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ILLINOIS CANNABIS INDUSTRY
OVERVIEW AND ANALYSIS
Original Publication Jan 2019 v.1.1
Updated Feb 2019 v.1.2
Updated Mar 2019 v.1.3
Updated Mar 2019 v.1.4
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FOREWORD
Issues Facing Medical and Adult Use
Cannabis Programs in Illinois
The passage of Senate Bill 336, the Opioid Alternative Pilot Program (OAPP), coupled with support and
encouragement from newly elected Governor, J.B. Pritzker, will likely redefine how cannabis is treated in the
state of Illinois as we proceed through and beyond 2019. Legislators, rule makers, and existing as well as
future program participants would be well served to carefully and thoroughly consider the implementation of
such programs and the far reaching potential effects on the medical patients, operators, and our communities.
After conferring with participants in the Illinois medical program, both license holders and operators,
operators throughout various other states, as well as those that have participated in non-US based medical
programs worldwide, we would like to provide input on some of the key issues facing the Medical Cannabis
Pilot Program (MCPP), the OAPP, medical expansion, and the potential adult use programs in Illinois. While
it is often stated that Illinois wishes to seek, and be seen as the gold standard for a well regulated cannabis
policy, we are gravely concerned with the potential for program falter or failure without significant foresight,
consideration, and action to address the many issues that are currently facing the medical and would be facing
adult use cannabis programs in Illinois.
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TABLE OF CONTENTS
1.0 - Medical Cannabis Program ............................................................................................... 4
1.1 – LIMITED SUPPLY AND MARKET FORCES .................................................................................................................................... 4
1.2 – EMPTY AND UNLICENSED DISPENSARY DISTRICTS ............................................................................................................. 7
1.3 – LIMITED MEDICAL CONDITIONS AND PARTICIPATION ..................................................................................................... 8
1.4 – CONSOLIDATION OF INDUSTRY OPERATORS AND OLIGOPOLIZATION .................................................................. 9
1.5 – OAPP EXPANSION AND MARKET PREDICTIONS .................................................................................................................. 10
1.6 – PROGRAM SOLUTIONS AND POSSIBLE ACTIONS .................................................................................................................. 11
2.0 - Adult Use Cannabis Program .......................................................................................... 13
2.1 – MARKET SIZE COMPARISONS ......................................................................................................................................................... 13
2.2 – CONCESSIONS FOR EXISTING MEDICAL STAKEHOLDERS .............................................................................................. 16
2.3 – PRODUCT SHORTAGES AND PROTECTIONS FOR EXISTING MEDICAL PATIENTS .............................................. 18
2.4 – USE OF TAX REVENUE ....................................................................................................................................................................... 20
3.0 – Illinois Adult Use Projections and Recommendations .................................................. 21
3.1 – ILLINOIS ADULT USE DEMAND ESTIMATE .............................................................................................................................. 21
3.2 – ILLINOIS ADULT USE LICENSED PRODUCTION SPACE ..................................................................................................... 25
3.3 – ILLINOIS ADULT USE ADDITIONAL LICENSED OPERATORS REQUIRED ................................................................. 27
3.4 – ILLINOIS ADULT USE PROGRAM IMPLEMENTATION NOTES ......................................................................................... 31
4.0 – Critical Analysis of Alternative Demand Studies ............................................................ 36
4.1 – FREEDMAN & KOSKI DEMAND STUDY ...................................................................................................................................... 36
4.2 – MARIJUANA POLICY GROUP DEMAND STUDY ....................................................................................................................... 42
4.3 – IL NORML DEMAND STUDY SUMMARY ...................................................................................................................................... 45
5.0 – Cannabis Program State Comparisons ........................................................................... 46
5.1 – CANNABIS PROGRAM LICENSING STRUCTURES ................................................................................................................... 46
5.2 – STATE OPERATOR LICENSE ALLOCATION AND COMPARISON .................................................................................... 48
5.3 – ANNUAL SALES AND OPERATIONAL CAPACITY ................................................................................................................... 52
6.0 – Conclusion....................................................................................................................... 55
CONTACT ............................................................................................................................................................................................................ 56
7.0 - References ........................................................................................................................ 57
ADDENDUM I - LICENSED CULTIVATION OPERATIONS ............................................................................................................ 59
ADDENDUM II - AVERAGE PRODUCT PRICING ............................................................................................................................... 62
ADDENDUM III - LICENSED DISPENSARY OPERATIONS ............................................................................................................ 65
ADDENDUM IV – VERSION UPDATES ................................................................................................................................................... 68
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1.0 - Medical Cannabis Program
1.1 – LIMITED SUPPLY AND MARKET FORCES
ISSUE: The current Illinois medical market has limited production capacity which limits
competition and artificially inflates medicine prices. 1
The current medical program is represented by a limited number of producers and retailers. As a result,
this has limited competition and has allowed the market to stagnate, inhibiting product development,
artificially inflating medicine prices above that of the black market and comparable legal markets, and limiting
product availability for patients. In Illinois, sixteen (16) cultivators, covering twenty (21) discreet licenses,
control the entire supply for the state’s medical program, which is distributed by fifty five (55) dispensary
retail establishments. Since the program’s launch in 2015, more than half of the licensed retail dispensaries
are now owned, or partially owned by cultivators or cultivator affiliated groups through the result of
numerous private acquisitions with clear ownership records unavailable to the public.
Production is further limited by those producers with multiple licenses and those with minimal
production capacity. Several licensed producers in Illinois maintain facilities at a bare minimum in order to
preserve those licenses in good standing according to the letter of the law. These facilities are not producing
medicine, or in the best case, are producing a negligible amount of medicine, and further decrease the supply
available for patients. Rules and regulations from the Department of Agriculture (AGR) called for
commencing operations within six months, with failure to do so eventually resulting in a forfeiture of a
license and surety bond. Many license holders missed this timeline with no repercussion, and several
continue to operate facilities with no production or negligible production simply to retain those coveted
medical licenses. Additional regulations in AGR rules require that licensees have the ability to expand to meet
demand as the program expands. This was a part of every cultivator’s original application that was reviewed
for approval by AGR and the basis for their original selection.2 These claims are further supported by
information acquired by the commissioned report from consultancy Freedman & Koski, which states per the
Illinois Department of Agriculture, Illinois cultivators currently operate only 259,000 square feet, with
613,000 square feet unused, approved, and or still under construction as the program is now entering year 5
since licenses were awarded in February 2015. 3 Worthy of note is there are single cultivator locations
throughout the nation that approach or exceed the size that all Illinois stakeholders cumulatively currently
occupy.
Numerous examples of the shortcomings of current Illinois cultivators and their accompanying
production limitations can be listed, but the general failings and themes within each shortcoming example
apply statewide and can be summarized. Wait times for medical products have been continuously growing
and have been quoted as high as two months as of January 2019, with other orders reduced in quantity due to
stock issues. Statements made by those licensed cultivators confirm that no operators will be able to meet the
upcoming demand of the OAPP, let alone further medical expansion or future adult use. Several cultivators
maintain second licensed cultivation sites that are inoperative as the medical program now enters its fifth year
since licenses were originally awarded in February of 2015. While some of those non operational and non
producing cultivation site have been recently sold, remaining stakeholders are increasingly becoming publicly
traded organizations, acquiring interest and control of numerous Illinois dispensaries, and expanding into
multiple other states. With such expansion elsewhere, these cultivation sites still sit undeveloped and under
or not producing as we rapidly move towards expanded medical and adult use while medical patients are
forced to pay some of the highest prices nationwide. These undeveloped facilities totaling in the hundreds of
5
thousands of square feet represent desperately needed production space while entering a period where
millions of additional are a necessity. The inability to meet demand should be seen as a failure to uphold the
rules and regulations by which they have agreed to abide by as a condition of licensure, and specifically
required cultivators to describe and confirm their ability to expand in a timely fashion and meet patient
demand. Such actions ultimately harm the patients of Illinois, to whom all licensed operators have a duty and
obligation to protect and serve.
A similar medical market can be seen in Arizona, when looking for a direct medical comparison. Arizona
currently has approximately three and a half times (3.5x) the patient population (~180,000) compared to
Illinois (~50,000), with more than 4x the cultivators and more than 2x the dispensaries. Current dry flower
sales are approximately five and a half (5.5) tons or approximately 11,000 lbs per month, which compares
with Illinois sales of just over half a ton of dry flower (~1,250 lbs) per month. Despite a patient population
difference of only three and a half times, Arizona patients purchase nine times (9x) more medical products by
weight when compared to Illinois. With the anticipated medical expansions, Illinois will likely see similar
demand to Arizona’s current program, and given the current product offerings in Illinois, the sales and
therefore production capacity would need to increase by ten times (10x) in a very short amount of time just to
serve the medical program.
Arizona allows ‘personal cultivation rights’, also referred to as ‘caregivers’ in Arizona. These producers
alone have near the current dry flower sales of the entire existing Illinois medical program, representing
approximately 1,200 additional pounds per month. This additional capacity is not included in the five and a
half (5.5) ton per month sales by licensed Arizona producers and merely serves to further highlight Illinois’
limited production capacity.
This limited supply has artificially inflated wholesale and therefore retail pricing resulting in medical
product wholesale costs that are, on average, three to four times the wholesale price seen in Colorado and
Arizona and retail costs that are double that of the existing black market in Illinois. As operators with years
of extensive experience dating back to the earliest implementation in Colorado have stated, this increase in
cost cannot be justified by any significant increase in regulations, compliance, or product quality. In any other
industry, this would likely be seen as price collusion due to the similar offerings and pricing from almost all
operators, along with their membership within cooperative industry based lobbying organizations.
Ultimately, the patients most in need that suffer the very serious ailments that the program was meant to
help, are the ones who bear the brunt of the burden. This can be clearly seen by the number of purchasing
patients in Illinois. Generally each month, only around 60% of the medical patients are actively purchasing
from licensed producers. 1, 4
SOLUTION: Increase the number of licensed operators and demand existing operators increase
capacity to meet patient demand. See Section 1.6 for further elaboration.
For a visual interpretation of the above, please see the chart on the following page which lists production
capacity and patient counts in Arizona.
6
Figure 1 – Arizona Medical Cannabis Patient Count and Sales
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1.2 – EMPTY AND UNLICENSED DISPENSARY DISTRICTS
ISSUE: Unallocated dispensary licenses which could be serving the patients of their respective
regions remain unissued after many years.
Following the original medical cannabis applications in 2014, several dispensary districts were not
awarded any licenses due to a lack of applicants in those regions. These include but are not limited to
Southern Chicagoland, DeKalb County, and Ford/Iroquois/Kankakee Counties. Under the program’s rules
issued by the Illinois Department of Financial and Professional Regulation (DFPR), the licensing process is to
be reopened with those remaining licenses awarded under the same scoring and application process as the
original round. 5
Multiple organizations have sought and retained special use permits for these areas, anticipating a
reopening of this application period for over three and a half years. Continued requests for clarification from
DFPR return no information regarding a potential application timeline and show no urgency in increasing
access for the state’s medical patients. Dispensary retail establishments are limited as it is, and for these more
rural locations, it results in patients having to drive upwards of 1 hour or more to reach their nearest
dispensary location. For patients that are seriously ill or suffer from limited mobility, this is a serious burden
to obtaining relief from their chronic and debilitating ailments. This issue is further compounded by the
limited 1:1 caregiver/patient ratio that Illinois currently allows. A caregiver possesses no other legal rights
other than to procure medicine for their designated patient, and this has always remained a significant and
unreasonable obstacle for patient access in Illinois. A common ratio also seen in other states which would
serve those patients in Illinois with mobility issues would be at a 1:5 caregiver to patient ratio or some
compromise to allow for ease of access for all patients.
SOLUTION: IDFPR reopens the application period for licensed dispensaries in the remaining,
unoccupied districts. See Section 1.6 for further elaboration.
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1.3 – LIMITED MEDICAL CONDITIONS AND PARTICIPATION
ISSUE: Limited medical conditions qualify for the MCPP under the Illinois program rules and
regulations. 5
The medical program in Illinois has a list of qualifying conditions along with a petitioning process to add
new conditions to that list. Several rounds of petitions were submitted following the program launch in 2015,
and most were suggested for approval unanimously by the Board tasked with making those determinations.
All, aside from PTSD which was forced through by judicial order, have stalled or been outright denied by the
Director of the Department of Public Health (DPH), Dr. Nirav Shah. 6
These mixed signals from Illinois regulatory bodies, on top of difficulties coordinating patient paperwork
with the state, along with the federal classification of cannabis have made licensed physicians in Illinois very
hesitant to participate within the medical cannabis program. Many patients and prospective patients find
their general practitioner unwilling to sign any documentation for cannabis and are forced to go out of
network and out of pocket to find a doctor willing to work within the confines of the program. Improving
physician participation and allowing physicians to determine which of their patients would benefit from
cannabis treatment should be a prime target for any regulations looking to ease suffering for medical patients
in Illinois as well as a goal for the responsible agencies including DPH and DFPR.
The limited medical conditions and limited physician participation serve as two significant barriers to
participation. The third and largest barrier is the cost to participate within the program. Prior to setting foot
inside any limited access areas of a dispensary, one must pay the non-refundable state application fee ($250
for 3 years) as well as their physician visit costs which regularly average around three hundred dollars ($300).
This provides a monetary and socioeconomic barrier to entry and represents a large outlay of funds for many
patients, prior to purchasing any medical products to actually treat their conditions which are not covered by
insurance. Due to the previously mentioned factors, we have also established that Illinois has the highest
prices nationwide, which greatly limit the ability of those operating under a budget to obtain their medicine.
In rural areas of the state, a large portion of patients are operating with limited budgets or on fixed incomes
relying on Social Security or disability benefits. Decreasing medical fees, increasing physician outreach,
education, and support, and/or allowing medical patients limited home production through personal
cultivation rights would go a long way towards easing this burden and increasing program participation, as
well as increasing the number of licensed operators to address adequate supply and pricing.
SOLUTION: IDPH accepts the presented findings and adds new qualifying conditions at the
suggestion of the Board, or by direct request from the Governor. See Section 1.6 for further
elaboration.
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1.4 – CONSOLIDATION OF INDUSTRY OPERATORS AND
OLIGOPOLIZATION
ISSUE: Limited product supply, high medicine prices, and unfavorable tax codes have led to a
market which is dominated by several large operators, further limiting competition and forcing
consolidation.
The above factors including limited operators, limited product supply, and limited participation have
resulted in an unprecedented rate of consolidation and oligopolization within the medical cannabis industry in
Illinois.
The tax code, 280E, stipulates that federally illegal businesses are only allowed to deduct cost of goods
sold. This results in cultivators and producers possessing a greater advantage in claiming standard business
expenses. This includes staff wages, utilities, rent, materials, as all are devoted to producing a product and
therefore can be deducted as cost of goods sold. Unfortunately for dispensaries and retail operators, since no
products are being produced, available deductions for cost of goods sold are extremely limited. This does not
include the most basic standard deductions such as wages for sales and front desk staff. This only includes a
small portion of rent and utilities (essentially any activities or spaces related to inventory storage or inventory
management). This results in a tax burden that does not represent actual sales, revenues, and profits.
Furthermore, this tax code creates a financial incentive for vertically integrated organizations to keep
wholesale prices as high as possible to maximize taxable deductions on both the production and retail
operations.
