An Introduction to the Illinois Cannabis Landscape
Illinois Landscape
Recently, Illinois issued 40 craft grow licenses and 32 cannabis infuser licenses. It’s a limited license state with 21 cultivators currently online. The original 21 licenses, issued in 2015 as part of the medical program, are now permitted to sell for adult use. Additionally, craft grows and infusers are both new license types.
Here’s a breakdown of craft grows and infusers:
- Craft Grows: Currently, craft grows are permitted to cultivate up to 5,000 s.f. of canopy space and process/manufacture. Rumors say that the State legislature will raise the canopy space to 14,000 s.f. in the next legislative session (January 2022). We suspect the long-term goal with these licenses is to bump them up to 30-40,000 s.f. of canopy space. The State has made clear they intend to issue up to an additional 60 craft grow licenses by December.
- Infusers: Permitted to infuse cannabis extract into edible products (read: they cannot purchase flower to create their own extract, which is a big problem). The basic idea with this license type is to create branded edible products; the hope is that they will innovate on the culinary side of cannabis. Unfortunately, Illinois law does not permit products that must be kept hot or cold, so everything created must be shelf-stable. That said, there are several things in the works in the legislature to try to expand this license so that it is a viable business. Further, the State has made clear they intend to issue up to an additional 60 infuser licenses by December.
Social Equity Applicants (SEAs)
Illinois issued these licenses to groups owned 51% or more by Social Equity Applicants (SEA). SEA’s are either:
- People from Disproportionately Impacted Areas.
- People with cannabis offenses that are expungable under the new adult-use law.
The purpose is to prioritize individuals who have been targeted by the war on drugs and who have not seen generational wealth from the legalization of cannabis. The state will also issue 185 new dispensary licenses in the next two weeks. Additionally, they will hold three separate lotteries at the end of this month and the beginning of August.
Why The Illinois Market is Interesting:
- Diversity: Soon, Illinois will be one of the most diverse cannabis markets in the country. Social equity laws and regulations allow for community reinvestment and a careful eye towards disadvantaged groups.
- M&A: Many new licensees will be in need of a serious influx of cash. While you can’t outright sell your license in the first year, people will find creative ways to get around that. Above all, this could negatively impact the diversity of the space, but it does provide opportunities for investors (hopefully, ethical ones).
- Limited Licenses: Unlike California, the State of Illinois has limited the number of licenses available for each license type. This drives up the value of each license. For instance, more than a thousand applicants submitted applications for craft grow and only 40 won. As noted before, they are issuing up to 60 more craft and infuser licenses.
- Partnership Activity: Becoming profitable is going to be difficult for craft grows, but even more so for infusers. This is going to drive a lot of innovation and unique branding opportunities. Many craft grows and infusers are already exploring unification under one brand to achieve greater market penetration. Most likely, these partnerships will be with seasoned cannabis brands who can provide things like: satandards of procedure, help purchase equipment, build out kitchens/extraction, and provide strategic advice.
How Point7 Can Help
Point7 supports our clients by presenting the details of different cannabis markets to help forward your business. New products and regulations are emerging and evolving constantly. Some states place limitations on the types of products a cannabis business can produce or sell. Overall, it is essential to understand your local market and the patient/consumer demand. If you’re looking for guidance for your cannabis business, reach out to us and see how we can help.