If you’re at all familiar with my work, you’ll know that I tend to speak about issues as they relate to cannabis consumers. I am not a business owner nor do I have any aspirations to become one. As a result, I found myself in unfamiliar territory when I contacted several cannabis license-holders to discuss their experiences since being issued a license from the state of Illinois. I figured that business must be going great. After all, cannabis licenses in Illinois are among some of the most coveted in the nation.
Or are they? Lately I’ve been wondering: where are the “craft grower” licensees? How many of the new “craft grower” licensees are in operation with products that they cultivated on the shelves? (Some “craft growers” are selling products with ingredients sourced from established license holders.)
- Background
- Why is the Illinois cannabis market described as “the most equity-centric in the nation”?
- What did the “craft growers” have to say?
- So, how many licensees are operational?
- And, how many licensees have construction approval?
- What does this mean?
- More quotes from craft growers
Background
The law that created a system for the regulation and taxation of cannabis in Illinois was called the Illinois Cannabis Regulation and Tax Act of 2019 (CRTA). The CRTA has been described as “the most equity-centric in the nation“. The CRTA created several new sets of cannabis licenses. Among those were a new set of licenses that were called “craft grower” licenses. According to the law, “craft grower” licenses would able to start with 5,000 square feet of canopy space on its premises for plants in the flowering state. “Based on market need, craft grower capacity, and the licensee’s history of compliance or non-compliance,” the Illinois Department of Agriculture may authorize an increase (or decrease) to a “craft growers” canopy space for flowering plants to a maximum space of 14,000 square feet. For comparison, the original 21 craft cultivation licenses can have 210,000 square feet of flowering canopy space.
“A craft grower may contain up to 5,000 square feet of canopy space on its premises for plants in the flowering state. The Department of Agriculture may authorize an increase or decrease of flowering stage cultivation space in increments of 3,000 square feet by rule based on market need, craft grower capacity, and the licensee’s history of compliance or noncompliance, with a maximum space of 14,000 square feet for cultivating plants in the flowering stage, which must be cultivated in all stages of growth in an enclosed and secure area.”
Illinois Cannabis Regulation and Tax Act (2019)
Why is the Illinois cannabis market described as “the most equity-centric in the nation”?
The CRTA is often described as “the most equity-centric in the nation” because the measure created a limited number of licenses that were supposed to be issued to those that were most impacted by the war on drugs. To put it differently, Illinois has intertwined the idea of social equity with the concept of ensuring market share for industry participants. Illinois Governor J.B. Pritzker has underscored that the limited issuance of licenses is an intentional component of the Cannabis Regulation and Tax Act (CRTA).
“We’ve been so focused on equity. Now what I mean to say is that I know that there are people that write about this that there are other states that have opened up the number of licenses to hundreds of hundreds of licensees and they have more dispensaries open than we do. But the reality is: we’ve limited the number of licensees in part because we wanted to make sure that the social equity licensees had a fair shot in the industry and they weren’t just edged out to the very end…having too many dispensaries in the market [would make it] so that people can’t make money.”
Illinois Governor J.B. Pritzker
In short, the CRTA was purposefully crafted to guarantee the financial viability of those who hold licenses in the market.
Governor Pritzker’s newly created Cannabis Regulation Oversight Office have strongly expressed their belief that states with open-licensing systems are indicative of inadequately regulated cannabis markets. Notably, Erin Johnson, the Illinois Cannabis Regulation Oversight Officer, recently highlighted Michigan as an example of a struggling market. She depicted a situation where many cannabis operators in Michigan face the risk of receivership and substantial price compression. Erin emphasized that her office diligently works every day to prevent such challenges from emerging in Illinois. She has indicated that she feels that Illinois’ limited-license approach is the critical factor in averting such difficulties within the state.
Historical data on the composition of the Illinois cannabis market
Returning to the initial questions I posed: Where exactly are these “craft grower” licensees, and how many of them are actively operating with their self-cultivated products on store shelves?