As a result, cultivators, while maintaining high unit pricing for wholesale purchasing, have limited
production and thereby participation, and as a result, many dispensaries that are not well versed or well
prepared have been forced out of business and/or acquired. Over half of the dispensaries in the state are
now owned outright, or partially owned by cultivator or cultivator affiliated groups through private
transactions not available to public record. This consolidation ultimately continues to hurt the patients by
limiting competition as outlined in Section 1.1, along with all the associated fallout from such pricing
schemes, ultimately placing the burden and costs on the medical patients of Illinois.
Furthermore, while it is understandable for existing operators to seek dominant market share, the
concept is already being rejected in patient communities and groups, and between limited options, pricing,
and taxation, patients and potential adult use consumers are already gravitating to the Michigan medical and
adult use markets, and awaiting the emerging and quite favorable Missouri medical program as well as a
potentially expanded black market in Illinois. One of the basic duties of any emerging and proposed adult
use program is to provide a regulated and taxed in-state system which provides safe access to cannabis while
ideally eliminating the black market. A consolidated and concentrated license distribution throughout the
Illinois industry encourages the opposite and could potentially push consumers towards these newly
expanded legal markets in other states and towards the Illinois black market.
SOLUTION: Increase the number of licensed operators and demand existing operators increase
capacity to meet patient demand. See Section 1.6 for further elaboration.
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1.5 – OAPP EXPANSION AND MARKET PREDICTIONS
ISSUE: Current product shortages in the program foreshadow a market that will be further stressed
with the increased demand from the OAPP, leading to an increased rate of consolidation, increased
medicine prices, and limited availability.
Current product shortages and increases in prices are foreshadowing what could be the first of potentially
several severe product shortages. Illinois licensed cultivators have stated outright (as recent as Jan 2019) that
they cannot meet current demand with wait times exceeding two months in some cases for delivery of
medical cannabis products. They have also stated that no cultivator will be able to meet the upcoming
anticipated demand of the OAPP which is clearly evident when viewing sales and production capacity
without bias. With SB 336 and the OAPP, this opens the medical cannabis program up to anyone with an
opioid prescription for a 90 day medical card. The OAPP also removes the waiting period and allows
patients ‘provisional’ access which negates the 90-120 day wait currently plaguing patients. Removal of this
wait is a fantastic step forward as it allows those with serious ailments to begin treatment earlier (especially in
the cases of cancer where proactive treatment can result in a very large difference for tumor growth and
metastasis). The removal of this waiting period will result in an immediate influx of new patients that will
further stress the current program and existing product shortages.
In the meantime, until sales and production capacity can meet demand and both producers and retailers
are forced to compete through additional operators, large operators will continue to consolidate the market
and demand prices simply due to lack of availability and lack of choices for the patients of Illinois, despite
producing medicine that would be considered lacking in quality and overpriced in any mature market
nationwide. An immediate solution to this would be to follow the model implemented in Arizona and allow
dispensary operators to have their own production space with additional licensing open to all applicants to
follow, as this pulls from an already vetted group that has undergone due diligence through background
checks and regular compliance audits. Coupled with the model from Washington featuring tiered canopy
limits, many small producers via existing dispensary stakeholders and new operators can be introduced to the
program quickly that will allow for increased diversity and competition in the marketplace while still allowing
licensed cultivators an advantage with a significantly higher or no canopy limit for production. This model is
further elaborated on in the following sections.
SOLUTION: Increase the number of licensed operators and demand existing operators increase
capacity to meet patient demand. See Section 1.6 for further elaboration.
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1.6 – PROGRAM SOLUTIONS AND POSSIBLE ACTIONS
When viewing solutions and possibilities, one can look at existing states and determine best practices
using that existing data and our experiences. The following programs have unique and beneficial features that
may serve the Illinois cannabis program as it matures.
New Jersey – Offering a direct comparison and essentially mirroring the progress of the Illinois
medical program. The New Jersey medical program featured a resistant Governor who inhibited the
program. Following the election of a new and more favorable Governor, Phil Murphy, executive
orders were immediately issued following his inauguration to expand the list of qualifying conditions,
expand the number of operators within the state, and ease restrictions on patients and physicians
regarding reporting policies and program fees. Through executive orders, New Jersey’s Governor
Murphy immediately implemented the above actions which represented much needed changes to a
failing medical cannabis program and would be an option for Governor-elect Pritzker. 7
Arizona – Offering a similar comparison and relevant look to Illinois’ medical program following the
OAPP program implementation. Sales and production capacity in Arizona first shows that Illinois is
ill-equipped to meet the growing and soon to surge demand for medical products, even with
expansions from each organization (despite the inability of all organizations to expand at this time,
this would require approximately a ten time increase in sales from each licensed operator). Arizona
offers dispensaries the option to cultivate both on site and off site, following approval from
regulatory bodies under the rules and regulations of the medical cannabis program. Allowing
licensed dispensaries to cultivate immediately increases production capacity and competition while
pulling from an already vetted group that has undergone due diligence through background checks
and regular compliance audits. This can be incorporated with features from Washington’s cannabis
programs to introduce new operators statewide and still provide ample opportunities and advantages
to the original operators, while increasing product availability to existing and prospective patients.
Missouri – Offering the newest medical program with licensing anticipated in 2019. Missouri
requires a minimum number of licensed operators: to guarantee access for patients but also to
maintain a competitive marketplace less susceptible to manipulation. This is established based on
population and requires one cultivation license per 100,000 inhabitants based on the latest census
data. This will result in Missouri licensing sixty (60) cultivators in a state with roughly six million
residents. An equivalent number of licensed cultivators in Illinois based on population would require
approximately one hundred and twenty seven (127) licensed producers. Similarly, dispensaries are
limited based on the congressional districts in Missouri and require a minimum of one hundred and
ninety two (192) licensed retail dispensaries which would be the equivalent of over four hundred
(400) retail establishments in Illinois. 8
Washington – Offering a developed medical and adult use program. Washington and other states
utilize tiered production systems. Washington’s system includes the following tiers:
Tier 1 – Less than 2,000SF of plant canopy
Tier 2 – 2,000SF to 10,000SF of plant canopy
Tier 3 – 10,000SF to 30,000SF of plant canopy
12
A tiered system would allow grandfathered cultivation operations to operate on a theoretical Tier 4
with an upper level or no canopy limit, while the proposed dispensary and future new licensees
would operate under Tier 1-3. Additional scaled licensing fees would be implemented to cover
program costs associated with compliance and regulation. 9
Michigan – Offering both a well developed medical program and the most recent transition into an
adult use state program. Michigan, foreseeing a lack of production capacity from licensed operators,
allows medical patients to operate as caregivers with personal cultivation rights. With the transition
to adult use, an emergency ruling was issued which authorized licensed establishments to purchase
from legal caregivers due to the lack of supply on hand from licensed producers and the large
demand from residents.10 This was a direct response by Michigan’s rule makers to the low supply,
and the expansion ruling came at the heels of forty licensed dispensary outlets which were almost
forced to close due to lack of cannabis products available for purchase. 11
While the medical program in Illinois has been successful to date with no outrageous cases of diversion,
theft, or notable public events, the program has been struggling with the above issues in the shadows at the
expense of the medical patients. As the program grows, these issues are becoming more and more evident
and if allowed to continue unaddressed, may very well end with failing the people the program was meant to
serve and protect - the medical patients of Illinois. As a result, additional operators need to be added to the
program immediately to prevent serious issues with product accessibility.
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2.0 - Adult Use Cannabis Program
2.1 – MARKET SIZE COMPARISONS
ISSUE: Illinois, compared to other medical and adult use states, is ill-equipped to meet any
significant increase in demand beyond the existing MCPP (not including OAPP), let alone the
demand generated by an adult use market.
We seem to continually hear about the ability of Illinois cultivators to meet increased demand, despite
supply already lacking in a limited participation medical market. Instead of debating theoretical capacity, we
again prefer to look at existing adult use programs both nationwide and in Canada. By looking at the served
population (residents plus tourism) and comparing that to production capacity and licensed producers, one
can obtain a very clear picture and understanding of Illinois’ shortfalls.
Adult Use in Illinois would represent a 127 million person market with 13 million residents and roughly
114 million visitors annually. Five of the six states (including Michigan) bordering Illinois have no cannabis
programs. Missouri is currently in the process of launching a medical program which many patients and
consumers have already identified as quite favorable allowing physicians to recommend cannabis for any
condition they deem appropriate and potentially poses many future challenges to the Southern Illinois current
stakeholders. Illinois features sixteen (16) cultivators with twenty one (21) licenses, and an additional fifty five
(55) licensed dispensaries. Currently, approximately 1,250 lbs of dry cannabis is sold per month with
additional material going towards extractions and edibles, of which would likely not exceed 2,100 lbs of dry
cannabis equivalent monthly. An in depth estimate of the demand in Illinois is featured in Section 3.0.
Colorado features an 87 million person market with 5 million residents and 82 million annual visitors.
Colorado currently has issued 1,000 dispensary licenses and approximately 1,500 cultivation licenses. One
single cultivation license, Los Suenos Farms, has a canopy twice the size of the entire Illinois program’s
combined cultivation footprint. Los Suenos operates approximately 1.2 million square feet of production
space. A second single cultivator in Colorado covers 300,000SF and is one of the largest indoor cannabis
producers worldwide. This leaves (approximately) 1,498 additional cultivation licensees in Colorado. In
2017, Colorado sold over six hundred and fifty thousand (650,000) pounds of cannabis which is
approximately forty times (40x) more than was sold in Illinois.
Arizona currently only has a medical program. With 180,000 patients, dry cannabis production in
Arizona (~11,000lbs/month) is still almost nine times (9x) that of Illinois (~1,250lbs/month) not including
personal cultivation rights/caregiver production, despite only having three and a half times (3.5x) the patient
population. The OAPP could easily bring in 100,000 or more new patients over the first several months of
2019, and with full patient and physician participation which would require every current operator to increase
sales by approximately ten times to meet that anticipated medical demand (e.g. each 30,000SF facility must
expand to 200,000SF, accounting for some increased efficiencies with economies of scale, and facilities
previously serving one hundred patients a day now serve one thousand). This does not include the expansion
that would be required for an adult use program.
Additionally Canada just recently legalized adult use cannabis. This is of particular interest given the
depth and longevity of their medical program. Canada entered into Adult Use implementation with over five
hundred licensed cultivation operations (~520) with several exceeding the total current operational combined
footprint in Illinois. Licensed producers stockpiled nearly 100,000 kilograms (~200,000 lbs) of cannabis
14
product for adult use. This stockpile represents over thirteen (13) years of current Illinois dry flower sales.
Amazingly, there was still a product shortage following launch in Canada which represents a 57 million
market comprised of 37 million residents and 20 million visitors annually. This goes on to demonstrate that
there has not been a single adult use program launch, not only in the U.S, but now worldwide, that did not
see a product shortage despite production capacities that are orders of magnitude larger than Illinois.12
Additional market size comparisons can be found in Sections 3.0 and 4.0 including estimated Illinois
adult use demand as well as side by side comparisons of state cannabis programs.
SOLUTION: Increase the number of licensed operators and demand existing operators increase
capacity to meet demand. See Section 1.6 for further elaboration.
For a visual interpretation of the above, please see the charts on the following page. Figure 2 lists
licensed producers in various states under medical and adult use programs. To compare, Oklahoma is
approximately a 26 million market with 4 million residents and 22 million annual visitors. Figure 3 shows
Canada’s adult use ramp up timeline, stockpile, and anticipated year one demand.
15
Figure 2 – Number of Licensed Producers in Various States
Figure 3 - Canada Cannabis Stockpile and Adult Use Demand
16
2.2 – CONCESSIONS FOR EXISTING MEDICAL STAKEHOLDERS
ISSUE: Significant risk and outlay was required from medical operators and reasonable and
favorable concessions should be made for existing stakeholders when implementing an adult use
program in Illinois.
While we continue to hear many arguments against additional licensees for those wishing to retain their
oligopoly and market share, the fact of the matter is a successful medical expansion and more so an adult use
program will require additional operators to meet demand, as clearly shown in Section 2.1. This can be
accomplished in a way that makes accommodations for existing operators, which has always been the norm
nationwide, is a reasonable request, and one which we fully support. Such expansion then, as outlined in
Section 1.5 and 1.6, should focus on the best attributes from various cannabis programs nationwide for
incorporation into the Illinois proposed adult use bill and subsequent launch. This could include the addition
of cultivators through current Illinois licensed dispensary stakeholders, as well as new applicants to follow
statewide which are limited in production capacity through tiered licensing and/or locations.
Concessions for medical stakeholders are reasonable and typical in most states. Concessions should be
made in Illinois, as they have been elsewhere, but as mentioned in this specific scenario, the successful launch
of a new program is not possible without significant expansion. The current market is showing it is incapable
of meeting medical demand, let alone the enormous surge an adult use program would generate. These
additional licensees will need six to twelve months or more of advanced positioning in order to establish and
develop adequate production with stockpiles of inventory depending on the license type. To reiterate, these
are based on the following states:
Arizona – Sales and production capacity in Arizona first shows that Illinois is ill-equipped to meet
the growing and soon to surge demand for medical products, and even less equipped to meet
demand generated by an adult use program. Adult use would likely require expansion in the range of
30-80x for each operator in Illinois given sales and demand seen in other states without additional
licensees. Arizona offers dispensaries the option to cultivate both on site and off site, following
approval from regulatory bodies under the rules and regulations of the medical cannabis program.
Allowing licensed dispensaries to cultivate immediately increases production capacity and
competition while pulling from an already vetted group that has undergone due diligence through
background checks and regular compliance audits. This can be incorporated with features from
Washington’s cannabis programs to introduce new operators statewide and still provide ample
opportunities and advantages to the original operators, while increasing product availability to
existing and prospective patients.
Washington –Washington and other states utilize tiered production systems. Washington’s system
includes the following tiers:
Tier 1 – Less than 2,000SF of plant canopy
Tier 2 – 2,000SF to 10,000SF of plant canopy
Tier 3 – 10,000SF to 30,000SF of plant canopy
A tiered system would allow grandfathered cultivation operations to operate on a theoretical Tier 4
with no canopy limit, while the proposed dispensary and new licensees would operate under Tier 1-3.
17
Additional licensing fees would be implemented to cover program costs associated with compliance
and regulation and scaled according to the tier under which the licensee operates. 9
Michigan – Michigan, foreseeing a lack of production capacity from licensed operators, allows
medical patients to operate as caregivers with personal cultivation rights. With the transition to adult
use, an emergency ruling was issued which authorized licensed establishments to purchase from legal
caregivers due to the lack of supply on hand from licensed producers and the large demand from
residents. 10 This was a direct response by Michigan’s rule makers to the low supply, and the
expansion ruling came at the heels of forty licensed dispensary outlets which were almost forced to
close due to lack of cannabis products available for purchase. 11
While sales and production capacity are greatly lacking in Illinois, distribution outlets are also limited as
shown by the chart in Figure 2. Additional retail licenses will be required to meet this demand and prevent
long lines and wait times for both adult use and medical patients. Other states often feature grandfathered
adult use licenses for medical dispensaries which would likely be an immediate solution prior to fully opening
up the applications to the public. Illinois features many organizations with multiple owners, where it may be
beneficial to allow a licensed dispensary to allocate its license to an alternative LLC should all the members of
the original entity be unwilling or unable to participate in the expansion. It is also preferred due to the current
Federal status of cannabis that individual locations and operations be legally separated. Generally a grace
period of several months to a year or more is provided, however capacity must be significant enough to allow
medical patients to continue to visit and obtain their medical products without interruption which will require
additional licensees all around due to the limited number currently existing under the MCPP, and the new
OAPP.
