A long-awaited change to allow craft cannabis growers to expand should bring consumers more choice, but may still not be enough for businesses to open or make a profit.
A rule change in December by the Illinois Department of Agriculture allows craft growers to immediately expand from the current limit of 5,000 square feet of flowering plant space to 14,000 square feet.
“It helps,” said Scott Redman, president of the Illinois Independent Craft Growers Association. “But it doesn’t really solve the financial hurdles craft growers are facing. 14,000 square feet is really a minimum they need to have any kind of chance.”
By expanding capacity, growers say, they should have a better chance of getting financing to enlarge or open their businesses. They also would be better able to supply dispensaries statewide with new strains.
Many growers say they would prefer a new law to codify their ability to expand, rather than an administrative rule that leaves the decision up to state regulators. Cannabis Regulation Oversight Officer Erin Johnson previously said she supports such legislation to do so. But state lawmakers failed to act previously, and it remains to be seen whether there is enough support to do so this year.
The craft size limit was set in 2019 when large marijuana companies lobbied to have it written into the law that legalized recreational sales. Those previously existing companies, some among the largest in the country, are allowed to have warehouses of up to 210,000 square feet — 42 times the size of current craft growers.
Previously, craft growers were allowed to request expansion in increments of 3,000 square feet. The new rule allows the Department of Agriculture to grant the full expansion to 14,000 — if bureaucrats deem there is a “market need.” But agency officials may also decrease the size of an expanded craft grower by 3,000 feet annually if it hasn’t sold at least half its product in the previous half year.
Some growers said that the change still won’t be enough. After years of delay, just 10 craft growers are deemed operational, out of 88 licensed businesses.
Most of the owners have been unable to open for business, due largely to an inability to get sufficient financing. Because the plant remains illegal under federal law, federally licensed banks are forbidden from financing such operations.
The arbitrary size limit compounds the problems of getting financing, craft growers say, because other lenders are leery of funding operations with such small capacity.
Ambrose Jackson, CEO of the minority-owned The 1937 Group, welcomed the expanded growing limits.
“This is good news,” he said. “Hopefully, it will give us the boost to get across the finish line to build out our cultivation facility.”
His group did receive $1.5 million in two rounds of funding through a state loan program, but must repay some of it at a high interest rate, he said, and has been plagued recently by investors who failed to come through.
While working to open a cultivation facility in Broadview, the group has instead formed partnerships to “stop the bleeding” and launch new products through partnerships. The group is working with Canna Bella Lux, a Latina-owned company, to develop a brand marketed toward women.
Last fall, The 1937 Group opened a unique Parkway Dispensary near Danville with a cannabis consumption lounge, full bar, video gambling, and a fenced-in backyard for events.
The marijuana market in Illinois has changed since his group applied in 2019. Licenses were delayed two years by COVID, problems scoring applications and litigation. In the meantime, existing medical marijuana businesses were allowed to open and expand, cementing their customer base.
“Now the market we’re coming into is not a fair market,” Jackson said. “We’re experiencing growth week over week, but it’s only halfway to where we expected to be.”
Growers hope the rule change to allow expansion won’t forestall legislative action, noting that only eight more craft growers are licensed to begin construction.
“It’s pretty sad after all this time,” Redman said.
rmccoppin@chicagotribune.com
