Illinois touts diversity in pot industry, but revenue for minorities shows little growth

Illinois has the most diverse cannabis ownership in the United States, according to a new study — but minority businesses received very little of the industry’s revenue, and new owners say they need a lot more help to get started.

The state-commissioned disparity study found that 60% of all recreational and medical cannabis licenses went to minority- or women-owned businesses. That includes 27% of owners who are Black, 16% women, 5% Latino, 3% Asian and 14% a mixed coalition. Other states reported minority and female ownership of 37% of less.

But not one dollar of sales from growing cannabis was documented going to ownership by Blacks or Hispanics by the close of the study at the end of 2023. Majority Black ownership made up only 0.02% of recreational dispensary sales. White male owners took in 78% of recreational dispensary sales, and 91% of grower sales.

The overall licensing diversity in Illinois is driven mostly by newer recreational pot licenses, and contrasts with the state’s medical cannabis market, authorized in 2013, which the study reported is 21% women- or minority-owned. Many of those first medical growers — like Cresco Labs, PharmaCann and Green Thumb Industries — were started largely by relatively wealthy white males who could meet the law’s strict financial requirements. Those companies have grown into some of the largest cannabis operators in the nation.

Part of the rationale for legalizing cannabis was to correct harms done to Black people, who were disproportionately prosecuted for marijuana-related offenses. Illinois law does not give preference for cannabis licenses based on race or gender, but does give advantages to social equity applicants, generally defined as people with a low-level weed offense or who come from poor neighborhoods.

“We’re incredibly proud of our emerging cannabis industry, and we’re fully committed to making this an industry where people most affected by the War on Drugs can start their own business and thrive,” Gov. J.B. Pritzker said in a news release.

Scott Redman, founder of the Illinois Independent Craft Growers Association, said that though the state has awarded licenses to minorities, very few of them have been able to open.

Only 16 out of 87 craft grow licenses were operational as of June, by the association’s count. The COVID-19 pandemic, inflation and high interest rates, litigation, lack of action by lawmakers, and unregulated competition from unlicensed intoxicating hemp products have ruined many efforts to open, Redman said.

As a result, many craft growers facing an Aug. 1 deadline to begin operating say they need extensions from the state.

“If nothing else, this study also shows the extreme need to provide some forms of financial support to (social equity) companies in order to get off the ground,” he said.

The state Department of Commerce and Economic Opportunity has provided almost $22 million in forgivable loans to social equity licensees, with 84% going to minority- and women-owned businesses. Cook County is offering $3.6 million in grants, though both programs have stopped taking applications.

Statewide, consumers spend $2 billion on cannabis each year, generating nearly $500 million in tax revenue.

Currently, 218 retail stores are licensed. Another 55 social equity licenses are on the way.

The consultant that conducted the study, the Nerevu Group, recommends strengthening social equity by increasing access to capital, unifying state policies and simplifying administration, and expanding economic opportunities for new businesses.

The study was based on surveys and focus groups. In one survey, 59% of minority or women respondents said they felt race or gender played a role in barriers to applying for a license — some from potential investors.

In focus groups, one applicant said, “One group of potential investors told me that I do not have the skill set necessary to make it in any business. These individuals were non-minority. For the record, I had more business experience and educational opportunities than both of them.”

Another said, “As a Black person, I feel that I don’t have the same access to capital, both in my personal and business networks, as others might. What this means is that the connections I have with people who could provide financial support or investment opportunities seem to be more limited.”

Others also reported that, while they cannot prove it, they believe that banks offer them higher interest rates or deny them loans and land in certain neighborhoods because of their race.

Gender discrimination was also cited as a challenge for women. During an interview, one participant recounted how despite her in-depth business and cannabis knowledge, she was ignored and belittled by her male colleagues.