John Pletz, Author at Green Market Report

Recent Stories by John Pletz

Business

For Illinois’ Cannabis Industry, the Roller-Coaster Ride Continues

John PletzDecember 4, 202314min00

Funding remains the biggest challenge across the industry.

Business

Illinois Cannabis Sales Rise, Taxes Fall

John PletzAugust 16, 20233min00

The cannabis business faces unique forces, from national politics to local market dynamics.

Business Public

Union Reaches Tentative Deal with Verano

John PletzJuly 21, 20233min00

It’s the second cannabis deal the Teamsters have reached in just a few months.

Business Private

Reality Hits Hard For License Lottery Winners

John PletzJuly 18, 20237min00

This story was republished with permission from Crain’s Chicago and written by John Pletz.

Martin Rasheed was surprised to learn he was among those chosen in a lottery with more than 2,200 other applicants for one of 36 new licenses to open marijuana stores in the Chicago area.

“I’m excited and I’m grateful. I never thought I’d be in this position,” says Rasheed, who works as a trucking broker. “I was an employee of a CBD store, which sparked my interest, and I took a certification class before the pandemic. I thought it was a good opportunity to put my name in the lottery and hope for the best.”

Now comes the hard part. Rasheed and the other applicants chosen in the lottery will have to prove they meet the criteria for the dispensary licenses. They’ll also have to pull together business and operational plans, find real estate — and come up with the estimated $500,000 to $1 million or more that it could take to pay for it all.

The Illinois Department of Financial & Professional Regulation is issuing 55 new retail licenses, adding to a pool of 192 licenses awarded last year.

Since Illinois began recreational marijuana sales more than three years ago, the industry has undergone a dramatic shift. Growth has slowed, in part because of a lack of retail outlets but also because inflation has put pressure on how much customers are willing to pay for weed. Capital is harder to find than ever.

“Fundraising and operations are both hard,” says Irina Dashevsky, co-chair of the cannabis practice at law firm Greenspoon Marder. “There are a lot of regulatory constraints. It’s not rocket science; it’s just cumbersome.”

The state scrapped a painfully long and expensive licensing process that pleased no one and was mired in litigation. But it kept the social-equity provisions aimed at diversifying ownership of the weed business in an effort to undo some of the effects of the war on drugs that hit Black and Hispanic communities hardest.

Applicants who won the most recent lottery will have 45 days to verify they meet the “social equity” criteria, mainly being owned or controlled by someone who lived in an area disproportionately affected by the war on drugs, had an arrest or conviction for marijuana possession or delivery that no longer is illegal — or whose family member meets the criteria. Eligibility also was extended to shooting victims.

Chicago-based tax and consulting firm RSM will determine if applicants meet the social-equity criteria. Tax and consulting firm KPMG scored the applications in the previous round of licensing.

Applicants who meet the social-equity criteria will be issued conditional licenses. They’ll have up to two years to find a location, build out a store and receive a final inspection by the state.

“(The latest applicants) didn’t have to submit detailed business plans, floor plans (or) security plans as part of the initial application process,” Dashevsky says. ”A huge amount of work is ahead.”

Funding is likely the most significant challenge for new applicants. Stocks of big cannabis companies have wilted, making it harder for small companies to find private investors. Because cannabis is illegal at the federal level, banks won’t lend to cannabis licensees.

And significant competition awaits. There are 110 stores operated by medical-cannabis license holders who had a five-year head start. And just 27 of the 192 new licensees have opened stores so far.

“Consumer interest in the product is still there,” Dashevsky says. “There will be enough demand to support the new licenses. The problem is getting the funding and knowing what to do to get open.”

Business Private

Illinois Grants 55 New Retail Cannabis Licenses Via Lottery

John PletzJuly 13, 20233min00

Most of the applicants were competing for 35 licenses in the Chicago area.

Business

Illinois Cannabis Sales Turn Around in June

John PletzJuly 10, 20232min00

Volume made up for falling prices during the month.

Business Private

Viola Entering the Chicago Cannabis Market

John PletzJune 21, 20237min00

This story was reprinted with permission from Crain’s Chicago and written by John Pletz.

A familiar name in the cannabis world is coming to Broadview, where a Viola retail store is set to open in the next week.

It’s the latest among the roughly two dozen new pot shops to open since the state of Illinois awarded 192 licenses last year after lengthy legal delays.

Preliminary licenses were issued just as private funding dried up and construction and other costs soared across the industry. As a result, many of the new stores that have managed to get open in this environment have one thing in common: affiliation with established operators in the cannabis industry, either in Illinois or other states.

Viola Chi is led by Dan Pettigrew, a Hyde Park entrepreneur and cannabis-industry veteran, and business partner Al Lomax. Pettigrew co-founded cannabis company Viola Brands with Al Harrington, a former pro basketball player, in Denver in 2011.

Pettigrew and Lomax won two licenses in Illinois. After opening the store at 1516 W. Roosevelt Road in Broadview, they plan to open another on Webster Avenue near Damen Avenue later this year.

Pettigrew and Lomax raised about $5 million for the Illinois stores apart from Viola Brands, drawing on relationships with Black business owners and investors.

“We understood it was going to be challenging,” Pettigrew says. “We’ve been operating in the legal cannabis space for over 12 years. We’re in a unique position (as minority owners) with a strong team and strong partners.”

The Chicago company is partnering with Viola Brands, which has operations in Colorado, Michigan, Missouri and Oregon, with facilities under construction in California and New Jersey. It also has won licenses in Maryland and other states.

Two other Chicago-area pot shops that have opened include those under the Spark’d brand. A Spark’d store that opened last month in Wicker Park is majority-owned by social-equity applicants Loretta and Priscilla Foster, who partnered with Paul Lee, a co-owner of Dispensary 33, which is one of the original Chicago dispensaries that launched with the state’s medical-marijuana program nearly a decade ago. A store in Hoffman Estates that opened in January is majority-owned by social-equity applicant Edward Bransford, who partnered with Bryan Zises, another co-owner of Dispensary 33.

“The Illinois application process was built to marry capital with experience with social equity,” Zises says. “That’s exactly what we did.”

Other familiar cannabis names among the newly opened stores in Illinois are Body & Mind, a publicly traded company with operations in Nevada, California, Arkansas, Michigan and Ohio; Star Buds, based in Denver, Colo.; and World of Weed, based in Tacoma, Wash., which is operating under the Ivy Hall name in Montgomery and Waukegan.

“Most of the people opening stores are extremely familiar with opening and operating a dispensary,” says Pam Althoff, former executive director of the Cannabis Business Association of Illinois, an industry trade group. “They know what it takes.”

Many winners of dispensary licenses have struggled to raise capital and get stores up and running. It’s one reason state legislators approved a one-year extension on the amount of time license winners had to find locations for new stores and authorized a $40 million loan fund.

“There’s no money anywhere in cannabis right now,” says Laura Jaramillo Bernal, chief operating officer at NuEra, an existing cannabis operator with six stores in Illinois. “For social-equity applicants who don’t have collateral or previous operating experience, it’s especially challenging.”