Before I attempt to provide some answers and share insights I’ve gathered from actual “craft growers”, let’s begin by examining some historical data about the cannabis market in Illinois. GrownIn reported on June 18, 2020, that among the 21 licenses issued, “only 10 of those licenses, held by six vertically-integrated operators, accounted for a staggering 76.8 percent of the marijuana production originating from Illinois fields and facilities.” This analysis was based on BioTrack data, which had been acquired by GrownIn.
“Dominating the market were these vertically-integrated companies: Verano Holdings, owner of Ataraxia, a cultivator in Albion; Cresco Labs, with cultivators in Joliet, Kankakee and Lincoln; Green Thumb Industries, which owns cultivators in Ogelsby and Rock Island; Ascend Holdings, which owns a cultivator in Barry; PharmaCann, which owns cultivators in Hillcrest and Dwight; and Revolution Global, which owns a cultivator in Delevan.”
GrownIn – Source
The ‘most equity-centric’ cannabis market: A consumer’s 4-year perspective
So, what does the most equity-centric cannabis market in the nation look like today? Only time will reveal the full picture as the state of Illinois is conducting a disparity and demand study. Today I can say that, from a consumer’s perspective: it appears that not much has changed. While new brands are emerging, and I’ve personally interacted with and sampled products from some of the recently established craft cannabis licensees, the overall number of new operators still seems statistically insignificant when compared to the well-established options. In essence, the shelves in Illinois cannabis dispensaries remain largely unchanged since the advent of adult-use cannabis. I was a medical cannabis patient even before Illinois legalized adult-use, and looking at the market now, it’s strikingly reminiscent of its pre-CRTA days. The operators who were already established within the medical cannabis program continue to overwhelmingly dominate the shelf space.
What is the difference between contract-packing, white-labeling, and licensing agreements?
Adding to this disparity, some of the newly operational craft licensees voice that they have pivoted to contract-packing or white-labeling.
What is white-labeling?
White labeling in the cannabis industry involves a company producing generic cannabis products that another company can brand and sell as its own. This allows the purchasing company to enter the market quickly without the need for significant investment in production facilities or product development. The manufacturer produces the product, but the branding, marketing, and sales are handled by the company that buys the white-labeled products. This model is popular for retailers or brands that want to offer a range of products under their brand name without manufacturing them.
White-labeling is not a unique practice for the cannabis industry. White-labeling exists in many industries.
“The large majority of these craft growers are doing phased build-outs. How many of these craft Growers are eventually going to be able to cultivate if they’re only starting off with processing? It’s way cheaper. I think it takes, from the figures I’ve seen, including my own, maybe about a few million, not including acquisition of the building, then you have to get the requisite equipment to begin processing, right? To fill pre-rolls, fill Vapes and stuff like that. But then the big issue is: where am I getting the product from? I’m probably getting it from an MSO, which means what? I’m helping them make more money, right? Because I’m just white labeling their stuff, right?”
“Anybody who is talking about white labeling in Illinois, and like it’s a negative thing: I don’t hold it against them. I just look at it as a result of their limited exposure to more mature markets and how the cannabis industry actually works. Many other areas of the country that have been doing this for decades legally. I’ll just use this example: California. Anybody who acts like white labeling is some new thing or some negative thing doesn’t know anything about the California Cannabis Market that we all look to as like, the gold standard, the mecca, the motherland of cannabis. There are so many growers that many choose not to create brands: they choose to grow for wholesale.”
These quotes are from “craft grower” licensees that wish to remain nameless for fear of retribution from state regulators
Certain “craft growers” I interviewed emphasized that they do not consider white-labeling a negative practice. To the contrary, some see it as one of the manageable entry points into the legal cannabis industry in Illinois. While many “craft growers” would prefer the ability to cultivate, process, and infuse their own products independently, they assert that problems stemming from the state’s management of this market have forced them to purchase from established license-holders instead of working independently as they had initially assumed they would be able to. The “craft growers” express that they feel forced due to a culmination of issues surrounding this venture: doubts among investors about whether state regulators will adhere to both the letter and spirit of the law, and the slow pace at which state operates. Ultimately, they say they feel forced to alter their business strategy to include white-labeling as a result of an environment that progressively fraught with what they describe as uncertainty, instability, and mismanagement.