SOLUTION: Concessions for existing medical stakeholders through strategies which have been
implemented in Arizona, Washington, and Michigan, focusing initially on additional production for
fully vetted operators and new applicants with tiered canopy limits.
18
2.3 – PRODUCT SHORTAGES AND PROTECTIONS FOR EXISTING
MEDICAL PATIENTS
ISSUE: The current production capacity in Illinois is unable to meet demand. Protections need to
remain for existing medical patients that guarantee their medicine supply at affordable prices and
protect the integrity of the medical program.
As mentioned in Section 2.1, every state which has implemented an adult use cannabis program has seen
production shortages initially out of the gate. This includes Canada with hundreds of licensed producers and
several hundred thousand pounds of product stockpiled. We have established Illinois is ill-equipped to
handle the current growing demand as well as any increase. However additional production capacity must
also coincide with an adult use program launch. Several months following construction must be allocated for
planting, growth, harvest, processing, and final sale and distribution to retail outlets. With that, additional
cultivation licenses should be awarded approximately a year or more prior to program launch in order to
build out facilities, commence production, and manage a harvest.
Very concerning would be a program that does not specify between medical and adult use production
while facing a lack of supply. Many of our patients require daily treatment for their conditions, whether that
is for Parkinson’s and Epilepsy patients that require daily relief, cancer patients that require daily treatment in
order to fight tumor growth and metastasis, as well as the other conditions which require daily or regular
medication in order to live a normal lifestyle. A situation where product shortages are severe enough to cause
an increase in price, or worse, a lack of availability, could not only be detrimental to their health; it could be
fatal. Guaranteeing production capacity through a sufficient number of licensed operators and therefore
product availability for medical patients that require such should be paramount to any program launch.
This may be accomplished in several ways, or with a combination of several approaches. The first,
discussed in depth above, would include the increase of production capacity through additional licensees to
meet the demand. Many other states also reserve the right for home cultivation. This would be one quick
way to allow patients to control their medicine intake and accessibility. For decades, starting in California,
personal cultivation rights allowed medical patients who could not afford the costs the ability to provide high
quality medicine for their ailments. This benefits those that require specific products (strains, cultivars,
products, terpene profiles, etc) as well as those that cannot afford the high costs of cannabis without the help
of insurance.
Often, states allow these medical patients to serve as caregivers for multiple other patients (e.g. Arizona
allows caregivers to cultivate for themselves as well as five other patients, with an allotment of twelve (12)
plants per patient, for a total of seventy two (72) plants for any individual caregiver). California, Colorado,
and Michigan, as well as many others, all allow for some sort of personal cultivation rights, varying based on
medical status, the number of associated patients working together as a collective, as well as the
differentiation between flowering and vegetative growth. Often, multiple cultivars are required for multiple
ailments, and especially when searching for desired phenotypes and plant gender, a limited plant count greatly
limits a patient’s ability to find relief. Instead, a limit on flowering plants with a higher limit or preferably no
limit for small vegetative plants would be a reasonable compromise that would serve to limit production
potential while still allowing for the variety necessary for medical users to treat multiple ailments. This model
can be seen in Oregon with various vegetative and immature plant limits ranging from twelve (12) to
unlimited counts depending on specifics as outlined by the state.13 These patients in need are the ones that
most benefit from the implementation of a personal cultivation rights program.
19
Cultivation is undoubtedly a difficult process, much more so to consistently produce the highest quality,
and many products provided today (certain oils, extraction methods, cartridges, drinks, sprays, etc) require
specific and expensive equipment or processes that cannot be completed in the home. For these reasons, the
personal cultivation rights market has a negligible effect, if any, on the actual cannabis market. Those fighting
against personal cultivation rights often are profit or fear motivated and desire to control the means of
production beyond simple licensure.
While the ability to provide for medical patients is a valid argument for personal cultivation rights, the
second argument in favor simply comes from the ethical perspective. One should not continue to be
imprisoned for cultivating a plant that is legally sold and cultivated numbering in the hundreds of thousands
by numerous licensed operators statewide. Furthermore, Illinois has always treated the cultivation of five
plants or less as a misdemeanor, yet six and beyond as a felony The hypocrisy should not be ignored and the
benefits from allowing those unable to afford their medicine to produce it safely in the confines of their own
home should be a guaranteed right under any adult use program.
The largest benefit of an adult use program is the immediate access to medical patients that do not qualify
under the current program or cannot afford to. These may include patients that cannot find a doctor to
participate, do not want their doctor or family to know they medicate with cannabis, cannot afford to have a
medical cannabis license due to work, or for various other reasons. Increased availability for these patients is
very significant, as many do not know or understand the importance of our internal endocannabinoid system
(ECS). Please take the time to view this very short, three minute video from Dr. David Allen on the
importance of the ECS and why accessibility to cannabis products could greatly change the lives of many
patients suffering from various ailments statewide. (VIDEO LINK) 14
SOLUTION: Increase the number of licensed operators and demand existing operators increase
capacity to meet patient demand. Implement additional incentives that justify the costs of the
medical program such as personal cultivation rights or increased weight limits, and reconsider the
current medical program fees to make the program competitive with an adult use market.
20
2.4 – USE OF TAX REVENUE
ISSUE: Should additional taxes be placed on cannabis in the form of a vice tax, and where should
those funds be allocated?
Tax revenue generated from an adult use cannabis program should go to benefit our communities and
provide all operating funds for compliance and regulation of the program. These primary outlets for funds
include schools, educational programs, infrastructure, and cannabis program regulation and compliance.
While a vice tax may increase product costs, we believe some additional tax is a necessary component to a
successful cannabis program. For example, Colorado has the top anti-bullying program in the nation, and it
is funded entirely by cannabis generated taxes. Programs like these along with much needed improvements
to school facilities and infrastructure should be focused on.
There is concern that an additional vice tax would encourage a more robust black market. While this may
be true with an excessive tax, currently Illinois is priced above the black market at this moment (and as a
result only 60% of the registered patients are actively purchasing). A small vice tax can generate a
tremendous amount of beneficial revenue. The largest contributor to decreasing prices that compete with
and/or eliminate the black market is increased competition. An increase in licensed operators and production
capacity will do far more to regulate pricing than any reduction in tax. Furthermore, an additional tax would
also serve to protect the medical program. If adult use is legalized and does not require the $500-600 initial
outlay of the medical program, there will likely not be an existing medical program in the near future without
an incentive to remain within the program. This could range from lower product costs due to taxes, legalized
personal cultivation rights or higher plant count when compared to adult use authorizations, as well as higher
personal limits for those that require more cannabis for the treatment of their ailments.
SOLUTION: Appropriate use of a vice tax can help fund necessary social programs and legitimize
and maintain the ongoing need for a medical program. Increasing licensed operators and thereby
competition, will be the largest factor in controlling prices and staying competitive with the black
market.
21
3.0 – Illinois Adult Use Projections and Recommendations
3.1 – ILLINOIS ADULT USE DEMAND ESTIMATE
To the benefit of Illinois, demand studies based on existing cannabis program data from states
nationwide are available for review. This overview will cover estimates provided by the Marijuana Policy
Project (MPP) report entitled Potential Tax Revenue from a Regulated Cannabis Market: Illinois 15 as well as the
latest available report by the Marijuana Policy Group (MPG) in association with the University of Colorado
Boulder Leeds School of Business and commissioned by the Colorado Department of Revenue entitled
Market Size and Demand for Marijuana in Colorado 2017 Market Update 16.
The MPP report estimates demand using dated NIH self reported numbers regarding nationwide and
Illinois residents who have consumed cannabis. Compared with nationwide and statewide population
statistics, the MPP estimated the market share of an adult use program in Illinois. Based upon the estimated
total national consumption released as a Feb 2014 White House report, the MPP estimates that Illinois
demand is between roughly 350,000 pounds and 725,000 pounds. The usage rates are based on usage
statistics self-reported to the NIH, and due to the historical illegality of cannabis, may under represent actual
use in a mature, legal market. This report dates prior to the Illinois medical program launch as well as
decriminalization statewide, which may have had a significant effect on perception in the past five years.
The MPP report estimate only includes Illinois residents and does not account for tourism prior to adult
use legalization, or the additional potential cannabis-specific tourism post adult use legalization that would be
generated as seen in other states. Undoubtedly, Illinois would continue to draw millions of tourists annually.
If adult use was passed, Illinois, in association with Michigan, would be one the first state’s in the Midwest
with such programs and one can reasonably assume the tourism sector would see increased benefit from
those specific, cannabis-based visits from out of state residents. A recent survey as well as numerous others
have found approximately 1 in 7 Americans had used cannabis within the last year. 17, 18
Furthermore, trends are increasingly showing one of the largest growing demographics for cannabis
usage is seniors which this 2014 survey, now five years old, may not have accurately captured. Governor
Hickenlooper of Colorado who oversaw the initial rollout of the adult use program further supported the
rapid and continued growth of this demographic as recently as 2018 by stating, “We haven’t seen a big spike
in consumption. The only increase in consumption is among senior citizens, which we think is either Baby
Boomers coming home to roost or arthritis and the aches and pains of growing older – people finding that
marijuana is better pain solution than opioids or other things.” 19
One issue that is becoming more and more apparent is due to the rapid adoption and expansion of
medical cannabis as well as adult use programs throughout the nation, the resulting participation of the
population in cannabis use studies and the resources available to study such are increasingly available. A
recent report issued by Eaze, a cannabis data clearing house, found that first time cannabis users increased
140% in adult use state programs in 2018, with senior consumption increasing 25%, and women’s
consumption also doubling in 2018. 20, 21
The IWSR, the leading source of data and intelligence on the alcoholic beverage market, in conjunction
with BDS Analytics says a growing number of consumers, especially millennials, are showing preferences to
consume both alcohol and cannabis, versus older generations which tend to stick with just one. That could
cut into long-term loyalty efforts by beverage makers, especially those in the beer and spirits fields. “Our
22
research shows that up to 40% of adults 21 and over consume cannabis in states where it’s legal,” said Jessica
Lukas, vice-president at BDS Analytics. 22
Clearly, rapidly changing demographics can result in drastically different results when analyzing usage
rates and often a several year old study simply does not capture the actual demand present and can lead to
underestimating the actual demand statewide. All of which indicate the consumption rate of adults in the
United States is growing faster than it can be tracked in states which have implemented adult use.
States developing and preparing for adult use programs more and more are finding reduced tax rates as
well as product supply and pricing have a direct impact on the conversion of consumers from the black
market to the regulated market. Oregon’s OLCC noted in their January 2019 report that greater production
and lower pricing models represent an increase in the ratio of regulated cannabis sales compared to that of
the black market. 23 As Illinois currently operates, prices for medical patients exceed the black market by a
substantial margin and are one of the main factors in limited Illinois medical participation for those with
medical registry cards. This price discrepancy between the black market and regulated market can be directly
attributed, among other shortfalls, to the lack of production and lack of licensed operators in the current state
program. The New Jersey adult use cannabis bill which has been inching its way towards finalization as of
March 2019, has been delayed only by the disagreement and negotiations between Governor Murphy and
legislators between a higher tax rate which is feared will continue to feed the black market and prevent the
desired result of users migrating to the taxed and regulated format and products, and a lower rate, which
many believe will ensure that migration.
The MPG report provides access to actual sale numbers for Colorado’s adult use market in 2017,
arguably some of the best data that can be assembled representing a maturing and legal cannabis market.
These numbers were broken down to account for resident and tourist based cannabis purchases based on
Colorado’s reported figures within the report. These showed that visitors were responsible for just over 9%
of sales. While Illinois’ market will not directly mirror Colorado’s market, due to inevitable variations in
population, demand, and preferences, an estimate using these proportions would serve to provide a guideline
for estimating Illinois demand in a mature market using this real world data. When comparing Colorado’s
2017 established benchmarks with Illinois’ population and tourism statistics, we can estimate approximately
1.4 million pounds of cannabis (flower equivalent) would be demanded by the full Illinois market annually if
usage statistics mirrored that of Colorado’s. Flower equivalent is a measure developed specifically for this
industry and utilized in the MPG study that converts non- flower consumption or production into weight-
based units of flower. This method allows regulators to properly compare supply, demand, potency, and
pricing across different product types. 16 More information can be found in Figure 4 below.
Estimating the potential demand in an adult use market in Illinois, as well as knowing current sales data
figures discussed previously which show January 2019 dry cannabis sales of 1,250 pounds and the state of the
medical marketplace with limited product availability and long wait times in certain cases, we can make some
estimates about the market expansion that would be required to meet the estimated adult use demand. At
this current sales rate, the demand estimated by both the MPP and MPG reports would require an increase of
between 23x and 98x statewide, for all operators. Due to the fact the MPP estimate excludes key purchasing
demographics, while the MPG estimate is based upon the latest 2017 sales data and population
demographics, we believe the higher MPG estimate to be a more accurate number when considering what the
actual Illinois market will look like if an adult use program is launched and allowed to mature. Additionally,
depending on the allocation and preferences of the purchasing population and efficiencies of the production
facilities, additional extraction and concentrate yield, and accounting for flower equivalent additions in
production through sugar leaf and trim used to make cannabis products, this may alter demand based on dry
23
flower, concentrate, extract, and edible usage which may decrease the multiplier slightly, in which case an
approximate 40x to 60x rate of expansion would be more appropriate.
As an example, this could require a 30ksf cultivation facility currently in operation, to potentially expand
their footprint up to and exceeding 1,800ksf. Likewise, such an increase would require a retail facility that
serves one hundred (100) patients a day to serve approximately six thousand (6,000) purchasers daily, again,
with our belief that these estimates will lean towards the upper end of the estimated demand figures. Even
when accounting for increased productivity per square foot associated with economies of scale in all
operations, especially in regards to post processing and production, or additional non-dry flower yields of
extracts and infused products, such an increase, or even a fraction of such, is unreasonable to assume could
be accomplished by any or all operators in a way that guarantees access for medical patients and meets that
actual statewide demand.
The tables and graphs on the following page further break down the above Illinois Adult Use Demand
Estimate and provide a graphical depiction of what an increase between 23x and 98x would entail for a state’s
total product sales, as well as a comparison to Colorado’s 2017 sales.
A mature market in Illinois, with twice the population of residents, millions of additional visitors
annually, and even with varying usage rates, would be reasonably expected to exceed Colorado’s 2017 sales as
a mature market. If a sufficient number of licensed operators are not available with the production capacity
necessary at such a scale, as well as the proportionate inventory surplus to meet not only initial demand, but
the continuation of consumer purchasing, this demand will not go unmet, and will likely instead be filled by
the black market.
