Pot group calls for rapid expansion of marijuana industry
Illinois NORML warns state is on verge of ‘one of greatest failures in the history of regulated cannabis’
Illinois NORML warns the state’s marijuana industry is an “oligopoly” on the verge of an epic failure. (Shutterstock)
By Ted Cox
A leading marijuana advocacy group is calling for the immediate expansion of the Illinois cannabis industry to meet the demand for both medical patients and the expected influx of legal pot smokers under a recreational-use program.
The Illinois Chapter of the National Organization for the Reform of Marijuana Laws put out a paper this week calling the current industry an “oligopoly” and saying studies put out by both the industry and legislators pushing for legalization have dramatically underestimated the demand for pot under a recreational program.
The chapter’s paper, “Illinois Cannabis Industry Overview and Analysis,” charges that the state’s marijuana industry is already struggling to keep dispensaries supplied for medical patients and those in a nascent opioid-alternative pilot program. It says already-licensed cultivation companies trying to keep the growing business to themselves will need to be augmented with hundreds if not thousands of new cultivators to meet the demand for legal weed.
It warns in no uncertain terms: “We are quickly proceeding towards what could be one of, if not the single greatest, failures in the history of regulated cannabis.”
According to the paper, “Limited product supply, high medicine prices, and unfavorable tax codes have led to a market which is dominated by several large operators, further limiting competition and forcing consolidation.”
It added that “over half of the dispensaries are now owned outright or partially owned by cultivator or cultivator-affiliated groups through private transactions not available to public record.”
That consolidation has become a key issue as the state mulls full legalization, with Gov. Pritzker already saying in his first budget address the state could earn $170 million in fees and licenses just in the first year of legalization.
Contradictory studies of the industry have been flying back and forth just this month. State Sen. Heather Steans and state Rep. Kelly Cassidy, lead sponsors of legalization in the General Assembly, released a study early in the month saying existing cultivation companies would not be able to meet the demand for legal weed. That opened the door for expansion of the industry to new local companies, many of them expected to be based in minority communities that bore the brunt of the “War on Drugs.” Cassidy has supported that “equity” position, calling it “the hill I’m willing to die on.”
The Medical Cannabis Alliance of Illinois, an industry group, countered with its own study saying already-licensed cultivation centers would indeed be able to handle the demand for legal weed, at least through the first five years.
Illinois NORML’s paper this week said they were both wrong, in that both vastly underestimated the demand for recreational marijuana in Illinois should it become legal. The paper projected a significant tourist market, stating, “Adult use in Illinois would represent a 127 million person market with 13 million residents and roughly 114 million visitors annually. Five of the six states (including Michigan) bordering Illinois have no cannabis programs.”
The paper extrapolated that from Colorado, the first state to legalize marijuana, stating, “Colorado features an 87 million person market with 5 million residents and 82 million annual visitors.” With Colorado consuming 650,000 pounds of reefer a year, the paper estimated Illinois demand at 1.4 million pounds.
Colorado, however, now has 1,000 licensed dispensaries and almost 1,500 cultivation licenses. The pilot program for medical marijuana in Illinois, by contrast, has 16 cultivators working from 21 licenses and 55 licensed dispensaries.
The paper suggested those cultivation companies were already unable to meet demand for medical pot, stating: “Illinois licensed cultivators have stated outright (as recent as January) that they cannot meet current demand, with wait times exceeding two months in some cases for delivery of medical cannabis products.”
“We are concerned about the ongoing health of both the medical-cannabis programs and any proposed adult-use programs. We are quickly proceeding towards what could be one of, if not the single greatest, failures in the history of regulated cannabis.”
Like the Cassidy-Steans study, the paper emphasized those entrenched companies would have to place a priority on serving medical patients. “While we continue to hear many arguments against additional licensees for those wishing to retain their oligopoly and market share, the fact of the matter is a successful medical expansion and more so an adult-use program will require additional operators to meet demand,” the paper stated. “Concessions for medical stakeholders are reasonable and typical in most states. Concessions should be made in Illinois, as they have been elsewhere, but as mentioned in this specific scenario, the successful launch of a new program is not possible without significant expansion. The current market is showing it is incapable of meeting medical demand, let alone the enormous surge an adult use program would generate.”
The NORML paper pointed out that California — which more recently legalized marijuana, but is a much larger state with an established weed culture — has more than 9,000 licensed cultivators to Colorado’s 1,400. Illinois, again, has 21.
Illinois NORML proposed expanding the market for medical marijuana, diversification of the industry through additional companies, and dramatically expanding the licenses for cultivation and dispensaries in order to ramp up supplies to meet the initial demand once marijuana is legalized — which could come as soon as early next year, although there’s a movement afoot in the General Assembly to slow the entire process.
“Without the implementation of the above to some degree, we are concerned about the ongoing health of both the medical-cannabis programs and any proposed adult-use programs,” the paper concluded. “We are quickly proceeding towards what could be one of, if not the single greatest, failures in the history of regulated cannabis.
“As the industry continues to grow nationwide, it is common to hear legislators utilize the phrase ‘learn from the mistakes others have made’ when addressing and designing newly proposed adult use programs,” it added. “To date, all adult-use program launches nationwide, and now with the Canadian program, clearly display one critical point that is increasingly overlooked. Virtually no adult-use program launched in any location worldwide to date has addressed meeting actual demand with adequate supply upon their initial launch. Given Illinois’s current shortcomings regarding sales and production capacity compared to similar programs, Illinois is possibly approaching what could be the most significant product shortage seen in any regulated program to date with both pricing and accessibility issues. These problems will continue to multiply as the programs expand if licensed operators are kept in limited and concentrated numbers.”