What is contract-packing?
Contract-packing, sometimes called co-packing or co-manufacturing is a scenario where a company or brand (the client) works with another company (the co-packer) to produce, pack, and sometimes distribute their product. This arrangement is more collaborative than white labeling and often involves the client’s proprietary formula, packaging design, and sometimes materials. The co-packer provides the infrastructure, expertise, and raw materials to manufacture the product to the client’s specifications.
Examples of contract packing in Illinois include Bloom Vapes. From I have been able to gather, Bloom provides the proprietary technology and packaging design while the co-packer (Helios Labs) works to assemble and distribute the product to licensed storefronts. Another example are Lobo Cannagars, which are also co-packed by Helios Labs. I discovered this during one of my last interviews on the Chillinois Podcast with Helios Labs.
“If you look at the projections of a craft cultivation, whether you’re going for 5,000 or 14,000 square feet of canopy, you’re tapped out; you max out the amount of money that you can make as a business. One of the things that we realized is that with a craft grow license, you’re able to do more than just grow cannabis. So, why wouldn’t we use everything that our license allows us to do? That includes branching out into manufacturing products like vapes or possibly other opportunities. This whole manufacturing process, brand licensing, and sourcing products from other cultivators, whether it’s flower or oil, all serve as additional revenue streams our license permits. It’s about creating a viable business. When we realized it was either fail or pivot, we had to rely on manufacturing and push hard, as that was the only way to keep from going under.”
This quote is from a “craft grower” licensee that wished to remain nameless for fear of retribution from state regulators
What is a licensing agreement?
Licensing agreements in the cannabis industry involve a company (the licensor) granting permission to another company (the licensee) to use its brand name, trademarks, proprietary knowledge, or technology to produce, market, and sell products. This agreement can be beneficial for both parties: the licensor can expand its brand into new markets or product categories without additional production costs, and the licensee can leverage a well-known brand to attract customers. Licensing agreements are common for expanding products into new geographical areas, especially where regulatory environments differ significantly.
Often times celebrities will launch their brands via licensing agreements, examples of licensing-agreements in Illinois include Tyson 2.0 (a licensed brand by Mike Tyson), Cookies (a licensed brand by a musician known as Berner)
What did the “craft growers” have to say?
Inability to sell to medical cannabis patients
One significant issue that has garnered attention among “craft growers” is the taxation of their products. In Illinois, medical cannabis patients are not required to pay adult-use taxes on their products, something that is seen as a crucial benefit to those relying regulated dispensaries. Based on what I’ve heard from consumers and licensees, craft products have not been able to be sold at the same tax rate as medical cannabis*, meaning that medical patients are unable to access craft products without incurring additional costs.**
*Despite what Illinois Cannabis Regulation Oversight Office had told the Chillinois Podcast(see question #9) in the past
**(some stores/brands are offering deals to offset the adult-use tax for patients that present their cards, but the products are sold as adult-use products)
“The multi-state operators love it. They’ve got the entire medical market to themselves.”
This quote is from a “craft grower” licensee that wished to remain nameless for fear of retribution from state regulators
Issues with funding
I sat down with several operators who described their experience with finding funding as a social equity licensee. Many craft licensees detailed their struggles with accessing capital through the service providers recommended by the state of Illinois. The “craft growers” told me about their experience with applying for loans from Good Tree Capital and Credit Union One, which were recommended by the state. They described being required to pay a $1,000 application fee and were also required to pay a monthly fee while waiting for the state’s participation loan from the Pritzker administration through Illinois Department of Commerce and Opportunity (DCEO).