24
1 Data utilizes equivalent pounds of cannabis covering total product sales Figure 4 - Estimated Illinois Demand Extrapolated Using MPG 2017 Demand and Market Study from Colorado (August 2018)
Sales Annually
(Pounds)
Increase in Sales Required to Meet
Estimated Demand for Illinois Adult Use
Program 1
Current Sales Colorado 3
665,000 N/A
Current Sales Illinois 1
15,000 N/A
Low MPP IL Demand Estimate 2
356,250 23.75x
High MPP IL Demand Estimate 2
725,000 48.3x
IL NORML Demand Estimate 4
1,462,000 97.5x
1 Based on total IL medical dry cannabis sales of 1,250 pounds per month, as of Jan 2019
2 Does not account for out of state visitors and only considers Illinois resident demand
3 Data utilizes equivalent pounds of cannabis covering total product sales 4 Based on extrapolation of actual 2017 Colorado Sales data
Figure 5 - Estimated Illinois Expansion Requirements for Adult Use Using MPG and MEP Demand Studies from Colorado and Illinois
Figure 6 – Illinois Annual Adult Use Demand Estimate and Current Sales
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
Current Sales Colorado
Current Dry Flower
Medical Sales Illinois
Low MPP IL Demand Estimate
High MPP IL Demand Estimate
IL NORML Demand Estimate
Po
un
ds
Illinois Annual Adult Use Demand Estimate
State Population (millions)
Visitors (millions)
Resident Cannabis Users
Visitor Cannabis Users
Resident Purchases (Pounds) 1
Visitor Purchases (Pounds) 1
Total Demand (Pounds) 1
Colorado 5.6 84.0 985,000 6,500,000 604,500 60,500 665,000 Illinois 12.8 114.0 2,250,000 8,800,000 1,380,000 82,000 1,462,000
25
3.2 – ILLINOIS ADULT USE LICENSED PRODUCTION SPACE
Estimated demand for an Illinois adult use program far exceeds current medical dry flower sales, and
even when making more than generous considerations for extracts and infused products, Illinois’ current total
medical production is not likely exceeding twenty five thousand flower equivalent pounds annually. This is
approximately two and a half months of Arizona’s current medical dry flower sales only or just about fifteen
(15) days of Colorado’s current cannabis sales. Of the three demand projections presented in Section 3.1, we
believe the MPG based estimate using actual sales data from Colorado’s 2017 fiscal year and population
comparisons is the more accurate model requiring approximately 1.4 million pounds of cannabis flower
equivalent under which we can proceed to estimate the amount of production space and therefore new
licensees such a demand may require.
Several yield metrics are available from published studies24 which we can use to extrapolate and
determine an approximate area necessary for Illinois’ production based on the 1.4 million pound demand
figure. These values can be seen in the below table and have been averaged into low yield, average yield, and
high yield estimates based on grams produced per square foot from published reports. An additional metric
based on a gram/watt standard within the cannabis industry was also included to supplement these values,
and while not present in the cited published study, have served as a benchmark comparison metric for
decades for indoor cultivation under HID lamps for cannabis growers.
These yield metrics account for flowering canopy only. Additional production space required in cannabis
production facilities include: vegetative canopy space; post production areas for drying, trimming, curing,
storage, extraction, infusion; ancillary areas for security, offices, accounting, sales, staff break areas,
washrooms; as well as unoccupied spaces including walkways around plant canopies, equipment, travel
corridors, loading dock, storage, etc. A common metric used for vegetative compared to flowering space is at
a 1:2 vegetative to flowering ratio. Additional post processing and other spaces outside of canopy space often
makes it that cannabis production facilities are often comprised of 50% flowering canopy or less when
compared to a total building footprint.
Study Yield per Flowering Canopy Area (g/SF)
Method Yield Type
Botec 21.5 Indoor Low Botec 41.3 Indoor Ave Botec 70.2 Indoor High Netherlands 34.0 Indoor Low Netherlands 46.9 Indoor Ave Netherlands 56.7 Indoor High Cervantes 29.6 Indoor Low Cervantes 48.4 Indoor Ave Cervantes 53.0 Indoor High Vanhove 40.7 Indoor Ave Knight 32.7 Indoor Ave 0.5g/w in 16SF with 1kW 31.3 Indoor Low 1.0g/w in 16SF with 1kW 62.5 Indoor High
Figure 7 – Yield Metrics per Flowering Canopy Area 24
26
The above yield metrics result in three estimated averages for low, average, and high yield values when
compared to flowering area of approximately:
29.1g/sf for low yielding operations;
42.0 g/sf for average yielding operations;
and 60.6g/sf for high yielding operations.
Most operations in Illinois are indoor cultivation operations, and those that are greenhouse operations
include HID supplemental lighting and light deprivation systems, essentially allowing for the same,
continuous production capacity year round through photoperiod manipulation. We can estimate these
facilities will be able to harvest five times per year, with dedicated vegetative space and proper timing,
planting, and coordination. Multiplying each of our average yield metrics above by five then results in a yield
metric that is applied annually, covering grams/sf/year. These values can be seen in the table below.
Yield Metric Per Harvest (g/sf)
Annual Yield Metric (g/sf/year)
Annual Yield Metric (lb/sf/year)
Estimated Total Licensed Illinois Plant Canopy (sf)
Ave Low 29.1 145.4 0.325 6.5 million Ave Average 42.0 210.0 0.469 4.5 million Ave High 60.6 303.0 0.676 3.1 million Figure 8 – Average Yield Metrics and Resulting Required Illinois Estimated Plant Canopy
Knowing both our anticipated demand of approximately 1.4 million pounds of cannabis equivalent
annually, as well as an assumption that vegetative to flowering canopy is split in an approximate 1:2 ratio, we
can estimate anywhere from 3.1 million to 6.5 million total square feet of production canopy area needs to be
licensed to meet demand (due to use of space, total facility footprints will far exceed these values). Initially,
many operators will likely not achieve the high yields metrics utilized above, and in fact many never achieve
those production levels commercially. More than likely, most large scale cultivators will produce average or
under average yields initially given they are cultivating in a new space, with new equipment, new procedures,
on large scales, and sometimes without the knowledge of the experienced, large scale, commercial operators.
Using the average yield of 42.0 g/sf, Illinois would require approximately 4.5 million square feet of licensed
plant canopy with the low yield average requiring approximately 6.5 millions square feet of licensed plant
canopy.
Additionally, the Freedman and Koski report utilizes plant numbers to calculate an estimated yield.
Given the potential variations between plant sizes that exist, ranging from small, sea of green type cultivation
methods, to larger plants capable of yielding multiple pounds each, we prefer to use area based yield metrics
discussed in Section 3.2. When analyzing the Freedman and Koski yield numbers, one can create an
equivalent yield metric per area which, upon conversion, is almost exactly our average number of 210
g/sf/year used above. While two different methods for calculation were used to determine these yield
metrics, the same average yield was therefore independently confirmed between both reports.
27
3.3 – ILLINOIS ADULT USE ADDITIONAL LICENSED OPERATORS
REQUIRED
Knowing the approximate production area required to meet our estimated 1.4 million pound annual
demand, we can then attempt to determine the estimated number of operators required to be licensed for
sufficient production capacity under a wide variety of conditions.
For a base assumption, we are assuming each current medical cultivator licensed will be both
participating in the adult use program as well as significantly increasing production capacity. Those currently
inoperable and/or under producing operations are also included for all twenty one (21) licensed facilities in
the state. Current operations, as cited by the Freedman and Koski report show 260,000SF of current plant
canopy is in operation, with 166,000SF unused, and an additional 447,000SF approved or under construction.
Allocating 75ksf of plant canopy for each cultivator (ultimately requiring a significantly larger facility area
when accounting for walkways, equipment, post processing areas such as dry, trim, cure, storage, extraction,
kitchens, security, offices, etc and therefore total footprint), we can assume those cultivators will utilize a total
production area of just over one and a half million square feet of plant canopy. Such an increase to 75ksf of
plant canopy per current medical cannabis cultivation center stakeholder, for most organizations, is at least
doubling plant canopy and for several, this would represent an increase of ten times or more, with a general
6x increase to all operational canopy statewide for medical cultivation stakeholders. 3
As a comparison and point of reference, a facility with 75,000 square feet of plant canopy, can be
estimated to have 2/3 of that canopy as flowering production. At the average yield metrics listed in Section
3.2 (given these medical cultivators have been in operation for over four years), this would represent an
annual average yield of around 10.5 million grams or around 23,438 pounds per cultivator. At current
wholesale prices of approximately $3,000/pound, this yield would represent approximately $70.3 million in
annual revenue per cultivator, an astonishing figure which still allows for a tremendous amount of new
operators and therefore program health and opportunities as listed below. At a more reasonable wholesale
price of $1,800/pound, this yield would still represent approximately $42.2 million in annual revenue per
cultivator, again an astonishing figure.
Utilizing our average and low yield metrics from Section 3.2, we can estimate the additional required
plant canopy that should be licensed to meet Illinois demand beyond the allocated 75,000 square feet canopy
for each medical operator above, to be between 2.9 million square feet and 4.9 million square feet.
Several proposals have been discussed regarding adult use licensing. These include craft cultivators
which have been proposed at a canopy limit of seven thousand square feet (7ksf). Using our above
calculations for additional licensed operation space of 2.9 million and 4.9 million square feet, we can estimate
between 416 and 699 additional licensed cultivation/craft operators would be required to meet the
immediate, anticipated real demand beyond that reserved for existing medical cannabis cultivation centers
that an Illinois adult use program is estimated to generate statewide.
An alternative would be to also offer additional cultivation licenses to current dispensary stakeholders as
seen in Arizona’s vertically integrated model and has been mentioned previously throughout this report. This
vertical integration model is utilized by numerous other states as well, such as New Jersey, New York, and
Florida. A second tier beyond craft producers authorizing a plant canopy of up to 15ksf based on
Washington’s tiered limits could also be utilized. While not every dispensary operator may have the
knowledge or financial capacity to undertake such expansion and new operations, as well as those already
owned by cultivation groups with no desire to have multiple cultivation operations, vertical integration
28
opportunities in addition to standalone licenses offer a level of competition and price protection to the
consumers of the industry, allowing the free market to flourish.
Even when assuming full participation of all fifty five (55) dispensaries at the full 15,000 square feet, this
would still require between 298 and 581 additional craft cultivators, each possessing 7,000 square feet of plant
canopy. This information can be seen in the table below.
Additional Plant Canopy
Required (SF) 1
Licensed Operators Required with Craft
Cultivators (7ksf) Only
Licensed Operators Required with Craft Cultivators (7ksf) and Tier 2
Dispensary Cultivators (15ksf)
Low Yield Metrics
4,890,000 699 Craft 581 Craft
55 Dispensary Average Yield
Metrics 2,910,000 416 Craft
298 Craft 55 Dispensary
1 Assuming medical cultivators each maintain 75,000SF of plant canopy
Figure 9 – Estimated Illinois Licensed Cultivation Operators Based on Yield Metrics and Licensing Scenario
As seen from the yield metrics and estimates for the number of licensed operators, a significant number
of additional operators must be licensed immediately in order to meet Illinois adult use and medical demand.
Sufficient time must be provided to these operators for the application submission preparation and process,
licensing, build out, growth, harvest, and to create inventory surplus prior to the commencement of adult use
sales, which can be estimated at between eight to twelve months. Despite the licensing of hundreds of
additional craft cultivators, ample opportunity and advantages can still be provided to medical operators as
concessions for their risk, time, and outlay for medical operations. Participation and coordination with both
existing stakeholders and new applicants and operators are paramount to the successful launch of an Illinois
adult use program in order to maintain and develop a healthy marketplace. Furthermore, expansion
opportunities for all cultivators should be available to meet demand as necessary as hard data becomes
available following program launch to further ensure and control the over and under supply and production
issues which are a concern.
However, an estimate for additional production capacity based upon sugar leaf and trim products must
be accounted for that is not present in the grams per square foot metrics. Unfortunately, no readily available
data is available. We can reasonably estimate an additional production capacity of approximately 10% could
be achieved when accounting for the collection of this additional cannabis resin and active ingredients for
incorporation into extracts, edibles, and infusions. With this additional production capacity, it may serve the
state better initially to select the number of cultivation licensed operators based on the average, or slightly
above the average yield metric licensing scenarios listed above.
Based on our research and analysis, an example using the following licensing classes and number of
cultivation licenses available is shown in the table on the following page. These do not include additional
licensing for dispensaries, processors, transporters, and analytical labs which will also require new operators
initially at program launch. The table on the follow page assumes each producer has maximized their
available plant canopy space and is using the entire allotment, while in reality many will not use the entire
amount to the absolute fullest. The licensing structure proposed below results in approximately 4.15 million
square feet of licensed plant canopy space, just under our average yield estimation for total plant canopy
statewide of 4.5 million square feet as shown in Figure 8.
29
Plant Canopy Limit
Number of Licenses Issued
Cumulative Plant Canopy Footprint
(SF)
Tier 4 - Existing Medical Cultivation Center
Up to 75,000SF
21 1,575,000
Tier 3 – Future Expanded Operations
Up to 30,000SF
0 0
Tier 2 - Existing Medical Dispensary
Up to 15,000SF
55 825,000
Tier 1 - New Craft Cultivator Applicants
Up to 7,000SF
250 1,750,000
Figure 10 – Sample Licensed Cultivation Operator Distribution
With data from the Illinois Department of Agriculture on current operators, looking at their production
areas, total facility areas, and total yields, would provide significant input into the realistic abilities to meet
such demand and verify that such increases in capacity are simply unreasonable for the limited operators
currently licensed under the MCPP and OAPP. Recent numbers published through a Colorado based report
by a Freedman and Koski show current cultivators throughout the entire state are only operating 260,000
square feet cumulatively between every licensed operation at the approximate average yield method cited
above of 42.0 g/sf. 3 Such an increase to 75,000 square feet of plant canopy per current medical cannabis
cultivation center, for most organizations, is at least doubling plant canopy and for several, would represent a
ten times or more increase, with a general 6x increase to all operational canopy statewide for medical
cultivation stakeholders representing approximately one and a half million square feet of plant canopy.
Additionally, actual plant canopy data is readily available from states with currently operational adult use
programs for comparisons. From a report just recently released in March of 2019 by Washington’s Liquor
and Cannabis Board (LCB), full and detailed plant canopy sizes are measured and extrapolated for the entire
state program including both the total active canopy in production statewide, as well as licensed canopy limits
as issued by the regulatory authority. This report showed that over 4 million square feet of canopy is
currently active in Washington State, which includes a population of 7.7 million residents as well as 40.1
million tourists annually, compared to Illinois’ 12.8 million residents and 114 million tourists. Additional
licensed canopy is over 10 million square feet and demonstrates that very rarely is licensed space used to its
absolute fullest, as mentioned previously in this section. 25 As a reminder and mentioned previously in this
report, Washington’s classification for Tiers 1-3 are listed below:
Tier 1 – Less than 2,000SF of plant canopy
Tier 2 – 2,000SF to 10,000SF of plant canopy
Tier 3 – 10,000SF to 30,000SF of plant canopy
An expanded commentary on such possibilities, as well as additional program regulatory notes can be
found in the following section 3.4, as well as section 4.0 discussing those alternative demand studies which
provides further input on some suggested best practices for adult use implementation based on our research
and analysis.
