Anticipation for Jan. 1 hung in the air of a parking lot here where four cannabis dispensaries sat shoulder-to-shoulder this New Year’s.

This month could mean a budding business plan blossoming into its full potential, or it could bring possible failure in an industry as crowded as this lot.

“It’s kind of like charging into the dark,” said Cody Lundmark, co-owner of Sacred Sun Farms, one of the four shops of the Four Corners cluster.

Montana launched recreational cannabis sales on Jan. 1. The road to recreational use has been thrust onward by Montana’s voters, who legalized medical use in 2004 and then took the full plunge in 2020. In last year’s election, 58% of voters enshrined cannabis use in the state Constitution alongside alcohol.

In the final weeks ahead of recreational sales, providers have been ramping up their production, specializing their craft and bracing for the unknowns like what demand will be, the Montana State News Bureau reports.

Local governments, meanwhile, have been trying to balance the voters’ will with regulatory framework rolled out by the state Legislature, along with feedback from the industry.

In this lot, providers are nervous and excited, but their position in the weeks leading up to recreational sales makes all the difference in determining who is confident and who is keeping their options open.

Sacred Sun Farms has 11 greenhouses and a high-end laboratory to engineer concentrate products like oils, and Lundmark doesn’t expect their shelves will go bare in the first wave of recreational sales. He said Sacred Sun is working on contracts to wholesale some of their concentrates to other dispensaries and let the product advertise itself in regions where Sacred Sun doesn’t have retail.

Wholesaling is arguably the second-largest shift in the industry this January, behind recreational sales. Previously, cannabis providers had to be vertically integrated, meaning they had to grow, manufacture and retail their entire product line.

In order to provide edibles, like cookies, concentrates and oils, dispensaries had to make huge investments in their equipment and quality control.

But under the new regulatory structure, providers can be horizontally integrated. That means they can run growing, manufacturing or retail operations, or any combination of the three. Theoretically, that could make a provider better able to play whatever hand they’re dealt in terms of size, location and access to cash investments.

“It changes the whole infrastructure of the market,” said Kate Cholewa, government affairs representative at the Montana Cannabis Industry Association, a trade group that’s long been involved in policymaking around cannabis. “Wholesaling can help some of the smaller producers keep their store shelves with product on it. It also means smaller folks are letting go of their concentrate production, which is an expensive piece.”

Across the lot from Sacred Sun, Chris Paradise with Supherb Wellness said recreational sales could mean boom or bust for his business.

The most recent shift in Montana’s medical cannabis regulations untethered patients from a single provider, allowing them to shop freely across Montana’s dispensaries. Since that change in 2020, Paradise said a loyal customer base has kept Supherb Wellness on its feet. But along with untethering, license fees have climbed.

“It’s brutal,” Paradise said. “(I’m) just trying to pay the bills and keep options open to doing something else.”

Paradise said if recreational sales, along with a new shop on Four Corner’s main drag, doesn’t boost his business, selling his product wholesale to another provider could give him a chance to stay in the industry. He, like others who spoke to the Montana State News Bureau for this story, have had offers from out-of-state prospectors. Paradise, like many others, turned them down.

“I’d rather go wholesale and stay the boss,” he said.

Then there’s Bloom. The provider has 24 dispensaries, 220 employees statewide and a Tier 12 license, the largest growing capacity available to providers.

Based in Helena, co-owner John Hoofman said Bloom began preparing for a recreational market in mid-2020, on a wager Bloom and several other providers bet that voters would approve legalization. Since then the business has built out its cultivation and retail infrastructure, keeping their processes dialed each step of the way.

“It’s really just organizing and analyzing the processes to make sure you have things in order to be able to execute,” Hoofman said. “You try to anticipate moving parts to the best of your ability.”

The demand for recreational sales remains the industry’s great mystery of 2022. Several providers who spoke to the Montana State News Bureau for this story said, after looking at other states that approved recreational cannabis use, they’re preparing for a 30-40% increase in sales from their annual medical sales.

But trying to accurately grow what an unknown consumer base will buy is like trying to fix a time machine before it’s ever launched someone to a different era.

The Governor’s Office of Budget and Program Planning projected $130 million in recreational sales in 2022, climbing to $195.5 million in 2023 once the moratorium on new businesses ends. These numbers were based on earlier projections by the University of Montana’s Bureau of Business and Economic Research, and adjusted downward to account for initial supply limitations as a result of the moratorium on new cannabis businesses until mid-2023.

The growth rates into future years were based on the increase of recreational cannabis sales in Washington, Oregon, California, Colorado, Nevada and Alaska.