The licensees described encountering challenges as the lenders required personal guarantees and credit checks, posing difficulties for disproportionately impacted individuals with poor credit or limited capital. These hurdles exacerbated their struggle to secure capital. In their perspective, they face additional challenges due to the nature of the marijuana industry, such as higher costs, complex zoning regulations, increased local fees, and elevated taxation, leading them to believe they are treated differently and, in some ways, discriminated against because of their status as a state-licensed cannabis business. The craft licensees referred to this as the “marijuana markup”.
Based on my research, Alex Nitkin from IllinoisAnswers.org reported on October 19, 2023, that the Cannabis Business Development Fund had delivered about $21 million of the $34 million in seed funding that it had promised since 2021, according to data provided by the DCEO to IllinoisAnswers.org.
“We’ve got to have access to capital. The whole intent is to provide ownership to disproportionately impacted individuals. If they’re not going to provide money, it’s very, very difficult for these businesses to get open. Even some they’ve provided that loan to haven’t been able to get open. So, it’s a struggle.”
“DCEO is frankly failing to respond. They won’t tell us when they’re going to roll it out, who’s going to be eligible, and how much. In defense of those staffers at DCEO, they’re not being informed by their superiors either. They don’t have answers, but in our business, we need answers. Even if the answer is no, that we won’t receive loans from them, we need to know.”
“The legislature and the governor, as I mentioned, can stand in front of the cameras and proudly proclaim they’ve created this program. They can proudly proclaim that DCEO has a loan program, and they’ve given out eight loans. They’ve given just enough to give window dressing to this craft grow market, but most craft growers you talk to that aren’t personally wealthy are not doing well…This is not a successful program. We don’t know the future. We’re anxious. I own a building, and we need build-out money.”
“The only way we’re going to get started is to, you know, sell our equity. That was not the intent of the program, and, well, the state’s not telling us they’ll loan us money. And I don’t want free money; keep in mind we’re not asking for grants. I want a loan. Yeah, we look forward to paying that money back, but you know, the bottom feeders and the sharks out there want, you know, 13 to 18% to borrow money. Even if my building, I’m paying a higher percentage rate on my building because cannabis may be in there in the future. Just…it’s not right. Yeah…it’s just not right.”
“We have been denied, and I think a good part of that is our ownership composition. You find me someone in a historic black and brown community trying to start a business with no revenue. Again, we’re pre-operational, so the only thing we have is a business plan: a piece of paper that outlines what we think we’ll make and the potential of our company. You take a company like that and ask them to go to a bank and apply for a $200,000 loan, and see how that works out, right? It becomes that much more challenging. So, I think that’s probably one of the biggest challenges with funding.”
“The options that the state recommended, I would say they were worse. It was Credit Union One and it was Good Tree Capital. And I will tell you why that program, I think, failed, is because the optics of it, at the very minimum, the optics, how it was presented, was this was a loan, um, from the state, when in fact it was a 50-50 loan between the state and the financial institution, Credit Union One or Good Tree Capital. The challenge is, Good Tree Capital and Credit Union One, just like any other bank, they have to go through their underwriting process, and again, they evaluate not on your business, because you don’t really have a business, right? You don’t have a operational business, so they can’t evaluate you on your business’s creditworthiness. They have to look at the individual members on the team, on the licensed ownership structure, on the business ownership structure, and evaluate that. And then, so if the lending institution denies you, and you get zero from the lending institution, you match zero. Right? Right, and it becomes challenging.”
These quotes are from “craft grower” licensees that wish to remain nameless for fear of retribution from state regulators
Lack of consistency with state regulators
Another issue raised by “craft growers” is the inconsistency in regulatory demands. “Craft growers” told me that they have found themselves at odds with state regulatory officials who sometimes insist on seemingly arbitrary changes. The growers tell me that these disagreements can be not only frustrating but also costly for businesses, as regulatory requirements may include adding walls, ceilings, or extra cameras, often for reasons that appear nonsensical to business owners. For instance, some regulations mandate the installation of additional cameras in areas where the likelihood of theft is extremely low. Compliance with such requirements incurs substantial costs in terms of data, storage, camera installation, and ongoing maintenance. ”Craft growers” spoke about other issues that sporadically came up due to the arrival of a new inspector.
