview of the earliest days of Dakota Herb.
“Basically,” said Grimmius, “medical passed and then it was the rat race to figure out which town or municipalities were gonna dispensaries, how many, and then finding properties and landlords who were going to allow our business type.”
This, said Grimmius, was one of the biggest challenges early on, actually finding locations comfortable with leasing space to a marijuana dispensary, manufacturer and cultivator.
This was doubly difficult because the company had to convince these locations to lease the space without knowing if Dakota Herb would actually get the licenses to run the business. “We didn’t know if we were going to get the licenses or not, and we needed the property first to even apply for the license,” Grimmius explained.
A challenge faced by everyone in the past few years, but felt especially strongly by cannabis companies racing to open perhaps the first state-licensed dispensary in South Dakota, was that of construction itself.
“Who’s going to help you build these things?” Grimmius reflected. “Finding contractors — sourcing materials — it’s a lot of moving parts.”
The other major challenge? Banking.
“The SAFE Banking Act not going through was really concerning,” said Grimmius. “Trying to find a local bank in South Dakota that is willing to work with our business type — I called pretty much every bank in the state and the vast majority said ‘no, not yet,’ — some of them said no, not ever.”
The Secure and Fair Enforcement (SAFE) Banking Act a U.S. House Resolution in the 2021-2022 Congress which sought to provide financial services to legitimate cannabis businesses operating in states which have legalized the industry. Due to the federal illegality of marijuana, banks have been hesitant to offer services to the industry for fear of federal regulation. The bill failed to pass the Senate.
Looking at the ways the industry has changed since the earliest days, Grimmius says he’s noticed a process of de-stigmatization. “More and more social acceptance,” he said. “I remember when we first started, there was a lot of people going ‘how is this going to affect my town,’ — but I think we’re starting to see a shift in that — it’s not the big scary monster that everybody thought it was going to be.”
With South Dakota being a medical-only state for at least another year (barring a seismic shift in federal drug scheduling), the market is somewhat limited by the number of patients registered in the state. While this obviously restricts the ceiling of the market, it also provides certain opportunities at present.
“It really allows us to get our products dialed in,” Grimmius explained. “[We can] expand our product offering with a smaller clientele. Everybody’s improving, figuring out what’s right, what’s wrong, what patients are looking for. Hopefully, that translates into the [recreational] market, if it ever happens, but this is allowing us to build slower.”
Grimmius expanded on this, noting that when it initially looked like South Dakota would be both a medical and recreational state, the ability for South Dakota companies to scale their operations to that market just wasn’t there.
“I think you would’ve had a lot of people frustrated in product availability,” Grimmius said.
Dakota Herb has plans to add a 5th dispensary, along with a growth and manufacturing facility on the south end of Sioux Falls. Currently with 26 employees, the new facility is expected to bump its employee numbers up to around 50.
Kittrick Jeffries – CEO, Puffy’s Dispensary
Puffy’s, a Rapid City based cannabis operation, headed by Jeffries, currently has two locations in Rapid, and is opening its Sturgis store at “high noon” on April 20.
The store, located at 1337 Main St. in Sturgis is Jeffries’ first location outside Rapid.
Following the passage of medical, Jeffries secured 11 dispensary licenses across the state, and is working towards utilizing them.
“Puffy’s wants to be a huge part of the community,” Jeffries explained, adding that the Sturgis Chamber of Commerce will be present at the ribbon cutting for the new store.
Puffy’s operating documents were signed on Oct. 1, 2021, Jeffries said, securing not just dispensary licenses, but also those for manufacturing and cultivation.
While the public is perhaps most aware of the cultivation and retail sides of the industry, Jeffries highlighted the manufacturing side of it. “Manufacturing is absolutely the most fascinating part about the industry, just shy of probably the cannabis genetics,” he exclaimed. “We can make concentrates and vape cartridges, gummies and chocolates and stuff like that — it is a very scientific product.”
Kittrick pointed out the huge amount of testing done on these products to ensure quality and the process of correctly dosing out the products to ensure the same experience each time they’re used.
Another interesting fact about every single marijuana product sold by state-licensed dispensaries like Puffy’s; they’re all made in South Dakota. This is again due to marijuana’s federally illegal status. Products cannot legally be transferred across state lines, even between neighboring states with the same laws.
Jeffries contends that this has actually been a boon to the state. “One, that’s job creation, and two, it’s trying to prevent the brain-drain,” he expressed. “A lot of the technology and engineering that’s in our manufacturing lab could be very well developed by some student at the South Dakota School of Mines and Technology.”
While Puffy’s as a company is growing, the process has not been without challenges. “The number one [challenge] is construction,” Jeffries said. “Then the labor shortage, everyone and their mom that owns a business knows what I’m talking about — everyone’s looking to hire.”