30
Figure 11 – Total Active and Licensed Plant Canopy in Washington State from March
2019 Report by Liquor and Cannabis Board 25
31
3.4 – ILLINOIS ADULT USE PROGRAM IMPLEMENTATION NOTES
We believe due to the sales data covered from the MPG study during 2017 in Colorado, combined
Illinois population demographics, Illinois will far exceed the Colorado’s sale figure of just over 650,000
pounds, requiring approximately 1.4 million pounds of cannabis flower equivalent annually. An adult use
program launch insufficient to meet demand, with burdensome restrictions and limitations, or overpriced
cannabis products will drive sales to the black market, as well as deprive Illinois patients and citizens most in
need access to in some cases life changing medicine and relief. Given Illinois has more than twice the
resident population and fifty percent more tourist visitors each year; we can safely assume demand will follow
accordingly, and at the very least, will certainly exceed Colorado’s 2017 level. A scenario that sees a drastic
difference in demand based on population percentages and purchasing habits is indicative of a program with
problems that is ultimately driving sales towards the black market. The goal of a regulated adult use program
should be to prevent a robust or thriving black market, while providing safe access to cannabis products for
consenting adults.
The following notes regarding an adult use program implementation have been compiled based on
feedback from industry professionals as well as Illinois residents and categorized into the following areas:
Personal Rights, Medical and Adult Use Program Differentiation, Program Licensing and
Operations, Implementation Timelines, and Taxes
PERSONAL RIGHTS
1. Expunge past convictions for lower level cannabis offenses.
o Create an automatic expungement process as well as allow for a petitioning process to
identify and remove lower level cannabis offenses from the record of those previously
convicted.
2. Legal cannabis use, smell, sight, and/or presence as allowed under any proposed act should no longer
be a reason for probable cause by any law enforcement officer, investigation, or cause for any
assumption due to being a license holder or agent of a cannabis operation.
o Undeniably, cannabis use is not accepted or approved by all, and any proposed law should
serve to protect against discrimination for any lawful user.
3. Place reasonable personal possession levels that encourage participation and limit the black market
o Possession limits have been proposed at thirty (30) grams of flower and five (5) grams of
concentrate. Given the fact that concentrate can simply be dissolved into an edible oil or fat,
one could theoretically take their resident allowed five (5) grams of concentrate and create an
edible blend approaching 5,000 mg THC depending on the purity of the concentrate.
Therefore giving both items a similar limit would be suggested to limit the creation of
homemade edible products that cannot be verified for homogeneity, potency, or ingredients
and therefore reduce black market sales and unregulated edible products.
Flower Concentrate Infused Products
Resident 30 grams 5 grams 3,000 mg THC Non-Resident 15 grams 2.5 grams 1,500 mg THC Figure 12 – Suggested Illinois Adult Use Possession Limits
32
4. Mirror Colorado’s personal cultivation rights with six (6) plants per adult, with a twelve (12) plant per
household cap.
o A 5 plant household limit makes it difficult for those wishing to hold onto cultivars as
mother plants that provide specific relief for their ailments, as well as for those growing
from seed that have to cull male plants as the plants show their sex. There is the possibility a
resident could germinate six standard cannabis seeds and have six male plants, all of which
would be unusable for consumption and would result in 2 months or more of wasted time
and energy. Utilizing an individual plant count limit of six or a household limit of twelve, a
resident can choose to flower three with three remaining in a vegetative state, or has the
option to run a single flowering cycle with all six to supply part of their cannabis needs. As
has been seen in other states, a majority of purchasers will prefer the legal, easily accessible,
and reasonable priced market over personal cultivation due to the time, knowledge, and
effort required for production, and as a result, personal cultivation rights have always had a
negligible effect on cannabis supply in adult use states. It should also be noted personal
cultivation rights of between 6 and 12 plants have become the norm in many states,
including California, New Mexico, Michigan, Arizona*, Washington, Oregon, Alaska,
Washington D.C, Hawaii, Maine, Massachusetts, Montana, Nevada*, North Dakota*,
Oklahoma, Rhode Island, Vermont, and Washington, with a * indicating program limitations
on cultivation rights related to individuals’ distance from a licensed dispensary.
5. Reduce penalties for low level cultivation and possession offenses to misdemeanor charges.
o The goal of an adult use program should be to primarily end a socially and morally unjust
and repressive policy of cannabis prohibition. Therefore, a reduction in these non-violent
offenses is necessary for simply cultivating a plant, especially while licensing potentially
thousands of new operators to cultivate, process, sell, and handle millions cannabis plants
and products statewide. Reduce all cultivation infractions under the federal mandatory
minimum of 100 plants to a misdemeanor at the state level. Allow for residents who are
cultivating under any proposed adult use act to do so freely, without reporting or licensure,
and with the ability to allow a friend or family member to assist with cultivation should they
be unable to themselves (in cases of the elderly, injured, unexpected trip, etc). Creating new
violations for cultivation with overly invasive reporting requirements or limitations will not
serve the purpose of an adult use act, which is to limit the black market and allow for safe
and personal use by consenting adults in the privacy of their home. As Illinois law currently
stands, a felony offense for six (6) plants or possession over the limit does not meet that
purpose. A retroactive expungement process for low level cultivation offenses should also
be considered.
6. A ban on home extraction using explosive gases has been discussed by some parties.
o While hydrocarbon extraction using potentially explosive gasses may or may not be legal
under any proposed adult use act, methods for extraction should be available to the home
user which includes non-explosive methods using olive oil, coconut oil, ethanol, butter, or
other, non-explosive solvents. Similar equipment is often used between these methods, and
things such as freeze dryers, vacuum chambers, vacuum pumps, heating pads, and other dual
use equipment which have uses for extraction as well as non-cannabis activities. If
hydrocarbon extraction was not allowed under an adult use bill, the proposed act should
prohibit the actual act of extraction or evidence of such, as opposed to equipment which
may have multiple uses.
33
MEDICAL AND ADULT USE PROGRAM DIFFERENTIATION
1. Protect medical patients’ supply.
o Maintaining adequate supply for medical patients is paramount to a successful program
launch, and the most likely way to guarantee such is through licensing a sufficient number of
facility operators. Using yield metrics, state comparisons, and estimated demand figures, we
can estimate the number of licensed operators required for production under different
scenarios. Current production is struggling to meet a limited medical demand, and no
existing operator will be able to guarantee medical access without an increase in supply.
o Authorize additional and expanded personal cultivation rights for registered medical patients,
allotting a higher plant count than the adult use program for treatment of multiple ailments
and maintaining critical cultivars for their specific medical conditions.
2. Differentiate between medical and adult use at the point of sale.
o Allowing for ease of use for retailers and producers alike, differentiating between medical
and adult use cannabis at the point of sale allows for the appropriate tax to be collected
while limiting increased production and dispensary operational and inventory difficulties
which differentiating at time of production creates. A wholesale tax can be collected on all
cannabis products sold, mirroring the current medical program, and a final point of sale tax
can be applied for all adult use purchasers, with medical purchases falling under the current
medical tax rate. With an increase in licensed operators, we would expect to see a spur of
innovation in new available products across the market. Medical purchasers and adult use
purchasers alike should be free to purchase these products. Differentiating at the point of
sale allows for fluid transfer of products to both medical and adult use patients and will best
prevent a shortage or surplus in either program by allowing producers and retailers to adjust
to demand at a moment’s notice and maintain fluid stock levels to meet changing demand as
the program matures.
3. Provisional licensing for existing medical operators should be issued immediately, in addition to new
applicants.
o As mentioned in Section 2.2, medical operators should be allowed certain concessions which
may include on site sales for medical and adult use in existing facilities, additional off site
facilities within their districts, as well as the opportunity for vertical integration as it draws
from a group of licensed operators already vetted to provide and handle cannabis products.
A sample of tiered licensing for cultivation has been provided in Section 3. Allow these
existing medical organizations that desire a separation of finances or those with multiple
owners to apply for those provisional licenses under separate entities elected by the originally
licensed organization. However, additional new operators must be licensed beyond the
existing medical license holders for all activities in order to meet the anticipated increases of
an adult use program demand.
34
PROGRAM LICENSING AND OPERATIONS
1. License additional operators for dispensary and cultivation activities.
o A sample tiered licensing schedule has been provided in Section 3.3. Additional operators
for retail and other licensed processes should be included covering processors (infused
products and extractions), as well as analytical laboratories.
2. Mandatory licensed transporters for all operational transfers will increase product costs.
o Licensed production, processing, retail, and lab operations should have the option to
transport products if meeting all transportation requirements under the proposed law and
rules and regulations, as is currently performed under the MCPP and OAPP by cultivation
centers. While licensed transporters may serve to assist with the market and delivery of
products, issues in Nevada arose which nearly forced all operators to utilize separate licensed
transport organizations. This can increase costs and wait times by adding in an additional,
unnecessary operator to the supply chain. For an extreme scenario, Nevada even proposed a
requirement to utilize a separate licensed transport organization when transferring products
between two related, interconnected facilities (e.g. on site cultivation and dispensary).
Transporters should serve as an additional option for licensed operators, but all licensed
operations should be allowed to transport their own products after meeting requirements for
transport under any proposed law.
3. Additional opportunities for transporters through lab testing transport of products.
o Products must be tested for purity and contaminants, which under the medical program
requires a lab employee to visit on site and then the cultivation center to deliver the
products. Allow for a teleconference where the lab employee can choose a sample at
random or alternative, and allow licensed transporters or other licensed operators to deliver
the random samples for testing and analysis. This prevents undue and unnecessary burden
on both cultivators and analytical labs, while providing additional opportunities for
transporting organizations.
4. Consider home delivery for cannabis products from licensed dispensaries and/or coordinated with
licensed transporters.
o Again, using licensed transporters and licensed retailers to transport if meeting all
requirements under any proposed law, home delivery allows those without mobility to access
cannabis products. Verification of identity and home delivery could be coordinated through
seed to sale tracking software with transporters and retailers. With the current medical
program, and especially the OAPP which has no provision for caregivers, lack of mobility is
a serious concern and problem for many medical patients, and would likely also be for many
future adult use purchasers, especially the elderly or handicapped.
5. Provide opportunities for vertical integration.
o For currently licensed medical operators, as well as newly licensed cultivators, producers,
retailers, and transporters, allow for vertical integration of operations and an individual or
entity to obtain a license in each category. Likewise, an individual staff member may require
access to multiple facilities and therefore authorize staff and agents to be licensed at multiple
facilities under different disciplines (retail, cultivation, processing, etc) and different
organizations.
35
IMPLEMENTATION TIMELINES
1. Newly licensed facilities will require ample start up time prior to the commencement of adult use
sales.
o Licensed facilities require significant turnaround time in order to wait for rules formation,
apply, license, build, operate, harvest, and process cannabis products prior to final transport
and sale. Due to these time critical activities, we would suggest any additional adult use
cultivators are licensed nine (9) to twelve (12) months prior to the commencement of adult
sales, and any other licensed operators including dispensaries, transporters, processors, and
analytical laboratories are licensed three (3) to six (6) months prior to the commencement of
adult use sales.
TAXES
As seen in Oregon and mentioned previously in Section 3.1, as well as discussed recently in New
Jersey’s proposed adult use legislative actions, lower taxes and ultimately lower product costs decrease
participation in the black market and increase the proportion of sales under the regulated market. In Nevada,
taxes are placed at the point of purchase, depending on whether a purchaser is a medical or adult use
consumer. Currently, a wholesale tax on medical cannabis provides 7% tax revenue to fund the medical
program and ancillary activities. A point of sale tax on adult use purchasers would supplement program
proceeds, and could be implemented in an easily collectible method for licensed operators and consumers at
the point of sale, simply defining purchasers as adult use or medical and collecting the respective tax.
Reporting and payment for those taxes should be implemented in a way as to not burden licensed
operators and modeled after other industries, with simple and straightforward monthly or quarterly tax
payments. A simple tax and collection system will encourage participation and full compliance from all
operators if laid out in a straightforward manner, paying exactly the amount required, each month, quarter,
and year. Complicating the tax payment system could serve to additional workloads for both licensed
operators and regulatory agencies through analyzing payments and issuing refunds for overpayment based on
mandatory and unnecessary requirements.
36
4.0 – Critical Analysis of Alternative Demand Studies
4.1 – FREEDMAN & KOSKI DEMAND STUDY SNAPSHOT OF DEMAND FOR ADULT-USE CANNABIS IN ILLINOIS
Two critical flaws are present in the Freedman & Koski (F&K) report commissioned on behalf of
Senator Steans and Representative Cassidy to analyze and evaluate the current medical cannabis and potential
adult use markets in Illinois.
Utilization of Inaccurate and Dated Survey Results as a Basis for all Demand Estimation
The F&K report rests the entire basis of the demand estimate on a single flawed statistic. F&K utilizes a
self reported survey from 2014/2015, now five years old, to evaluate the number of cannabis users in both
Colorado and Illinois. This survey represents a snapshot in time in Illinois prior to the launch of the medical
program, prior to statewide decriminalization of personal possession amounts in Illinois, and at a time where
adult use cannabis had been approved in Colorado for over two years with Colorado’s medical cannabis
program in operation for over a decade.
This survey shows a ‘Past Month Use’ of 17.12% for Colorado and 8.06% for Illinois. This F&K study
proceeds to utilize these past month use survey results as absolute fact, ignoring that this is a five year old
study with drastically different political climates regarding cannabis in Illinois than the current climate in 2019.
When surveying a population, of course a state with a legalized act several years into effect will report higher
usage rates than those participants in another state where that same act is illegal, those respondents are asked
to admit to a crime, and even medical usage is essentially non-existent. It does not factor in the drastic
change in public perception due to the effects of decriminalization, the very likely under reporting of usage
from respondents, the increase in the number and normalization of legalized adult use states nationwide, and
the Illinois Medical Cannabis Pilot Program which has become much more commonplace and accepted
statewide, far beyond medical cannabis users themselves, and was not even operational at the time of this
survey.
From Section 3.0, this issue is discussed with references:
A recent survey as well as numerous others have found approximately 1 in 7 Americans had used cannabis within the
last year. 17, 18
One issue that is becoming more and more apparent due to the rapid adoption and expansion of medical cannabis as
well as adult use programs throughout the nation, is the resulting participation of the population in cannabis use studies and
the resources available to study such are increasingly available and are changing drastically. A recent report issued by Eaze,
a cannabis data clearing house, found that first time cannabis users increased 140% in adult use state programs in 2018,
with senior consumption increasing 25%, and women’s consumption also doubling in 2018. 20, 21
The IWSR, the leading source of data and intelligence on the alcoholic beverage market, in conjunction with BDS
Analytics says a growing number of consumers, especially millennials, are showing preferences to consume both alcohol and
cannabis, versus older generations which tend to stick with just one. That could cut into long-term loyalty efforts by beverage
37
makers, especially those in the beer and spirits fields. “Our research shows that up to 40% of adults 21 and over consume
cannabis in states where it’s legal,” said Jessica Lukas, vice-president at BDS Analytics. 22
Clearly, rapidly changing demographics can result in drastically different results when analyzing usage rates and often
a several year old study simply does not capture the actual demand present and can lead to significantly underestimating the
actual demand statewide. All of which indicate the consumption rate of adults in the United States is growing faster than it
can be tracked in states which have implemented adult use.