Licensees tell me that the experience with Illinois Department of Agriculture staff lacks consistency. These inconsistencies have led to added expenses and complexities for “craft growers”. Business owners question the practicality of certain regulatory decisions, wondering why anyone would go to such lengths to attempt theft when easier opportunities, like areas without cameras such as bathrooms, exist.
“Craft growers” tell me that the state’s press conferences might emphasize the “robust growth” of the marijuana market in the state of Illinois, but that the reality on the ground tells a different story.
“Some of what they’re doing is required by law, some of what they’re doing is required through their rules that they created. But, generally: the inspectors are over-regulating. They are creating burden and expenses that are unnecessary for these startups”
“Yeah, that definitely happens to everybody, and it’s inconsistent. I mean Cole, you’ve pointed out some things like the inconsistency that the state has shown with outdoor grows. It’s honestly baffling. I think GTI or one of them is suing the state to try and keep their outdoor grow? What is this? How does the state allow this? Shouldn’t they be able to shut them down, saying, ‘No, actually, you’re done growing and selling anything’? I guess my whole thing is the reason why I’m not pushing for more is just that I’ve seen the ineffectiveness of the advocacy work of the social equity community. The fact is, we can scream as loud as we want, but it doesn’t mean we’ll get what we want unless the big players want it because it benefits them”
These quotes are from “craft grower” licensees that wish to remain nameless for fear of retribution from state regulators
In case you missed it, I shared an exclusive report that highlighted regulatory inconsistencies that exist with regard to outdoor cultivation in Illinois.
Size discrepancy
For the first time, I am hearing chatter from “craft growers” that suggests that they are looking to increase their flowering canopy size past the 14,000 square foot maximum. A few of the “craft growers” that I spoke to hesitated to fully embrace this idea, but ultimately agreed that 14,000 square feet was not enough space. Others shot down the idea altogether, citing the ineffectiveness of the advocacy work of the social equity community.
“How do we put ourselves in the best position where investors can say, ‘Hey, look, this is a worthy investment?’ One of the issues that we’ve heard, is our canopy size in comparison to that of the larger multi-state operators within the state. The thought is that 5,000 is cool, 14,000 is better, greater than 14,000 is best. In comparison to the larger organizations, that’s one of, I would say, one of the frustrations.”
“I don’t know that meeting the capacity of the large organizations in this state is the right answer, but I do believe that 5,000 is not enough, 14,000 is not enough. Now, is 110k enough? I wouldn’t go there. Hell, many companies haven’t even maximized their capacity. I’ll say that today, and then, you know, maybe at some point, I might say it should be equal, but as of today, I would say, you know, 28,000, 14 times two, in that space, and see where it goes from there.“
“I’m kind of in the camp of like I’m not pushing for more than 14, okay? I mean, at the end of the day, we’ve seen that the more canopy you have available, the more money it takes to build it out. Even the current operators, a lot of them haven’t even built out their full canopy that they have available over the last eight years or whatever. They’re in the process; some of them just finished build-outs too.”
These quotes are from “craft grower” licensees that wish to remain nameless for fear of retribution from state regulators
Go along to get along
Several “craft growers” tell me that they feel that in this arena, there seems to be an unspoken expectation or requirement to align with the larger Multi-State Operators (MSOs) to facilitate legislative progress. Some took a measured approach with this topic, indicating that they’d rather work together with the larger companies than against them.
Other “craft growers” described the “hidden costs” are required to get things done Springfield. According to growers, the “hidden costs” are the plated dinners, hiring specific lobbyists(some of which previously served as an elected official in Springfield), and campaign contributions that are required to get the ear of representatives with authority and influence.
