We increasingly covet legal weed in Illinois. Earlier this week the state reported a robust $61 million in recreational sales, shattering June’s record of $47 million.
Consumers within the proximity of dispensaries with reliable supply are living in groovy times.
Dispensary owners that don’t control their own supply, however, remain nervous. Some with a license to expand to a second store are waiting for greater predictability of inventory before opening up those doors. Not doing so risks providing poor first impressions to consumers who don’t understand why their favorite flower isn’t in stock.
Additionally, it is not yet apparent how supply from the 21 licensed cultivators in Illinois (where as of last March six vertically companies accounted for 78 percent of the production) will increase quickly enough to serve 75 new dispensaries from social equity applicants.
Assuming retail licenses are announced next month, the next wave of independently-owned pot shops will begin opening within the next year. Their inventory will be dictated by incumbent suppliers, with potential relief down the road from dozens of craft growers who are awaiting their own licenses from the state.
The lucky few applicants who become licensed to sell recreational cannabis in Illinois necessarily need to focus on supply if they want to build sustainable relationships with consumers in their communities.
“If you are bringing consumers into an unsatisfactory experience, they are going to branch out and choose other options,” says Mike Luce, co-founder of High Yield Insights, a market research firm based in Chicago.
Continued supply shortages in Illinois are a result of the limited ramp up time for supply to meet recreational consumer demand, a pre-Covid cannabis cash crunch that is impairing some licensed cultivators from making necessary infrastructure investments, and the slow going of everything associated with living in pandemic times.
What is of limited concern now to dispensary applicants who must prioritize zoning, staffing and banking issues just to be in business, may prove to be existential next summer when they discover they are unable to procure product that is flying off the shelves of incumbent providers.
Of course, it’s not all doom and gloom. While the industry is focusing heavily on who will receive licensure to sell, grow, infuse and transport cannabis in the coming months, when you zoom out it becomes apparent that cannabis is becoming big business in Illinois – perhaps even sooner than the government and corporate communities anticipated.
Illinois is home to some of the largest and most successful cannabis companies in Illinois, including publicly traded Cresco Labs and Green Thumb Industries. The corporations that are benefiting from the existing climate but who also preach about their commitment to social equity can, perhaps, find different ways to support minority-owned businesses that are part of the cannabis ecosystem but don’t necessarily touch the plant.
A letter to J.B. Pritzker’s office asking for the state to reinvest larger than expected tax proceeds from cannabis sales into social equity applicants spending more than they expected as a result of licensure delays is a good start. But much more can and should be done.
“There’s the short game and the long game,” says longtime cannabis industry consultant Mark Peysakhovich, “and the long game really hasn’t started yet.”
As the cannabis industry continues to mature and normalize, there will be opportunities up and down the supply chain where minority-owned businesses can build wealth for a wider set of stakeholders and employees than who will ever work in the licensed retail, agricultural and processing aspects of the industry.
“Where are they buying their toilet paper, IT services, or outside legal counsel?” asks Peysakhovich. “If it’s not somebody with a diverse background, then why not? If we’re not asking those questions, we are fighting over the crumbs.”