Jeffries said he’s excited about his staff, and noted the amount of education and training they go through. “They’re all learning all 880 points of rules that are promulgated by the Department [of Health] (DOH), and they have to be experts — absolutely every step of the way, they have to be experts,” he said.
The DOH requires 2 hours of training for employees of cannabis companies. “At Puffy’s, we do 80 hours,” Jeffries said.
More than just training goes into the hiring process. Jeffries says that there is an extensive background check process for potential hires. “We go down the list — any type of background check you can think of, we do it,” he said. Staff also has to be knowledgeable and well versed in the products and their effects.
With more and more dispensaries opening it’s not just the employees that businesses will begin to be competing for, but customers too.
“I’d say there’s still the camaraderie and helping everyone to build their businesses,” Jeffries said, indicating that the competition hasn’t yet reached too heavy a pitch. “For sure it’s a competing business when other folks have dispensaries in your jurisdiction, but at the end of the day, this is about helping people.”
Jeffries really emphasized that aspect of the industry, noting that he’s got no problem with referring a customer to another dispensary if he doesn’t happen to carry a product they need.
“We all work together,” Jeffries said.
Looking at the immediate future, Jeffries expressed his thoughts on the biggest opportunity the industry holds.
“Education,” Jeffries said emphatically. “I think it’s absolutely about education — dispensaries and business owners like myself, we have the same goals in mind as Protecting South Dakota Kids — who is one of the biggest opponents to legalizing adult-use cannabis — and so far we haven’t heard a single horror story from medical cannabis dispensaries where products have been seeping into the black market, or kids are getting caught with it.”
Jeffries says security is extremely important to the industry, noting the uses of child-proof packaging, proper labeling of products and multiple levels of security and verification at dispensaries. “We are here to make sure this is a viable, sustainable and safe industry.”
Jordan Kuusela – Operations Manager, Native Nations Cannabis
Native Nations Cannabis became the first operational dispensary in South Dakota in July of 2021.
Run by the Flandreau Santee Sioux Tribe, independent of the state’s system, Native Nations was more than a little ahead of the rest of the state. In fact, it would be more than a year after they opened their doors before the first state licensed dispensary would open.
“We started a little bit ahead of the state,” said Kuusela modestly, “and so we have right now in our system about 12-and-a-half to 13,000 patients.”
Kuusela also mentioned a policy change the tribe has made. Until recently, if you wanted a card to buy from the Flandreau Santee Sioux Tribe, you would need to either undergo certification from doctor and then pay for your card from the tribe, or if you already had a card issued by South Dakota or another state, you could present that and simply pay for your tribal card.
Now, the tribe has waived that fee. “The tribe decided to start accepting in-state medical cards,” Kuusela said. “They won’t have to pay the second fee to get a tribal card.”
For a period of time, Native Nations was really the only option for South Dakota medical cardholders. The first cards were issued in November of 2021, about 8 months before the first state-licensed dispensary would open.
While not recognized by the state, Native Nations has committed to meeting the standards required by the state for testing.
“We’ve been doing full-panel testing on all of our products, we get a full COA (certificate of analysis) — the state only requires microbials and potencies — so aside from that there’s anywhere from 10-15 additional tests that can be ran on each product, so that’s another thing we do,” Kuusela said.
Native Nations has grown their facility quite a bit from the single grow house that was operating when they opened. In 2022, work was underway to open not only a 2nd grow house on the premises, but a 3rd one as well.
“Grow two is fully operational, so we have a weekly harvest coming out of both buildings,” Kuusela said. “We have almost tripled our output with both buildings online.”
Being separate from the state system, Kuusela says Native Nations is focused on acting on sovereignty. This has included conversations with other tribes across the nation, and has led to growing opportunities.
“We have a location in St. Regis, New York, which is the Mohawk Tribe,” said Kuusela. “We also have another location in Long Island, and that’s the Shinnecock Tribe.” While both of these are within tribal programs in New York, she says the company is also discussing working with New York State.
Reflecting back on the past few years, Kuusela says she sees the industry progressing, but laments what she sees as a focus by some on an attempt to build a recreational customer base.
“It’s medicine, and we’re just out here trying to educate people, and we see that lacking in areas,” said Kuusela. “What’s the highest potency, what’s going to get me the highest — out here, we’re talking terpenes, we’re talking different cannabinoids — stuff like that. We’re trying to give them the education they need; that it’s not just potencies. It’s not just getting high.”
Kuusela says while it has been a subject of conversation as to whether or not to allow recreational marijuana on the reservation, the focus right now is still medical.
“We have patients coming in here that have gotten off of — you know, Percocet Oxycodone — things like that and they have switched over to RSO (a cannabis extract oil) or concentrates, tinctures, things of that nature,” she said.
“Recreational is great,” Kuusela clarified her stance, “if the people want it, we should let them have it — but with medical, it allows us to keep it more patient focused, keep the products more medicine based and not just go for higher potencies.”