“It’s a bit disheartening when you hear craft growers go to the state, spend time, energy, and resources trying to advocate for what we believe puts us in the best position to operationalize these businesses. It often feels like there’s this, um, I don’t want to say competition, but the thought is you must be in alignment with the larger MSOs in order for us to move legislation to address some of your perceived challenges for your company. I would say that’s, if anything, probably one of the greatest challenges.”
“I’m not one of the folks who bash the multi-state operators. I believe, listen, we’re a cannabis ecosystem, and we have to work with one another. We need one another. The same way I believe the larger companies, they need smaller companies like us, and we need them as well. So, I’m not one of the guys that’s like: “let’s screw those guys; they’re the competition, they’re the bad guys.” I don’t believe that. But I do think if the intent of the craft grow license is to help minority companies and smaller companies get a foothold in the industry”
“You have to be in those circles; you have to spend the money; you have to donate or contribute and most importantly you’ve gotta make sure that they know that you donated. You have to make sure that they know what issues you want them to support as a result, right? And it’s just like, as people that have these licenses and are just trying to figure out how to not lose everything that they and their family and friends invested, we don’t have time for that.”
These quotes are from “craft grower” licensees that wish to remain nameless for fear of retribution from state regulators
Fire-sale on licenses
Multiple “craft growers” told me about a situation where some licenses were sold off with impending deadlines*. This situation left some businesses in a tough spot. The “craft growers” tell me that looming deadlines caused a few businesses to take the path of least resistance: selling their licenses at what could be termed ‘fire sale’ prices, or well below their “actual value”.
License-holders believe that these licenses hold substantial worth, but the fear of being unable to get their operations off the ground or losing the license back to the state prompted some businesses to opt for this route. “Craft growers” tell me that the lack of communication and clarity in the process added to the uncertainty and contributed to the decision to sell.
*From what I understand, according to a recent report by IllinoisNewsJoint.com: these deadlines were recently extended to create “the final universal deadline”. I can’t help but wonder how those who rushed to sell their licenses due to what appeared to be impending deadlines feel about these extensions.
“so what they chose to do was sell it inexpensively or sell it what I would consider a fire-sale you know: less than a million dollars or million-five… I forget what the numbers were but these licenses are worth more than that”
This quote is from a “craft grower” licensee that wished to remain nameless for fear of retribution from state regulators
“Craft growers” are concerned that their licenses are quickly losing value
Due to fire-sales and other compounding issues, multiple “craft growers” I interviewed expressed concerns about the diminishing value of their first-round licenses compared to those in round two. Some even hesitated to share these concerns, fearing it might further devalue their licenses. Others urged me to include their thoughts. The “craft growers” told me that they hope that transparency on this topic would lead to a reckoning where all licenses re-attain the same “promised value”.
“the thing is, Cole, it’s like… what we’re seeing is the second round of licenses have a higher valuation than the first round why because a lot of potential buyers do not have confidence”
“At the time that we applied for the application, this is when there was this thought or notion that hey, all you need to do is win the license, and everything is good from there. So, you know, I put together a team that I thought would put us in the best position to win a license. When we won the license, it was a little bit disheartening to discover that all the so-called money that’s there for having a license wasn’t there. That became one of the greatest challenges and still a challenge to this day. We were one of the first 40 to receive a license, and we’re still looking for capital to get.”
“I think… I mean I don’t know, maybe it’s one person who said that to you, but I don’t think…license winners, especially on the craft grow side, are as entitled to feel like there’s some “promised value” for these craft grow licenses that needs to be delivered upon. I don’t necessarily believe most most of them feel like that. I mean everybody knows this game is about timing”
These quotes are from “craft grower” licensees that wish to remain nameless for fear of retribution from state regulators
So, how many licensees are operational?
At the time of this writing, it appears that 11 craft cultivators have received operational approval. From what I understand, the Illinois Department of Agriculture provides monthly updates to a PDF here.
