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With Illinois Legalization, A Potentially Massive New Market Emerges

June 4, 2019

Cannabis companies are toasting the emergence of a potentially momentous expansion opportunity, as Illinois becomes the 11th state to legalize adult-use cannabis and the first to establish a regulated sales structure through the legislature. Governor J.B. Pritzker has vowed to sign the bill, which passed the state congress late last week, calling it “the most equity-centric approach in the nation.” Illinois is the fifth-most-populous state in the U.S., with nearly 13 million people.

Under the new law, Illinois residents 21 and older will be allowed to possess 30 grams of cannabis, with non-residents allowed to possess 15 grams. Sales will begin January 1 next year from licensed sellers, which will initially consist only of established medical dispensaries before new shops begin receiving permits around mid-year. Taxes will be assessed at the point of sale, with any product at less than 35% THC (such as flower) taxed 10% of the price, edibles taxed 20%, and products at more than 35% THC (concentrates and certain oils) taxed 25%.

Industry leaders applauded the move, in particular those headquartered in the state. Charlie Bachtell, CEO and co-founder of Chicago-based Cresco Labs, who served on the Cannabis Legalization Subcommittee of Pritzker’s transition team, noted, “As the current market leader in the rapidly expanding medical-use cannabis program in the state, we look forward to also serving what will no doubt represent one of the largest adult-use cannabis customer bases in the U.S.” In addition to its namesake brand, Cresco markets Reserve, Remedi, and Mindy’s cannabis labels.

Cresco says it will have the ability to open five adult-use retail dispensaries in the state, joining its five medicinal dispensaries, along with three cultivation facilities, the maximum number allowed per company. Cresco expects Illinois’ adult-use market to be 10-20 times larger than the state’s medicinal program, which grew by more than 50% to $136 million in dispensary sales last year, across 55 stores.

Also well positioned in Illinois is Green Thumb Industries, which has five existing dispensaries in the state. Headquartered in Chicago, Green Thumb’s revenue more than doubled in the first quarter to $28 million. The company’s founder and CEO, Ben Kovler, commended the state’s approach, saying it legalized cannabis “in a fair, equitable manner that will expand upon the success of the medical cannabis program.” Kovler’s great-grandfather, Harry Blum, helped turn Jim Beam into one of the icons of American whiskey following the end of Prohibition. Now he’s angling to do the same for Green Thumb, whose brands include the Rise retail chain and the upscale Beboe cannabis label.

While established industry names are gearing up for Illinois’ recreational market, smaller players will also be part of the landscape: under the new law, “craft growers” will be able to apply to cultivate cannabis on up to 5,000 square feet.—Danny Sullivan

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