Has CT’s launch of the cannabis industry benefited big companies?

In Connecticut, 18 months elapsed between passage of legislation legalizing cannabis and the opening of the first stores. This time allowed entrepreneurs to plan for future ventures and regulators to ensure smooth adoption, with the goal of ensuring disproportionately affected communities had a fair chance to participate in these ventures.

But there are currently only four breeders growing cannabis for Connecticut’s recreational and medicinal markets, all of which are among the largest cannabis companies in the country, raising some questions about whether the launch has been as smooth as initially hoped. Critics say these four companies are being helped at the expense of smaller business owners and consumers.

“If you think that limiting access is the goal of the program, then I think you can argue that Connecticut has the program that does it the hardest, 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 doesn’t help social justice advocates. It doesn’t help the public. It’s just keeping these four operators afloat.”

One such company, Indiana-based Curaleaf, reported $340 million in third-quarter earnings last year. Verano Holdings, which owns CTPharma, reported revenue of $123 million in the third quarter of 2022. Although cultivation licenses have been issued, including to social equity growers and micro-cultivators, it is not yet producing cannabis.

To grow cannabis, a grower must be licensed, then obtain a local building permit, purchase equipment, and hire staff before planting the first seed.

Others, however, argue that growing and selling cannabis on a large scale requires a significant financial investment and that commercialization allowed business owners to break into the market in months rather than years.

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

The cost of entry

Ortiz and others argue that licensing costs were set so high that smaller dispensaries and growers were forced to work with the largest companies.

According to state law, if an existing medical cannabis cultivator – of which there are only four in the state – wants to expand their business, this extended license costs $3 million. However, if they’re working with an equity joint venture, “that fee is $1.5 million.”

That, Ortiz said, is encouraging larger companies outside of Connecticut to get involved in the recreational market and find a social justice candidate to work with.

“It’s very weird if I wanted to open a hardware store and I had to go to Walmart and say, ‘Walmart owns half of it,’ or I can’t even open my store? Like it’s crazy to have that,” he said. “People should consider it an abomination of what has been spoken of in terms of justice or even simple trade.”

For a foreign company to partner with a local equity joint venture, the law would require that local company to retain 65 percent control.

“If I wanted to, I could work with someone who wasn’t in the top 4,” he said. “So I could go to another MSO out of state and say, ‘Hey, do you want to grow in Connecticut? Pay the $3 million. We can grow indefinitely.’”

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

“It’s been made very difficult,” said Ivelise Correa, executive director of Good Trouble Advocates and vice president of BLM860. “They basically had to work with an outside agency. If you wanted, like some other state corporation or something, if you wanted to come in, and that’s the only way someone from Hartford will be able to come in.

The prospect of delay

State Senator Gary Winfield, D-New Haven, among other lawmakers, was one of the legislative architects of the introduction of recreational cannabis. He said the goal of the joint stock program is to provide a path for companies in communities hardest hit by the drug war to get into the market earlier.

“Some people are going to look at this and say, ‘We need to get these companies up and running. You must have a piece,” he said. “Some people look at the Social Justice Fund and say, ‘This is money that goes back to help all sorts of people.’

Winfield said drafting the legislation required some compromises and he knew there would be criticism, that he “expected people to have criticism”.

“I’m not a person to stand there and defend this as the best thing ever. I’m someone who says we had a trial. We tried to weigh everything,” he said. “From some people’s point of view, we’re going to get it wrong.”

“I’ve been listening to what people were saying and trying to figure out how we’re going to create a law that does as much as possible,” he said.

In the meantime, the hemp farmers have campaigned for it. as existing marijuana growers, they could have remodeled their facilities to fill gaps in the recreational cannabis market. A corresponding draft law is currently being examined in the state parliament.

“Someone said something along the lines of, ‘Well, if we allow hemp farmers to get licensed, they’re jumping ahead of the line and that’s unfair,'” said Kristin Souza, owner of Middletown CBD store Sugar Leaf. “I don’t see it that way because right now the problem is that we have supply issues and quality concerns and these people should have been admitted in the first place because they are artisanal growers.”

Fine Fettle’s Zachs said it’s important to compare Connecticut’s adoption of recreational cannabis to that of other states.

“It took Connecticut 18 months to go from signing the bill to adult sale, and during that time it gave companies an opportunity to get started and research properties and prepare,” he said. “Do I think it’s perfect? No. It sounds crazy to say, but we get things up and running and licensing much quicker than most other states.”

Ortiz argued that speed shouldn’t be the primary concern.

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

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