In short, utilizing a survey that is five years old with results collected during a vastly different political
climate both here in Illinois as well as nationwide is misleading and proceeding to make it a critical
component of any demand estimate is simply inaccurate.
38
Estimated Yield and Data is not Supported by Current Medical Cannabis Production Statistics
After falsely establishing that Illinois currently consumes cannabis at less than half of the rate of
Colorado, the F&K report goes onto ignore current medical cannabis production shortfalls despite having
significant access to data from the Department of Agriculture on actual production canopy and yields.
The F&K report cites a current, active production canopy of 259,762 square feet under the Illinois
medical cannabis program. They proceed to establish, based on Illinois and Colorado statistics, that with a
plants per pound average of 1.33 combined with a per plant area of 2.44 square feet, Illinois would require 1.1
to 1.7 million square feet of production area to meet their proposed demand estimate. While the F&K report
provides citations and disclaimers throughout, it never takes those numbers and applies them to the current
medical program to evaluate the results and gain insight into current medical production.
As of Jan 2019, Illinois is selling approximately 1,250 pounds of dry cannabis monthly. If we extrapolate
that to an annual number, Illinois sells approximately 15,000 pounds of dry cannabis each year, and when
factoring in extracts, edibles and infusions, a very conservative approach (overestimation) could estimate total
production at 30,000 pounds annually of cannabis flower weight equivalent, doubling the dry flower sales.
Using those figures cited from the F&K report, with 259ksf of production space, averaging 1.33 plants
per pound, and 2.44 square feet per plant, we can estimate the number of pounds that the medical program
should theoretically be yielding annually through simple multiplication and division assuming that all facts and
figures provided by the commissioned F&K report are accurate.
As established, Illinois is actually only producing and selling at most, 30,000 pounds annually. Yet, using
the F&K report’s yield estimates, the Illinois medical market should be producing over 80,000 pounds
annually. Ask any medical patient, view any medical dispensary menu on Leafly from Illinois, call your
nearest dispensary and ask for pricing, or view more detailed and relevant state comparison data in Sections
1.0, 5.0, and the Addendums: Illinois prices are some of the highest in the nation and higher than the current
Illinois black market.
Illinois patients regularly see dispensary pricing with ounces up to and in multiple cases exceeding $400
per ounce, while black market products in abundance range from $150 to $300 for product quality that meets
or exceeds that provided by the current medical program in many cases and its limited operators. Illinois
patients have reverted to visiting Michigan to purchase their medication, with numerous reports of such
activities throughout social media message boards with the reasoning for such being both the higher quality
and more affordable pricing for medical products in Michigan.
39
We can proceed to use the current sales in Illinois at 30,000 pounds, to estimate how much area this
should theoretically require for production, using the F&K report figures of 1.33 plants per pound and 2.44
square feet per plant.
Utilizing the F&K reports on figures, we can estimate only 98ksf of plant canopy is theoretically required
to produce the current cannabis products sold in Illinois, yet 259ksf is reported in operation. Still, Illinois
medical cannabis prices remain artificially high and product supply limited with often sold out varieties and
limited selections from licensed producers. See Section 1.0 covering the medical cannabis program for a
more detailed discussion on this topic.
We can proceed a step further and verify these results and noted discrepancy using the IL NORML yield
metrics found in Section 3.0. Instead of establishing a method of plant count, IL NORML used an analogous
method of estimating yields based on flowering canopy with low, normal, and high yield metrics from
published studies and benchmarks utilized in the indoor cannabis cultivation community for decades.
Ultimately, the IL NORML method looks at a cultivation method minimizing downtime between
harvests with dedicated flowering and vegetative areas and establishing that approximately two thirds (2/3) of
plant canopy can be utilized for flowering with the rest for vegetative, propagation, and non-flowering plant
growth, with average yields in the flowering areas of 42.0 grams per square feet, five harvests annually, and
the rough cannabis-based conversion of 448 grams to a pound (as opposed to 453.6 g/lb). Using these same
metrics, we can repeat the calculations above to determine both the annual yield that would be theoretically
expected from Illinois’ current 259ksf operational canopy, as well as the theoretical plant canopy necessary to
produce 30,000 pounds annually, and we find that almost the exact same theoretical values are established
through the IL NORML yield metrics despite using an alternative method compared to the F&K Report.
Using the IL NORML yield metrics, we would theoretically expect a state with 259ksf of operational
plant canopy to yield over 80,000 pounds annually, far exceeding the current medical sales of 30,000 pounds.
Using those same yield metrics to determine the plant canopy area needed to produce 30,000 pounds, we can
estimate approximately 96ksf of indoor plant canopy would theoretically be required to produce 30,000
pounds annually, again far less than the currently claimed operational canopy of 259ksf.
40
While the IL NORML Report and the F&K Report utilize different methods to establish and evaluate
yields, those yield metrics from both reports agree as to the final theoretical capacities, and both clearly show
there is a serious gap between theoretical yield capacities and actual, real world reported yields and product
sales, both coming to nearly the same conclusion for production capacity and square feet of canopy required.
The questions then become, why is there this discrepancy between estimated yield capacities and actual
sales data coupled with artificially high prices? Given the supply capacity calculated and a significantly lower
demand based on current purchasing patterns from medical patients, any introductory economics student
would anticipate a decreasing price due to ample availability and limited demand.
However, this is not what we see in Illinois, with increasing prices as of early 2019, with limited product
offerings and abundant out of stock notices from producers, with detailed information covered in Section 1.0.
Based on the evidence presented, several potential conclusions may be reached:
1. Actual operational production space within the Illinois medical program could be significantly less
than the 259ksf reported. Production claims which accordingly overstate the current and future
capacities could have the consequence of limiting competition and future license opportunities for
new, unique producers.
2. Current Illinois production facilities are producing extremely low yields. Using the lowest yield
metrics from the IL NORML report of 29.1 g/sf, the current medical sales of 30,000lbs annually
under the Illinois medical program represent a level that is only 53% of these lowest yield metrics
and only 37% of the average yield metrics given the 259ksf of operational space claimed, well off the
chart and far below from the lowest expected theoretical production targets for any cannabis
cultivation operation.
3. Medical products in Illinois are sold for artificially inflated prices due to limited product supply,
thereby taking advantage of the current limited competition to the detriment of sick and dying
medical patients in Illinois.
All three possibilities should result in the same conclusion: More licensed producers are required
throughout the medical market and necessary to serve any adult use market.
We can potentially conclude that current prices are under manipulation in the current medical market and
therefore more competition is needed to maintain fair pricing, actual production space in operation is less
than claimed with overstating production abilities potentially resulting in a limited market for existing
operators only, the current production facilities are producing very low yields, or more likely, some
combination thereof. All of these issues would be remedied by simply allowing for an open market in which
producers and retailers are forced to compete instead of being granted state sanctioned monopolistic control.
41
This discrepancy is addressed in Section 1.0 where it touches on these issues within the medical program
more in depth. Additionally, Section 5.0 shows state comparisons between medical and adult use programs
nationwide which also demonstrates a model based on such a concentration of licensed operations in the
hands of so few unique operators is not supported by any operational cannabis programs nationwide with
significant production capacity and sales.
F&K Report Conclusion
Two main issues with the F&K report commissioned by Illinois Legislators Senator Steans and
Representative Cassidy are critical errors including inaccurate demand estimates using dated and
underrepresented usage data coupled with serious supply concerns through a drastic difference between
estimated and actual, real world output. These critical errors are then utilized to draw a conclusion that is
inaccurate and if used to form the basis of a new adult use program, may significantly inhibit the success of
that very same program. Should the state of Illinois proceed utilizing the demand and yield estimates
calculated within the F&K report, there is a very high possibility that the Illinois adult use program will not
only falter and/or fail initially upon startup, but the existing medical program may also be decimated, limiting
product and access to those sick and dying patients that require such.
No adult use model currently implemented throughout the nation and world supports the idea that a
market limiting production to a handful of licensed operators is healthy or sustainable.
42
4.2 – MARIJUANA POLICY GROUP DEMAND STUDY COMMISSIONED BY MEDICAL CANNABIS ALLIANCE OF ILLINOIS
DEMAND, MARKET SIZE, AND LICENSING STRATEGY FOR LEGAL CANNABIS IN ILLINOIS
The demand study by the Marijuana Policy Group (MPG Report) which was commissioned by the
Medical Cannabis Alliance of Illinois features the same demand based inaccuracies due to utilizing the exact
same outdated survey data, as well as similar yield metric inconsistencies featured in the F&K Report. These
issues discussed above in the F&K Report Analysis are critical assumptions and form the basis of the entire
demand estimate for both reports, leading to a significant underestimating of demand in Illinois.
The MPG Report has an additional critical flaw. This report was commissioned by a group of industry
operators who have actively lobbied for no additional production licenses. A short mention at the beginning
of the document makes reference to this commission and represents a clear conflict of interest from the
funding source. The MPG Report then goes onto establish an even lower estimated demand when compared
to the F&K Report, with first year demand estimated at roughly 207,000 pounds, a total mature market
demand of 334,000 pounds, and a theoretical high capacity of approximately 483,000 pounds.
The MPG Report anticipates only a portion of demand will be captured in the first year. Essentially, this
acknowledges and accepts the fact that a large portion of demand will continue to be met by the black
market. The Illinois black market currently supplies all adult use demand and also contributes to supplying a
portion of the medical demand in Illinois due to issues discussed in Section 1.0, mainly due to pricing and
product quality issues.
It is important to realize that demand does not spontaneously and conveniently increase as a program
ages and develops, and much of this demand is currently existing and being met. Licensed operators become
more skilled and prices decrease to a level that forces the black market out of business or into very limited
non-regulated markets. To date, no adult use program has launched nationwide or worldwide with sufficient
inventory and pricing which competes with all black market products, and until these product offerings can
catch up, the black market will continue to fill the demand, regardless of any demand estimations, licensing,
and state programs. The goal of any adult use program should be to improve the safety of our communities,
and relegating a high percentage of an already under estimated demand to the black market is not meeting or
striving to meet those goals. Authorizing only a handful of large organizations to cultivate for such an
immense program is actively working against those goals.
Taking a look at those demand estimates from the MPG Report, we can compare them to programs
nationwide that are already operating with significant data available. As mentioned throughout all three
reports, Colorado sold over 650,000 pounds in 2017 with less than half of the residents and a lower tourist
population when compared to Illinois. The MPG Report proceeds to rely on outdated and inaccurate survey
data and manipulate statistics to estimate that Illinois therefore will purchase half of the cannabis that was
purchased in Colorado, despite the drastic differences in resident and tourist populations.
Furthermore, Arizona, based on November 2018 monthly sales of 11,486 pounds in their medical
cannabis program, sells approximately 138,000 pounds annually by extrapolation. This is purchased by a
patient population of just over 180,000 medical patients, with no adult use sales, and additional home grow
with quite a significant production capacity which is not accounted for in the data set. According to this
study, the total adult use demand in Illinois during the first year will only be 50% more than what
approximately 180,000 Arizona medical users purchased from licensed retailers under just the medical
43
program, with a total Arizona resident population of approximately 7.2 million compared to Illinois’ 12.8
million.
The MPG Report estimates anticipated monthly adult cannabis users in Illinois as 801,450 despite using
underreporting and outdated survey data which is almost 4.5x the number of medical patients in Arizona, yet
the MPG Report proceeds to estimate product usage of only 50% over the current Arizona program which is
also supplemented with a significant medical home grow program unaccounted for in the reported sales data.
A table and graph below displays this data covering Illinois MPG estimates, Colorado 2017 sales, and Arizona
2018 sales.
Estimated Illinois First Year Demand
(MPG)
Estimated Illinois Total
Demand (MPG)
Colorado 2017 Sales
Arizona Sales (Nov 2018
data, medical only)
Total Cannabis Equivalent
207,000 lbs 334,000 lbs 665,000 lbs 138,000 lbs
Resident Purchasing Population
12,800,000 12,800,000 5,600,000 180,000
Figure 13 – MPG Demand Estimates and Operational State Comparison Table
Figure 14 – State MPG Demand Estimates and Operational State Comparison Graph
665,000 lbs
138,000 lbs
207,000 lbs
334,000 lbs
5,600,000
180,000
12,800,000 12,800,000
0
2000000
4000000
6000000
8000000
10000000
12000000
14000000
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
Colorado 2017 Sales
Arizona Sales (Nov 2018 data, Medical Only)
Estimated Illinois First Year
Demand (MPG)
Estimated Illinois Total Demand
(MPG)
Re
sid
en
t P
urc
has
ing
Po
pu
lati
on
Tota
l Can
nab
is F
low
er
Equ
ival
en
t (l
bs)
MPG Demand Estimates and Operational State Comparisons
Total Cannabis Flower Equivalent (lbs)
Resident Purchasing Population
44
The ratios between cannabis product sales and resident and patient populations in actual operational
states compared to the estimates should be noted for their drastic difference in form. When stepping back
away from the data, and viewing these claims objectively from a distance when compared to other states with
operational programs and real world data, in our opinion, it should be clearly evident that both reports are
significantly underestimating adult use demand in Illinois, with the latest MPG Report under representing
demand to a point where their funding source and motives should be questioned.
Every reader should ask themselves, will a mature market in Illinois with more than twice the
resident population and 38% more tourists annually sell less cannabis than Colorado sold in 2017;
and furthermore, will the first year of adult use demand in Illinois with 12.8 million residents only
require approximately 50% more cannabis than Arizona’s medical program with 180,000 patients?
This is, in fact, what both the F&K and MPG Reports propose.
45
4.3 – IL NORML DEMAND STUDY SUMMARY ILLINOIS CANNABIS INDUSTRY OVERVIEW AND ANALYSIS V1.4
The IL NORML Report provides the best comparison, with the largest data set, comparing many
programs nationwide, leading to the most realistic conclusions when compared to both the F&K and MPG
Reports. Hinging the basis of a demand estimate on a several year-old self-reporting survey at a time with
drastically different political atmospheres is inaccurate and if used to form the basis of a new adult use
program, may significantly inhibit the success of that very same program. Detailed evaluation and a thorough
understanding of the shortfalls in the existing medical program were not addressed by either the F&K Report
or the MPG Report, and significant assumptions were made based on the theoretical production capacity
compared to real world data by both groups. Furthermore, the MPG Report was funded by a biased source.
We do however support the MPG’s stance on significantly increasing dispensary operations statewide.
This would significantly increase access, especially to medical patients, at a time when patients with limited
mobility have limited or, in the case of Opioid Alternative Pilot Program (OAPP) patients, no alternatives for
access with no ability to authorize a caregiver under the OAPP. Even with additional adult use allocations for
medical operations, additional licensees will be required.
The IL NORML Report, using a straight extrapolation based on in state residents, tourism, and Colorado
2017 sales data, estimated that Illinois demand in a mature market would reach 1.4 million pounds annually.
Even if including a safety factor of 75% for decreased usage rates when compared to Colorado, which is
claimed from a five year old survey but not necessarily accurate in 2019, even then we can anticipate Illinois
will require well over 1 million pounds of cannabis flower equivalent annually to meet demand.