- 11th Level, Inc.
From what I’ve been able to gather, this operator has co-packaged products on the shelves.- Update 2/7/24 at 7:25AM: I’ve been told that this information was inaccurate. I have reached out to directly to 11th Level, Inc. for accurate information.
- Update 2/7/24 at 8:15AM: A representative from 11th Level, Inc. responded to my inquiry and indicated that they are not co-packing. They tell me that “the most accurate description is that we’re doing manufacturing. We currently only produce one brand, which is our brand: Lab 11.”
- Update 2/7/24 at 7:25AM: I’ve been told that this information was inaccurate. I have reached out to directly to 11th Level, Inc. for accurate information.
- CANNECT Gardens LLC
- CRIG, Inc.
- Galaxy Labs LLC
- From what I’ve been able to gather, this operator has been selling self-cultivated flower. In other words, cannabis that they grew in their facility is now on dispensary shelves.
- Green Growth Group, Inc.
- It is worth noting that MariMed, a “leading multi-state operator”, acquired this license.
- I recently interviewed CEO of MariMed at Benzinga
- It is worth noting that MariMed, a “leading multi-state operator”, acquired this license.
- Helios Labs LLC
- From what I’ve been able to gather, this operator has co-packaged products on the shelves.
- Hi Rise Group LLC (NEZ)
- Illinois Collective LLC
- From what I’ve been able to gather, this operator has been selling self-cultivated flower. In other words, cannabis that they grew in their facility is now on dispensary shelves. (I have tried samples)
- Oregonix Farms LLC
- From what I’ve been able to gather, this operator has been selling self-cultivated flower. In other words, cannabis that they grew in their facility is now on dispensary shelves.
- RB Vending Investments LLC
- It is worth noting that Jeff Rehberger, of Lucky Lincoln Gambling, is a face behind this license. According to reporting by WBEZ, Jeff has a troubled history with the state of Illinois.
- SB IL Grow LLC
- From what I’ve been able to gather, this operator has been selling self-cultivated flower. In other words, cannabis that they grew in their facility is now on dispensary shelves.
And, how many licensees have construction approval?
At the time of this writing, it appears that 7 craft cultivators have received construction approval.
What does this mean?
Based on my conversations with social equity licensees, it seems evident that the “most equity-centric” market in the nation may be falling short of its promises. Some of the “golden ticket” winners are finding that their coveted licenses are losing their luster, while others are seeking to part ways while the opportunities still hold value. Meanwhile, those who have always enjoyed access to capital face fewer obstacles on their path to operational success. If the fundamental goal of this program was to empower disproportionately impacted individuals to embark on their entrepreneurial journeys, it appears that the path to success has been marred by daunting regulations, a lack of confidence, and a system that often seems stacked against those it was supposedly intended to uplift. As Illinois grapples with these challenges, the future of its equity-driven cannabis market remains uncertain, leaving many hopeful for a more equitable and inclusive path forward. It will be interesting to see the result of the disparity and demand study that is due from the state of Illinois.
I want to take a moment to reiterate that I consider myself to be a barely-educated cannabis consumer. My primary goal with this was to share the stories that have been entrusted to me. I think that it’s important to note that this particular piece has been one of the most challenging for me to cover, as I personally find the subject matter rather dry, and much of the business-related terminology often goes right over my head. I receive frequent contact from many licensees. Lately, licensees have been telling me that they feel that their voices are going unheard. Additionally, they shared concerns about the media not giving proper airtime to their issues. As a result, I decided to take the time to capture the insights that I gathered from these licensees, even when I didn’t find their issues particularly exhilarating. This leads me to my next point.
Why should the public care?