J.D. “Pepper” Petersen, president and CEO of the Montana Cannabis Guild, another trade group in Montana, is not optimistic about providers meeting demand. The medical industry was geared to produce no more than what registered cardholders were consuming, and Petersen doesn’t believe the industry has had enough time to ramp up for an expanded market. Add in the millions of tourists that visit Montana each year, and supply-and-demand becomes hard to reconcile.

“I just don’t see how we’re going to be able to keep up,” Petersen said. “Our capacity might be there in November when the tourists leave.”

Some providers, whether they’re stalwarts of Montana’s marijuana industry or new to the scene, are going to feel out the market before scaling their businesses.

Gallatin Valley Organics, a Tier 1 shop in Bozeman, is waiting it out to see where they’ll fit best in the market, said manager Theresa Upp. In the coming months, Gallatin Valley Organics will have a kitchen up and running to offer edibles, but with a small-scale growing capacity, they are studious about the quality of their flower.

Add in their location – a block off Main Street, prime real estate in a booming town – and the small shop has mighty staying power in a potentially chaotic market.

“We’ve been a little slower than others, but we’re being calculated about it,” Upp said.

In Missoula, Glenn Broughton of Starrbuds said he’s remained a Tier 2 provider, but hadn’t previously maxed out his grow facility. Starrbuds has a healthy revenue at its current size, he said, and filling out his square footage for cultivation feels like a good cushion. Broughton considered scaling up if he needs to meet demand, but doesn’t foresee a huge wave of customers around the corner.

“We’ve been medical here since 2004, the whole novelty … it’s not near as enticing to people,” he said. “It’s going to be the first week or two that’s going to be the busiest.”

Local governments, meanwhile, are busy setting the table for recreational sales to begin next year.

The Legislature’s final framework for legalization allowed counties that did not approve recreational cannabis sales to continue that prohibition on business, despite recreational cannabis use still being lawful statewide. The result is a patchwork of “green” counties, which largely cover the western part of the state, and “red” counties, which mostly populate the east side of the state. Counties then have some levers to control things locally, like whether to flip to a red or green county, or to impose an additional tax on cannabis sales, or how to weave the upcoming industry into its community fabric.

Not every market looks awash in cannabis like Four Corners. Dispensaries have in some cases filled out spaces in communities where other businesses have fallen away, populating a former drive-in restaurant in Missoula or a shuttered storefront on main street downtown.

Gallatin County has the largest number of dispensaries at 76, but since 2013 only 20 have been allowed in Bozeman city limits.

In October, the Bozeman City Commission voted to remove that cap, a new arrangement city officials said would reflect the county’s overwhelming vote to legalize recreational use and roll back restrictions to allow the state to take a more controlling role over the industry.

Nearly half of the providers located in the city sued the next month to reinstate the cap, claiming it devalued their city licenses and would create the same congestion as seen in Four Corners, which is in the county.

Missoula’s city council never created a cap, but did set a 500-foot buffer between dispensaries.

Billings, meanwhile, is having a near identity crisis. In Yellowstone County, 53% of voters approved marijuana.

Months ago, voters in Billings, where 60% of the county lives, decided to keep recreational sales out of city limits. Medical storefronts were already banned in the city. Following a public hearing earlier this month, the Yellowstone County Commission put the entire notion of recreational cannabis back to the voters this coming June, to possibly reverse their decision in 2020.

Montana’s tribes, meanwhile, were promised equal footing when the state Legislature passed its vision for a recreational marijuana market.

Each of the eight tribal governments were given a combined-use license – in industry terms, a vertical license – that allowed tribes to sell cannabis 150 air miles from the reservation border.

Those terms allowed tribes into the market without fear of losing federal contracts on reservation lands, since cannabis is still illegal at the federal level.

The rules also allow tribes to put a dispensary in a county where recreational sales are legal and within the 150 air-mile range if the reservation borders a county that did not approve recreational sales in 2020.

But tribes’ opportunity looked to be dashed by the final language in the Legislature’s framework bill, until an administrative fix earlier this month.

The legislation allocated tribes a Tier 1 license, the smallest growing capacity available. The law didn’t specifically allow tribes to scale up to reap much profit, considering they’d have to develop each step in the process as vertically integrated.

The Montana Department of Revenue, which is the regulatory agency for recreational and medical cannabis, said this month they had not received any notice of interest from tribes in engaging with the combined-use licenses.

Jason Small, a Republican state senator from the Northern Cheyenne community of Busby who was influential in ensuring the licenses for tribes, said that uncertainty around state regulations may have been enough to keep tribes from making a play in the cannabis market.

“I’m led to believe that without that change, it wasn’t that viable an option,” Small said.

But in early December, an interim legislative committee and the Department of Revenue clarified the rules to say state tribes could scale up their operations.

“It’s a hell of an opportunity, if someone wants to use it,” Small said.

The Associated Press contributed to this report.