MJBizMag October 2020 - 14

Existing Strategy Favors MSOs
Trends&HotTopics | Jeff Smith
Social equity licensees should be given a first crack at competing
in new recreational markets
A
template has emerged for new
adult-use cannabis markets:
Give the state's existing
medical cannabis operators a head
start-sometimes as much as a year or
more-to begin marijuana sales.
This is the quickest way for a
recreational marijuana market to
launch and start creating revenue,
industry experts say. States are
under even more pressure to
generate revenues quickly, given
the staggering economic cost of the
coronavirus pandemic.
But is this approach good for the
industry? Or will it just exacerbate
industry consolidation around
multistate operators (MSOs)? And
where does social equity fit in?
Getting a Jump Start
Many states once had a
preponderance of small, local
marijuana businesses. But since
2018, MSOs have rapidly expanded
their footprints, targeting not only
potentially lucrative medical
cannabis markets but also states
with the potential to legalize
adult-use marijuana.
Take Arizona, where adult-use
marijuana will appear on the ballot
in November. In the 12-month period
before the coronavirus hit the United
States, seven MSOs either expanded or
acquired operations in Arizona.
The MSOs positioned themselves
to profit from Arizona's $750 million-ayear
MMJ market and likely adult-use
legalization.
Then, MSOs Harvest Health &
Recreation, Curaleaf and Cresco
Labs bankrolled an industry-backed
recreational marijuana initiative that
almost exclusively favored existing
MMJ operators.
The pro-marijuana group Smart
and Safe Arizona raised nearly
$3.5 million through mid-July,
according to data compiled by the
Arizona Secretary of State's office.
Arizona-based Harvest
contributed more than $1.4 million,
Massachusetts-based Curaleaf
donated $600,000 and Illinois-based
Cresco Labs added $300,000.
Not surprisingly, those companies
have the most to gain from adult-use
legalization in Arizona. Harvest is
the state's No. 1 operator with 15
dispensaries and several cultivation
and processing facilities.
When some cried foul over
Arizona's MSO-first approach, one
concession was made: Smart and
Safe amended its initiative to include
26 social equity licenses. But the
licensing of those social equity
applicants is likely to come well after
the adult-use market is launched: The
initiative calls for state regulators to
develop that program.
If the marijuana industry is intent on
providing more than just lip service to diversity,
it will need to figure out a way to work
with regulators to fast-track social
equity applicants, perhaps as financially
supported micro-businesses.
14 Marijuana Business Magazine | October 2020

MJBizMag October 2020

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