In many states, marijuana laws are written in ways that favor big businesses. Barriers to entry for cultivators, processors, and dispensaries include high application fees, exorbitant taxes, and security requirements that climb well into the millions. In an industry where bank loans and investments are hard to come by, small farmers and small businesses are at a very big disadvantage when it comes to entering and thriving in the marijuana market.
Before California legalized recreational marijuana in 2016, many cannabis growers actually opposed it. They cited high environmental costs to operate marijuana farms, unnecessary inspections, a separate cultivation tax, and the upcoming Type 5 cultivation licenses for large businesses coming in 2023 as the four primary reasons for opposing legalization of recreational marijuana in the state.
In Colorado, big businesses are establishing a stronghold in the marijuana market in a different way. In May 2016, the state extended a moratorium on the issuance of new cannabis licenses. As a result, big marijuana businesses were able to purchase most of the available licenses. In addition, Colorado doesn’t limit the number of plants marijuana cultivators can grow in each facility. That means big businesses with deep pockets could produce more than enough marijuana to meet demand.
Sean Williams of Motley Fool explained the situation in Colorado saying, “An oligopoly-driven oversupply is pushing prices down. While this could be good news for the consumer for the time being, in the long term it could keep smaller marijuana players out of the market by keeping margins low, ensuring that just a few large players remain.” In other words, the stage is set for big marijuana in Colorado.
Craft Marijuana Cultivators Could be the Future of Small Marijuana
While most small businesses and local farmers struggle to find the money to overcome the barriers to getting in and staying in the marijuana industry within their states, farmers in Massachusetts are looking for ways to circumvent big businesses. Massachusetts Senator Julian Cyr introduced an amendment that became law as part of a comprehensive cannabis bill which allows craft cooperatives. These craft cooperatives give smaller farmers the ability to come together in order to split the costs and profits associated with growing marijuana.
The cooperative model has been compared to craft breweries in the beer industry where smaller “craft” cannabis cultivators might grow high-quality, specialty marijuana that could be sold at a higher price point than mass-produced marijuana grown by big businesses with big farming operations.
Craft cooperatives are intended to make the marijuana industry in Massachusetts more open. Since recreational marijuana was legalized in the state in 2016, the market is expected to grow significantly in the future, and more farmers of all sizes want to get into it. Craft cooperatives don’t solve all of the problems small growers face when trying to enter the marijuana market, but they could help.
The Future of Big and Small Marijuana
It seems inevitable that big business will play a major role in its short-term and long-term growth. The way marijuana laws are written, it’s simply too cost-prohibitive for many smaller businesses and farmers to compete.
However, as the farmers in Massachusetts have proven by speaking out about laws that made it impossible for them to participate in the industry, it is possible for smaller players to create opportunities and carve a niche. Until laws change in more states, this might be the best small businesses and growers can hope for.
How do you feel about big business and big marijuana? Leave a comment and share your thoughts.