Diving further into an Illinois adult use program’s needs, the IL NORML Report proceeds to calculate
the number of needed potential licensed cultivators with various canopy restrictions based on their status to
meet this demand. Based on talking points from Illinois legislators surrounding ‘craft cultivation’ licenses at
7ksf plant canopy, we can proceed to estimate the number of new licensees required for production in a
theoretical adult use scenario as well as a scenario that allows for vertical integration with dispensaries
authorized to cultivate on smaller scales, effectively pulling from a group of already vetted and established
operators to increase production capacity. All scenarios require newly licensed operations in the hundreds
even using the highest yield metrics from all combined reports. The number of newly licensed production
operations needed for a successful adult use program is far over the current twenty one facilities which are
held by an even smaller number of unique operators.
Detailed analysis can be found in Section 3.3 including a snapshot of the anticipated demand, some key
figures, and the suggested number of licensed operations required to serve an initial Illinois market have been
included on the following pages.
Ultimately, legislators drafting the adult use cannabis laws for Illinois are responsible for creating an
environment to foster a successful program, while increasing safety for our communities through the
elimination of the black market. A restriction on any new licensing for producers could potentially serve to
bolster the black market in Illinois on a scale that is unprecedented aside from the initial restriction and
illegality of cannabis over eighty years ago and its listing as a Schedule I substance under the Controlled
Substances Act. We ask that all legislators, operators, patients, consumers, and regulators thoroughly
consider and analyze the materials available to prevent a serious falter or failure of a potential adult use
cannabis program in Illinois and allow for an open market with reasonable considerations for all, but most
importantly, the medical patients.
46
5.0 – Cannabis Program State Comparisons
As mentioned in the previous Section 3.0, to the benefit of Illinois, demand studies based on existing
program data and actual sales data from states nationwide are available for review. This data is constantly
changing, as does the cannabis industry, with the varying numbers of licensed operators, patients, production
numbers, and types of licensing, changing as quickly as the industry does. The information with Section 4.0
as well as additional graphs and charts in the attached Addendums, the data was taken from numerous
sources covering the most readily available data our team could compile. These are listed as references in
Section 6.0.26-35
5.1 – CANNABIS PROGRAM LICENSING STRUCTURES
State regulated medical and adult use cannabis programs have taken different approaches to licensing,
each having their own benefits and detriments given the strategies chosen. For categorization, we have
defined these various programs under several categories which include: Open Licensing, Partially Restricted
Licensing, Restricted Licensing, and Vertically Integrated Licensing.
For the purpose of this analysis, we are only considering retail and production activities (dispensaries and
cultivators), and are not including any manufacturing (extractions, infusions, and concentrates), testing
laboratories, transport operators, or other licensed entities. Programs with open licensing are considered
those states with open applications for dispensary and cultivation operators. These states allow for open
competition and development of market forces through a relatively open market. In some cases, a complete
open market has resulted in an excess of production and resulted in states reverted to partially restricted
licensing. Partially restricted licensing may place a hard limit on either cultivators and/or dispensaries, or may
have placed a freeze on new applicants. Some states have turned to placing an upper limit on licenses
awarded, sometimes based on population statistics and congressional districts. Restricted licensing allows for
limited producers and retailers and has
minimal or no ability for new
operators to enter the market. These
states tend to have a limited amount of
available licensing opportunities, which
as a result can be monopolized by
large operators with the resulting
markets subject to manipulation and
consolidation. Finally, vertically
integrated licensing includes programs
that either require or allow for
dispensaries to produce their own
products, often only licensing a
dispensary and authorizing production
at on and/or off site facilities
following inspection and confirmation
of compliance with all regulations.
Vertical integration provides a balance
in the marketplace by allowing each
retail facility the option to cultivate, in
addition to purchasing from
Figure 15 – Cannabis Program Licensing Structures in 26 States
Vertically Integrated
52%
Open 15%
Partially Restricted
15%
Restricted 18%
Cannabis Program Licensing Structure
47
standalone cultivation operations and other dispensaries, preventing the main issue of artificially inflated
pricing and manipulation sometimes seen in limited markets without such.
A review of 27 state programs found over half had opportunities or required operators to be vertical
integrated. Another 30% had either open licensing or partially restricted licensing programs with the ability
for new operators to enter the market and a large enough operator pool to provide an adequate level of
competition. Washington and Oregon have placed a temporary freeze on new applicants for the cannabis
programs. Nevada has placed a hard limit on the number of retailers, but places no such limit on the number
of cultivators. Only 19% of the states reviewed had restricted licensing, which includes Illinois, and offer
very limited or no access to the market for additional operators with limited licensed operations statewide.
The list of twenty seven states analyzed can be found in the table below which is also accompanied by a
breakdown of the associated licensing structure for each state.
State Programs Licensing Type
Arizona MED Vertically Integrated Delaware MED Vertically Integrated Florida MED Vertically Integrated Hawaii MED Vertically Integrated Maine MED + REC Vertically Integrated Massachusetts MED + REC Vertically Integrated Minnesota MED Vertically Integrated Montana 1 MED Vertically Integrated New Hampshire MED Vertically Integrated New Jersey MED Vertically Integrated New Mexico MED Vertically Integrated New York MED Vertically Integrated Rhode Island 2 MED Vertically Integrated Vermont MED Vertically Integrated Connecticut MED Restricted Illinois MED Restricted Maryland MED Restricted Pennsylvania MED Restricted Washington DC MED + REC Restricted Missouri 4 MED Partially Restricted Nevada 3 MED + REC Partially Restricted Washington State 5 MED + REC Partially Restricted Oregon 5 MED + REC Partially Restricted California MED + REC Open Colorado MED + REC Open Michigan MED + REC Open Oklahoma MED Open
1 Option for standalone dispensary licenses 2 Emergency rules issued to license new cultivators 3 Hard limits on retailers with no cap on cultivators 4 Hard limits on retailers and cultivators based upon population statistics and congressional districts 5 Previously open licensing, implemented a temporary freeze on new applicants
Figure 16 – Cannabis Program Licensing Structures in 27 States
48
5.2 – STATE OPERATOR LICENSE ALLOCATION AND COMPARISON
The following figures show comparisons between several states and the number of licensed operators
within the cannabis programs. The data below was assembled from various sources included in the
references, with the key information transcribed to the tables and graphs below, with the most up to date
materials readily available and accessible. Given the ever-changing cannabis industry, market, and demand,
the numbers below and within this document represent the best and latest assembled data set our team could
compile. These figures are changing on a month to month basis, as most adult use programs continue to
experience dramatic growth, with similar growth seen in various medical programs throughout the nation as
well.
A simple review of the number of licensed cannabis operations in various active states shows interesting
trends and patterns. First, adult use states, understandably, tend to have a much higher number of licensed
operators. When compared to Illinois, this is often an order of magnitude or more of a difference, with more
than fifty times (50x) the number of licensed operators in states such as Washington, Oregon, and Colorado.
California, as of the latest released data, had awarded 9,249 cultivation licenses which is more than 450x the
number of cultivators in Illinois. Given the population and tourism that visits Illinois annually, we can safely
assume the demand in Illinois will be greater than all other current adult use states, barring California. When
looking at numbers in other industries and sectors and using those to draw a comparison, the Chicago area’s
demand alone may very well exceed demand in all other adult use states, aside from California.
Secondly, almost sixty percent of states reviewed below had the same number or more cultivators than
dispensaries. Figures 16 and 17 look into the ratio of licensed cultivators and dispensaries. More often than
not, those with ratios below 1.0 (e.g. more dispensaries than cultivators), are limited medical programs. Every
adult use program reviewed licensed significantly more cultivator operators than dispensary operators.
Figure 17 – State Licensed Cannabis Dispensary and Cultivation Operations
0
200
400
600
800
1,000
1,200
1,400
1,600
State Licensed Cannabis Operations
Licensed Dispensaries
Licensed Cultivators
9,249
49
From the above data, it is clearly evident that adult use states all feature a significantly higher license
count with a majority of all state programs reviewed licensing more cultivators than dispensaries. Analytically,
when considering the amount of products a retailer might need to stock to satisfy patients and consumers,
which generally tallies into the hundreds, multiple producers are commonly needed to supply that wide of a
range of products, especially as the products become more and more specialized as the market matures.
Several states, in addition to Illinois, do license more dispensaries than cultivators. When viewing those
states’ program statistics, we find these are, more often than not, states with limited licenses overall, often
licensing between ten (10) and seventy (70) operators throughout the entire state for both production and
retail activities. While this may be sufficient for limited medical production in some cases, substantial demand
created with any adult use program will far outweigh the ability of limited operators to meet that demand and
allows for the ability to maintain a high market share and manipulate pricing to artificially inflate wholesale
and retail costs. This can be seen in the Illinois demand estimate and comparison to Colorado’s latest sales
data in Section 3.0.
Additional figures which show general demographics including patients participating in medical
programs, land areas in each state, as well as an anticipated purchasing population which is a combination of
state residents and out of state visitor counts from each state’s reported tourism data, as well as the ratio of
state licensed cultivators to dispensaries are available below. Additional figures and metrics can also be found
in the Addendums.
It is important to remember, especially with Chicago, that Illinois has always been a significant economic
state. Given this fact, we anticipate Illinois will feature one of the highest cannabis product demands in the
nation to date if an adult use bill was passed, partly due to resident population and annual tourism as well as
general economic performance across multiple industries that Illinois has historically shown. This in itself
complicates any direct comparisons and analysis based upon all adult use markets in the United States,
including Canada, as the Illinois market is substantially larger than all to date, excluding California, which is a
mature market overall, and the single largest market in the world and is struggling with black market issues
due to high licensing fees, complicated processes, and high tax rates.
50
State Programs Licensed
Dispensaries Licensed
Cultivators Patients
Land Area (thousand
square miles)
Residents (millions)
Tourism Visitors
(millions)
Total Purchasing Population (millions)
Arizona 1 MED 130 130 180,000 114 6.8 44.0 50.8 California MED + REC 377 9,249 350,000 164 39.0 281.0 320.0 Colorado MED + REC 1,019 1,391 88,000 104 5.6 84.0 89.6 Connecticut MED 9 4 29,000 5.5 3.6 6.4 10.0 Illinois MED 55 21 54,500 58 12.8 114.0 126.8 Maryland MED 57 14 64,000 12 6.0 41.5 47.5 Massachusetts 1, 2 MED 40 40 55,046 10.5 7.0 26.0 33.0 Minnesota MED 8 2 12,000 87 5.5 30.9 36.4 Montana MED 300 472 32,000 147 1.0 12.2 13.2 Nevada MED + REC 66 133 17,000 111 3.1 42.9 46.0 New Mexico MED 81 35 58,000 122 1.0 35.4 36.4 New York MED 22 10 78,000 54.5 8.6 243.8 252.4 Oklahoma MED 640 1,028 11,000 70 4.0 21.8 25.8 Oregon MED + REC 606 1,115 34,869 98 4.2 30.0 34.2 Pennsylvania MED 35 12 51,000 46 12.8 197.0 209.8 Rhode Island MED 3 36 19,000 1 1.0 24.8 25.8 Washington State MED + REC 485 1,191 32,000 71 7.7 40.1 47.8 1 States are vertically integrated and license dispensary operations only with no count of cultivation operations readily available. These dispensary licenses to
operate are accompanied with the ability to cultivate; therefore these states were listed at a 1:1 ratio of dispensaries to cultivators. 2 Useable statistics are not yet available for the Massachusetts Adult Use Program.
Figure 18 – State Licensed Operators Comparison
51
Figure 19 – Ratio of State Licensed Cultivator to Dispensary Operators
Figure 20 – Ratio of State Licensed Cultivator to Dispensary Operators
2.46
2.02 1.84
1.61 1.57
1.37
1.00 1.00
0.45 0.44 0.43 0.38 0.34 0.25 0.25
0.00
0.50
1.00
1.50
2.00
2.50
3.00
Ratio of Licensed Cultivators to Licensed Dispensaries
State Program
Ratio of Licensed Cultivators to Licensed Dispensaries
California MED + REC 24.53 Rhode Island MED 12.00 Washington State MED + REC 2.46 Nevada MED + REC 2.02 Oregon MED + REC 1.84 Oklahoma MED 1.61 Montana MED 1.57 Colorado MED + REC 1.37 Arizona MED 1.00 Massachusetts MED 1.00 New York MED 0.45 Connecticut MED 0.44 New Mexico MED 0.43 Illinois MED 0.38 Pennsylvania MED 0.34 Minnesota MED 0.25 Maryland MED 0.25
24.53 12.00
52
5.3 – ANNUAL SALES AND OPERATIONAL CAPACITY
The MPG Colorado report is a starting point for establishing yield estimates based on actual sales data in
a maturing market. Additional states release updated sales information both in regards to revenues and
product weight sold. Readily available data from several states’ statistics have been assembled below which
compare total annual sales with both licensed operators, per patient, and per potential purchaser. These
values are again tabulated based on state population and tourism data, in conjunction with readily available
state cannabis program reports from governing regulatory bodies.
Sales data was obtained from readily available state released reports and news reports which are listed in
the references section. Given the ever-changing cannabis industry, market, and demand, the numbers below
and within this document represent the best and latest assembled data set our team could compile.
1 Additional Caregiver Production not accounted for 2 Additional Caregiver and Personal Cultivation Rights Production not accounted for 3 States are vertically integrated and license dispensary operations only with no count of cultivation operations readily available. These
dispensary licenses to operate are accompanied with the ability to cultivate; therefore these states were listed at a 1:1 ratio of
dispensaries to cultivators. 4 Data utilizes equivalent pounds of cannabis covering total product sales
Figure 21 – State Medical and Adult Use Annual Sales of Dry Flower Comparison
Current sales data from Illinois shows dry cannabis sales of approximately 15,000 pounds annually.
Compared to the Arizona medical program, we have already established Arizona represents a market
consuming approximately ten times the amount of cannabis, despite only having a little over three times the
patient population. This was theorized as a result of the high product pricing in Illinois which restricts
medical patient participation with only 60% or less of registered medical patients purchasing monthly, as well
as supported by various operators by increased sales during times of reduced pricing, and stated by Oregon in
their OLCC 2019 report. It was found that the more reasonable the price, the more the consumer purchases,
and is a factor not well accounted for in attempting to establish anticipated supply and demand needs of the
potential Illinois adult use program. When considering sales metrics from other adult use programs, one can
see Illinois lags by an order of magnitude, and in the case of Colorado’s total sales, represents an increase of
twenty seven times (27x).
While we have established Illinois is currently far under selling what would be required in an adult use
market, the pounds sold per cultivator and pounds sold per dispensary tell an interesting story. In these listed
mature and developing adult use markets, the average cultivator sells between two hundred (200) and one
thousand (1,000) pounds annually. We know there are numerous very large producers nationwide, an
State Programs Approximate Pounds Dry
Cannabis Sold Annually
Pounds Sold Annually
Per Cultivator
Pounds Sold Annually Per Dispensary
Pounds Sold Per Patient
(Medical Only)
Pounds Sold Per Million Potential
Purchasers
Arizona 1, 3 MED 130,000 1,000 1,000 0.72 2,559 Colorado 2, 4 MED + REC 650,000 434 592 N/A 6,753 Illinois MED 15,000 714 273 0.28 118 Nevada MED + REC 108,000 812 1,636 N/A 2,348 Oregon MED + REC 170,000 152 281 N/A 4,971 Washington State 2
MED + REC 173,000 145 357 N/A 3,619
53
example of Los Suenos in Colorado was given previously, however the pounds sold annually per operator
show many smaller licensees are also well represented in these legal markets. Illinois currently sells 714
pounds per cultivator, which is right in the middle of the figure in the adult use states, if not leaning towards
the upper range, and given the fact that numerous Illinois cultivation facilities are currently not producing
and/or inoperable, this does of course affect those statistics which if viewing operating cultivation facilities
would be considerably higher than the above listed 714 pounds per cultivator. This would also be a significant
factor in potential Illinois craft cultivators, as it is highly unlikely each and every licensed craft cultivator
would meet the average square foot production metrics utilized throughout this report.
