Did CT’s cannabis industry rollout benefit big business?

It was 18 months in Connecticut between the passage of a law legalizing cannabis and the opening of the first stores. That time allowed entrepreneurs to plan for future businesses and regulators to ensure a smooth rollout with the aim to ensure disproportionately affected communities had a fair shot at being involved in those businesses.

But currently there are only four cultivators growing cannabis for Connecticut’s recreational and medical markets, all of which are some of the largest cannabis businesses in the nation, raising some questions over whether the rollout went as smoothly as was initially hoped for. Critics say those four businesses are being helped at the expense of smaller business owners and consumers.

 “If you think restricting access is the goal of the program, then I guess you can claim that Connecticut has the program that does that to the strongest extent, but it’s not helping patients,” said Jason Ortiz, executive director of Students for Sensible Drug Policy and past president of the Minority Cannabis Business Association. “It’s not helping social equity advocates. It’s not helping the public. It’s just keeping these four operators afloat.”

One of those companies, Curaleaf, for example, based in Indiana, reported third quarter earnings of $340 million last year. Verano Holdings, which owns CTPharma, reported $123 million in revenue in the third quarter of 2022. While cultivation licenses have been issued, including to social equity growers and micro-cultivators, none are as of yet producing cannabis.

In order to grow cannabis, a cultivator must be licensed, then gain local zoning approval, purchase equipment and hire staff, before the first seed is planted.

Others, however, argue that growing and selling cannabis at scale requires a significant financial investment, and that the rollout allowed business owners a way into the market within months, instead of years. 

“Cannabis is an unbelievably capital-intensive industry,” said Ben Zachs, chief operating officer of Fine Fettle, which owns four cannabis dispensaries in Connecticut. “It is not just capital intensive, it is time consuming to build a cultivation facility from scratch, or to go in and retrofit a building. You’re doing 12 months at best, maybe 24 months, and you can’t take a bank loan.”

The cost for entry

Ortiz and others argue that the cost of licenses were set so high that smaller dispensaries and cultivators were forced to partner with the largest corporations. 

According to state law, if an existing medical cannabis cultivator — of which there are only four in the state — wants to expand their business, that expanded license will cost $3 million. If however, they partner with an equity joint venture, “such fee shall be $1.5 million.”

That, Ortiz said, encourages larger companies from outside Connecticut to engage in the recreational market and find a social equity applicant to partner with.

“It is very strange if I wanted to open up a hardware store and I had to go to Walmart and say, ‘Walmart owns half of this’ or I can’t even open my store? Like it’s crazy to have that,” he said. “Folks should look at it as an abomination of what has been talked about as far as equity or even just basic commerce.”

For an out-of-state company to partner with a local equity joint venture, that local entity would have to retain 65 percent of control, under the law. 

“I could partner, if I wanted to do that, with somebody that’s not one of the top four,” he said. “So I could go to a different MSO from out of state and say, ‘Hey, do you want to grow in Connecticut? Pay the $3 million. We get unlimited size grow.’”

Nutmeg New Britain, for example, which has been granted a micro-grow license as an equity joint venture, has partnered with Curaleaf, according to state records. 

“It was made very difficult,” said Ivelise Correa, executive director of Good Trouble Advocates and vice president of BLM860. “You basically had to partner with an out of state agency. If you wanted, like another state company or something if you wanted to get in and that’s the only way that anyone from Hartford is going to be able to get in. 

The prospect of delay 

State Sen. Gary Winfield, D-New Haven, was one of the legislative architects of the recreational cannabis rollout, among other legislators. He said the goal of the joint equity program was to allow businesses in communities most affected by the drug war a way to get into the market, sooner. 

“Some people will look at this and say, ‘We have to get those businesses up. They have to have a piece,” he said. “Some people look at the social equity fund and say, ‘That’s money that’s going to go back to help all kinds of people.”

Winfield said that crafting the legislation required some compromise, and he knew there would be critiques, that he “expected people to have criticisms.”

“I am not a person who stands there, and defends this as the best thing ever. I’m a person who says, we had a process. We tried to weigh everything,” he said. “From the perspective of some folks, we’re going to get it wrong.”

“I was listening to what people were saying and trying to figure out how do we craft a law that does as much as possible,” he said. 

Meanwhile hemp growers have been lobbying that. as existing marijuana growers, they could have been allowed to convert their facilities to fill gaps in the recreational cannabis market. A bill to that effect is currently being considered in the state legislature. 

“Someone said something along the lines of, ‘Well if we allow the hemp farmers to get a license, they’re jumping ahead of the line and it’s unfair,” said Kristin Souza, owner of CBD shop Sugar Leaf in Middletown. “I don’t look at it like that because right now, the problem is that we have supply issues and concerns with quality, and these folks should have been allowed in the first place because they’re craft growers.”

Zachs of Fine Fettle said, comparing the rollout of recreational cannabis in Connecticut to that of other states is important. 

“It took Connecticut 18 months to go from signing the bill into law to adult use sales, and during that time, it did give companies an opportunity to get started and to start looking for real estate and to start preparing,” he said. “Do I think it’s perfect? No. It sounds crazy to say but we’re doing a much more rapid job of getting things moving, of giving out licenses, than most other states did.”

Ortiz argued that speed should not have been the primary concern.

“I’d rather us delay it for a year and have a better program for the next 100 than to rush into a terrible program faster and then have to deal with a terrible program for the next 100 years,” he said.

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