One question that I posed to the craft licensees was, “Why should the public care about this? Why should the average cannabis consumer care about your story?” I didn’t hear anything that I considered to be a convincing answer. Some mentioned that these efforts are meant to rectify the injustices of the war on drugs. I’ve maintained that the only true way to begin to rectify these injustices and prevent further injustices is to put an end to the war on drugs altogether. In the context of cannabis in Illinois, this would entail repealing the Cannabis Control Act of 1978. To loosely quote defense attorney Evan Bruno, meaningful cannabis reform begins with the recognition that personal cannabis use, possession, and cultivation need not be a criminal issue. In any case, I hope that this piece has shed some light on the complexities of the Illinois cannabis market and the challenges faced by those striving to make a mark within it.
Step into any dispensary in Illinois, and I’m willing to wager that a significant portion of the clientele remains blissfully unaware of the issues expounded upon in this article. Moreover, I’d venture to say that the majority of consumers lack an understanding of the issuance of new licenses altogether. To them, cannabis is simply legally available at designated state-sanctioned outlets. Beyond this, it seems that consumers generally remain oblivious to the industry’s underlying challenges.
How to make the public care
I will leave you with a piece of advice for an industry seemingly in search of a lifeline. To garner support and foster a sense of community, I believe that it’s crucial for licensees to provide the public with compelling reasons to stand behind them. One suggestion that I have made for craft licensees seeking public support is to pair their proposals for industry improvements with initiatives that directly benefit the community. An example would be to link discussions about canopy expansion with the expansion of home grow rights for medical patients and all adults. By aligning their interests with the well-being of the community, licensees can build trust and gain valuable support. In essence, the journey of cannabis licensees in Illinois intersects with the broader goals of removing criminal penalties for cannabis and embracing meaningful reform. These initiatives not only contribute to a fairer and more equitable cannabis industry but also resonate with the community’s desire for positive change. In the pursuit of a thriving and inclusive cannabis market in Illinois, fostering a sense of shared purpose between licensees and the public can be the catalyst for lasting progress.
Source for numbers on licensees (construction approval/operational approval): PDF list that is uploaded here. The below PDF that was sourced for this article was accessed on 2/1/2024.
More quotes from craft growers
“Everybody knows like the dispensaries are cheaper to get up and running; they make less money annually, net profit-wise, because of 280e, and when that goes away, there’s a lot of optimism that the dispensaries will start being like, you know, where some bread and butter is at. But the craft grows, you know, they take an investment almost 10 times higher, like eight to 10 million dollars to get up and running. And then even after you raise and spend eight to 10 million dollars and you build this thing out, and it takes, you know, six months minimum, right? Then you have to employ all of these people and growers, you have to get all the supplies, and you have to spend another six months paying for everybody and everything, right, before you have any product to actually ship to a dispensary. Then, once you ship it to a dispensary, you’ve got to wait another 30 to 60 days before they turn around and pay you, right? Like, all of these millions of dollars, like, you know, all of that adds up. And so, the time is the biggest hurdle for investors. Investors are not interested in giving you all those millions of dollars and then waiting a year and a half for you to turn around and give them money, especially with the risk, the inherent risk that comes with agriculture, growing plants, even if they’re indoor, like, things can go wrong, and you can lose a harvest. So, there’s more risk involved with a grow, there’s more expense, there’s more time, right? And then, on top of that, the worst thing is the regulations. They’ve handcuffed everybody up until just now by saying, ‘Yeah, you can start off at 5,000 feet of canopy, eventually you can go up to 14, but we’re not going to tell you how.’ And so, investors have been using that 5,000 and the lack of a pathway to get the 14 as a reason to cap your valuation based on what you can grow, $5,000 square feet of canopy. So, really, my company’s value should be three times higher than what it is, and as a social equity applicant, I’m supposed to retain 51% ownership. With this valuation and only being able to work with 49%, it just doesn’t make sense for anybody. What they want to do is take the majority of your business, leave you with nothing in order to get up and running. Most people don’t even want to do that; it’s just too much money, too much time, it’s just a pain in the ass.”
“You know how there’s a limit of 10 stores per person or entity? Some have found ways to get around that and now control like 20 to 30 stores in the state.”
The Cole Memo 
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