Search

It's David vs. Goliath in Illinois' marijuana industry - Chicago Tribune

ajangtayu.blogspot.com

As Illinois begins to award much-delayed cannabis business licenses, the new business owners will face a long uphill climb. They’ll be pitting mom-and-pop startups against giant companies that have had a five-year head start to take control of the market.

Entry-level entrepreneurs will have, in many cases, one dispensary to compete with companies that control up to 10 stores across the state. New craft growers will be limited to 5,000 square feet, compared with behemoth cultivators in cavernous warehouses up to 221,000 square feet.

Jessica Ryan, director of cultivation, in a drying room at Cresco Labs in Joliet on Dec. 17, 2019.
Jessica Ryan, director of cultivation, in a drying room at Cresco Labs in Joliet on Dec. 17, 2019. (Zbigniew Bzdak / Chicago Tribune)

The upstarts will have to compete with international corporations that advertise on radio and billboards, hire award-winning chefs to make edibles and have established brand name loyalty. The uneven playing field affects customers, because dominance by a few competitors has led to higher prices, which helps perpetuate illegal sales.

Those who have already competed in this market, though, say the newbies can succeed — if they concentrate on their own strengths and customers.

Plants in growing room at Cresco Labs in Joliet on Dec. 17, 2019.
Plants in growing room at Cresco Labs in Joliet on Dec. 17, 2019. (Zbigniew Bzdak / Chicago Tribune)

“The industry doesn’t even come close to hitting what it can,” Dispensary 33 co-owner and general manager Paul Lee said. “So there’s still a lot of room for growth. But they’ll have a heck of a time getting started.”

Illinois held a lottery last week to award 55 new recreational cannabis store licenses after more than a year of delay. Meanwhile, the industry has changed drastically since Illinois first gave out medical cannabis licenses at the end of 2015. Chicago also has become a capital of the industry, as home to some of the largest multistate operators, or MSOs, in the country.

Industry newsletter Grown In reported that 77% of legal recreational cannabis shipped in Illinois this March was produced by just six MSOs — Verano Holdings’ Ataraxia, Cresco Labs, Green Thumb Industries, Ascend Holdings, PharmaCann and Revolution Global.

Verano alone accounted for one-third of the product. Independent growers made up just 12% of the market.

One key to small and minority companies succeeding, former state Rep. Rickey Hendon said, will be working with each other, so growers and infusers supply stores, and retailers sell craft products.

“It’s not going to be easy,” he said. “If we work together, we’ll be able to help each other. Craft growers will need somebody to sell their products.”

Hendon’s group, West Side Visionaries LLC, won rights to a retail license and hopes to open a shop where he previously ran a CBD store.

But first he needs to raise funds for the $1 million or so he expects it will take to buy, build, hire, stock up and get running by this fall. It should be easier now that he has access to a license.

“Now, people are calling me saying, ‘You need any money?’” he said.

Even with two more lotteries in August to award 130 more dispensary licenses, a few companies that had the wherewithal to submit dozens of applications could end up with most of the licenses.

“It does concern me that consolidation is turning the industry into all big boys, so we want to make sure the small operators get their businesses started,” Chicago NORML’s Edie Moore, whose investment group won a craft license, said. “Just a few could own the most. We’re trying to change that, but it’s going to take a little bit of time.”

It’s not only important to get a license and start a business, she added, but also to keep it. There’s the danger that big companies could buy out the small investors, so regulators will have to make sure there are no violations of ownership agreements.

The state also recently awarded licenses to 40 craft growers, 32 infusers and 141 transporters. A key factor in growers’ success will be the size of their facilities, which initially are limited to 5,000 square feet of flowering plants.

New legislation sponsored by state Rep. La Shawn Ford would increase that limit to 14,000 immediately, while others like Hendon are calling for a 100,000-square-foot ceiling. The size of the facility relates directly to revenue, and so becomes equity that businesses can use to leverage loans. In addition, there is a proposal to require that growers provide oil for infusers to put into edibles and other products.

New licensees have to match their products to their customers’ preferences, said Jamie Schau, senior insights manager for cannabis industry analyst the Brightfield Group.

The most important quality Illinois customers are looking for in cannabis is to produce whatever effects they’re looking for, according to a Brightfield survey. The desired effect could be to get high, to dull pain, get sleep, or increasingly, to relax or elevate their mood without being intoxicated. Customers also care about price and taste.

“Trying to satisfy the consumers across top metrics will be key to developing a portfolio that matches the demands of the Illinois market,” Schau wrote to the Tribune, “aiding businesses to turn purchasers into loyal brand fans and succeed among larger competitors.”

Craft growers are delighted to have their first licenses, said Paul Magelli, founder and executive director of the Illinois Craft Cannabis Association, which sued the state to release the licenses. But applicants remain very concerned about the integrity of the process.

The state Department of Agriculture awarded the permits but has kept secret who the winners are and what their scores were. Officials said only that about two-thirds of the owners are Black or Latino, and all are majority veteran-owned. One unanswered question is whether the winners are in-state investors or out-of-state MSOs, which won some of the new dispensary licenses.

“That opaqueness doesn’t sit well with folks,” Magelli said.

Growers and infusers will need $5 million to $10 million to get going, Magelli estimated. First they’ll need financing, then to build their facilities, and stock them with plants, equipment and employees, which will likely take a year to 18 months to accomplish. The state requires licensees to become operational in six months, but has indicated it will give more time to those who are making progress.

Craft applicants already have invested about $100 million and 1 million hours into the industry, according to a survey by the association. They plan to invest another $500 million in the next eight months or so to build and get underway.

“This is going to be an economic engine for a whole new sector of cannabis in Illinois and the country,” Magelli said. “Like craft brewing, artisanal cannabis will be a powerful part of the industry if we can get it stood up successfully.”

Verano CEO George Archos believes there is plenty of room for new entrants, noting that Verano worked with some to get them started. He expects the craft growers, like microbreweries, to concentrate on higher-end products.

“I think they’re going to do very well. There are lots of opportunities here in Illinois,” Archos said. “It’s important for us to make sure all new entrants are successful.”

Adblock test (Why?)



"industry" - Google News
August 04, 2021 at 05:00PM
https://ift.tt/3yo2s8F

It's David vs. Goliath in Illinois' marijuana industry - Chicago Tribune
"industry" - Google News
https://ift.tt/2RrQtUH
https://ift.tt/2zJ3SAW

Bagikan Berita Ini

0 Response to "It's David vs. Goliath in Illinois' marijuana industry - Chicago Tribune"

Post a Comment

Powered by Blogger.