An increase in demand to accompany adult use without increased licensing opportunities, would force
this number to skyrocket. Given our high and low end demand estimates for an Illinois adult use program
established in Section 3.0 of between 350,000 pounds and 1.4 million pounds annually, this would result in
each cultivator being responsible for, on average, the annual sale of between 17,000 pounds and 63,000
pounds and at current wholesale pricing levels would represent between $51 million and $189 million in
revenue per cultivator. Given the estimate of 1.4 million pounds annual demand was based on actual sales
data from 2017, we believe this higher figure to be more accurate in estimating such a market in Illinois.
Based on the metrics reviewed, a state regulatory model with such a concentrated level of production and
distribution is not supported by any data available from any adult use state operating nationwide. Due to the
often complex regulatory and legislative processes as well as the time to market for a cannabis production and
retail facility from design through build out, to planting, harvest, processing, and finally sale, any serious
shortage would not have a simple or quick remedy. In a case with a prolonged shortage, and similar to
Michigan’s forty licensed dispensaries almost being forced to close due to lack of supply, which was only
temporarily remedied with an emergency ruling, the ripple of affected persons would include licensed
operator’s staff as businesses suffer and lack of supply leads to potential dispensary staff layoffs, unrealized
tax revenue, business closures, increased black market activity, and as mentioned, lack of access for those
medical patients who require such. Furthermore, if these shortages were to occur from combined medical
and adult use operators with no additional production capacity to fill the void, this would have the potential
to cause widespread accessibility and potentially fatal problems for medical patients that require a continued
and uninterrupted supply of cannabis for their seriously debilitating ailments.
54
Figure 22 – Annual Product Sales per Licensed Operator State Comparison
Given the Illinois demand estimates from Section 3.0 and the comparison with mature programs
nationwide, it should be clear that such a limited operator market without additional licensing would be far
from the norm and cannot be supported by any data currently existing or available from any program
nationwide. An increase of twenty three (23x) to eighty three (83x), likely leaning towards the higher end of
the estimate between 40x and 60x based on the fact the higher number was derived from actual sales data,
such an increase is simply not achievable by all operators, nor is it sustainable for the medical program.
Doubling any size business is a significant undertaking, and increasing of multiple times over is not the
standard in any industry.
Clearly, additional licensing is needed for all operators in the case of an adult use program, and even to
expand and maintain the current medical program under the OAPP.
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
Arizona Colorado Illinois Nevada Oregon Washington State
Po
un
ds
Annual Sales Per Licensed Operator
Per Cultivator
Per Dispensary
55
6.0 – Conclusion
The MCPP, OAPP, and potentially adult use cannabis programs have the ability to provide relief as well
as assistance to a tremendous amount of people throughout the state of Illinois through medical cannabis, tax
revenue, and inhibition of the black market and associated crime. These programs can be a great success;
however, to realize their full potential, proper implementation is paramount. We believe these key issues are:
1. Medical Program Diversification of Operators through Additional Licensing
Open the application process for unawarded dispensary districts and non-operating or non-
producing cultivators under MCPP and in preparation for the OAPP and the potential adult
use program
AZ, WA, MO, and MI based program additions for additional tier based licensing to
increase production immediately and thwart product shortage, adding new licenses from
existing operators thereby allowing for vertical integration as well as opportunities for new
qualifying applicants across all disciplines
NJ based approach for the medical program expansion using a Governor’s Executive Order
to implement these changes quickly and efficiently
Eliminate/minimize current oligopoly and predatory pricing practices which harm the
patients and drive continued or increased sales towards the black market
2. Medical Program Increase in Participation
Allow additional qualifying medical conditions through IDPH and/or a Governor’s
Executive Order as suggested by the appointed advisory board or as determined by
physicians
Protection and incentive to retain the medical program if an adult use program is launched in
Illinois including lower fees, less restrictions on physicians and conditions, increased limits,
and increased personal cultivation rights
3. Adult Use Program Increase in Licensing and Production
Similar programs (CO, AZ, WA, OR, MI, and Canada) as well as Illinois Demand Studies in
Section 3.0 demonstrate Illinois is severely lacking in sales capacity. Additional operators
must be licensed upon the initial program implementation in order to design, construct,
operate, and harvest inventory before adult use sales commence so adequate inventory
surplus can be created to meet the potential demand and guarantee access for medical
patients.
Concessions should be made to existing medical stakeholders including grandfathered
licensing with the possibility of tiered cultivation licenses and additional retail locations, in
addition to an application process for new operators. Tiered cultivation licenses that limit
flowering plant canopy as opposed to facility footprints should be considered, allowing for
greater control in preventing a scenario of oversupply while leaving potential for increases in
production as demand requires.
4. Adult Use Tax Revenue
Determining the proper tax rate and allocating funds generated to necessary programs and
projects
56
Without the implementation of the above to some degree, we are concerned about the ongoing health of
both the medical cannabis programs and any proposed adult use programs. We are quickly proceeding
towards what could be one of, if not the single greatest failures in the history of regulated cannabis. Our
suggestion would include the immediate increase of production capacity to help alleviate current product
shortages and future anticipated demand with the OAPP while plans are made for adult use.
As the industry continues to grow nationwide, it is common to hear legislators utilize the phrase ‘learn
from the mistakes others have made’ when addressing and designing newly proposed adult use programs. To
date, all adult use program launches nationwide, and now with the Canadian program, clearly display one
critical point that is increasingly overlooked. Virtually no adult use program launched in any location
worldwide to date has addressed meeting actual demand with adequate supply upon their initial launch.
Given Illinois’ current shortcomings regarding sales and production capacity compared to similar programs,
Illinois is possibly approaching what could be the most significant product shortage seen in any regulated
program to date with both pricing and accessibility issues. These problems will continue to multiply as the
programs expand if licensed operators are kept in limited and concentrated numbers.
Please feel free to contact us with any questions, concerns, or for more information. Anything we can do
to further advise or assist is encouraged and welcomed. Thank you for the opportunity to provide these
thoughts on the current and future status and success of medical and adult use cannabis in Illinois.
CONTACT
Illinois Chapter of the National Organization for the Reform of
Marijuana Laws (IL NORML)
Dan Linn, Executive Director
847-341-0591
danlinn@illinoisnorml.org
Kelvin D. McCabe, Board of Directors and Legal Counsel
309-837-1110
mccabe.esq@gmail.com
57
7.0 - References
1 - “MCPP Program Update – December 11, 2018.” Medical Cannabis Pilot Program, 11 Dec. 2018,
www2.illinois.gov/sites/mcpp/Pages/update12112018.aspx
2 - “AGR PART 1000 COMPASSIONATE USE OF MEDICAL CANNABIS PILOT PROGRAM.” Illinois General Assembly Home Page, 25 Mar.
2015, www.ilga.gov/commission/jcar/admincode/008/00801000sections.html.
3 - Hudak, John, et al. A Snapshot of Demand for Adult-Use Cannabis in Illinois. Freedman & Koski, Feb. 2019.
4 – “Arizona Medical Marijuana Program - January 2019 Monthly Report.” AZ DHS, Feb. 2019, www.azdhs.gov/documents/licensing/medical-
marijuana/reports/2019/2019-jan-monthly-report.pdf.
5 - “IDFPR PART 1290 RULES FOR ADMINISTRATION OF THE COMPASSIONATE USE OF MEDICAL CANNABIS PILOT
PROGRAM.” Department of Financial and Professional Regulation, 3 Dec. 2018,
www.idfpr.com/MC/68%20IAC%201290%20Emergency%20Amendments%20Register.pdf?ActID=3503&ChapterID=35.
6 - McCoppin, Robert. “Illinois Declines to Expand Medical Marijuana Conditions List.” Chicago Tribune, Chicago Tribune, 1 Feb. 2016,
www.chicagotribune.com/news/local/breaking/ct-illinois-medical-marijuana-met-20160129-story.html.
7 - Livio, Susan K. “Phil Murphy Moves to Expand Access to Medical Marijuana in New Jersey.” NJ.com, 23 Feb. 2018,
www.nj.com/politics/index.ssf/2018/01/hold_murphy_expands_medical_marijuana_program_adds.html.
8 – “Section 1 of Article XVI - Right to Access Medical Marijuana.” Secretary of State - Missouri, 28 Nov. 2016,
www.sos.mo.gov/CMSImages/Elections/Petitions/2018-051.pdf.
9 - “Producer License Descriptions and Fees.” Marijuana Licensing | Washington State Liquor and Cannabis Board, 2013,
lcb.wa.gov/mjlicense/producer_license_discriptions_fees.
10 - “LARA to Make Recommendation to the Medical Marihuana Licensing Board Regarding the Supply of Medical Marihuana Products.” Michigan
Department of Licensing and Regulatory Affairs, 28 Nov. 2018, www.michigan.gov/lara/0,4601,7-154-89505-484210--,00.html.
11 - “Michigan Medical Marijuana Shortage Could Result in Dispensary Shutdowns.” Marijuana Business Daily, 16 Nov. 2018, mjbizdaily.com/medical-
cannabis-supply-shortage-michigan-shutdowns-licensed-dispensaries/.
12 - Lamers, Matt. “On Cusp of Legalization, Canadian Cannabis Stockpiles Hit Record.” Marijuana Business Daily, Marijuana Business Daily, 3 Oct.
2018, mjbizdaily.com/on-cusp-of-legalization-canadian-cannabis-stockpiles-hit-record/.
13 - “OMMP Plant Limits.” Oregon Health Authority,
www.oregon.gov/oha/PH/DISEASESCONDITIONS/CHRONICDISEASE/MEDICALMARIJUANAPROGRAM/Documents/Plant
-Limit-Chart.pdf.
14 - Allen, David, MD. “Dr David Allen the Discovery of the Endocannabinoid System.” YouTube, YouTube, 10 Dec. 2014, youtu.be/LCs4B-oXOdk.
15 – “Potential Tax Revenue from a Regulated Cannabis Market: Illinois.” Marijuana Policy Project (MPP), 2017, www.mpp.org/wp-
content/uploads/2015/04/IL-2017-MPP-Fiscal-Estimate.pdf.
16 – “Market Size and Demand for Marijuana in Colorado - 2017 Market Update.” State of Colorado, Colorado Department of Revenue, University of
Colorado Boulder Leeds School of Business, Marijuana Policy Group, Aug. 2018,
www.colorado.gov/pacific/sites/default/files/MED%20Demand%20and%20Market%20%20Study%20%20082018.pdf.
17 – “Marist Poll.” Weed and The American Family - Poll Results Conducted March 2017, maristpoll.marist.edu/yahoo-newsmarist-
poll/#sthash.iuGvQeBO.qVzvX2X9.dpbs.
18 - Carroll, Linda. “One in Seven U.S. Adults Used Marijuana in 2017.” Reuters, 27 Aug. 2018, www.reuters.com/article/us-health-marijuna-us-
adults/one-in-seven-us-adults-used-marijuana-in-2017-idUSKCN1LC2B7.
19 – Stuart, Tessa. “Interview with John Hickenlooper.” Rolling Stone, 25 June 2018, www.rollingstone.com/politics/politics-features/john-
hickenlooper-on-the-future-of-weed-the-2020-race-and-whats-happening-at-the-denver-post-629368/.
20 - “State of Cannabis: Consumers Diversified in 2018.” Eaze, 15 Jan. 2019, www.eaze.com/article/insights-2018-state-of-cannabis-report-marijuana-
consumer-diversify.
21 - Pellechia, Thomas. “In 2018, U.S. Consumers Ordered Cannabis Every 8 Seconds.” Forbes, 2 Feb. 2019,
www.forbes.com/sites/thomaspellechia/2019/02/01/in-2018-u-s-consumers-ordered-cannabis-every-8-seconds/#3228742c322e.
58
22 - Morris, Chris. “Cannabis May Pose a 'Long-Term Risk' to the Alcohol Industry.” Fortune, 21 Feb. 2019, fortune.com/2019/02/21/cannabis-risk-
to-alcohol-industry/.
23 – “2019 Recreational Marijuana Supply and Demand Legislative Report.” Oregon Liquor Control Commission (OLCC), 31 Jan. 2019,
mjbizdaily.com/wp-content/uploads/2019/01/Recreational-Marijuana-Supply-and-Demand-Legislative-Report.pdf.
24 - Caulkins, Jonathan, et al. “Estimating Adequate Licensed Square Footage for Production.” Washington State Government, Botec Analysis
Corporation, lcb.wa.gov/publications/Marijuana/BOTEC%20reports/5a_Cannabis_Yields-Final.pdf.
25 – “Year One Canopy Report - March 2019.” Liquor and Cannabis Board - Washington State, Mar. 2019, lcb.wa.gov/sites/default/files/publications/Marijuana/YearOneCanopy.pdf.
26 - “Annual Marijuana Business Factbook - Sixth Edition 2018.” Marijuana Business Daily, Anne Holland Ventures Inc., 13 Nov. 2018,
mjbizdaily.com/factbook-2018-access/.
27 – “CalCannabis: 2018 by the Numbers.” California Department of Food and Agriculture, CalCannabis, 31 Dec. 2018,
static.cdfa.ca.gov/MCCP/document/CalCannabis--2018%20by%20the%20Numbers_12.31.18.pdf.
28 – “Constitutional Amendment 2 - Medical Marijuana.” Missouri Department of Health & Senior Services, health.mo.gov/safety/medical-
marijuana/index.php.
29 – “Marijuana Establishments.” State of Nevada, tax.nv.gov/MME/Marijuana_Establishments_-_Home/.
30 – “Marijuana License Applications.” Oregon Liquor Control Commission (OLCC), 15 Feb. 2019.
31 – “Marijuana Statistics and Reports.” State of Nevada, tax.nv.gov/Publications/Marijuana_Statistics_and_Reports/.
32 – McVey, Eli. “Chart: Wholesale Marijuana Prices on the Upswing in Nevada.” Marijuana Business Daily, 17 Aug. 2018, mjbizdaily.com/chart-
wholesale-marijuana-prices-nevada/.
33 – “MED Licensed Facilities.” State of Colorado, 1 Feb. 2019, www.colorado.gov/pacific/enforcement/med-licensed-facilities.
34 – “Retail Marijuana Fair Market Value.” State of Nevada, 1 Jan. 2018, tax.nv.gov/uploadedFiles/taxnvgov/Content/Forms/Retail-Marijuana-Fair-
Market-Value-Jan-1-2018.pdf.
35 – “Washington State Liquor and Cannabis Board Data Portal (WSLCB).” OpenData by Socrata, data.lcb.wa.gov/browse?category=Production.
59
ADDENDUM I - LICENSED CULTIVATION OPERATIONS
STATE COMPARISONS METRICS
372.2
319.8
264.3
158.1 147.5
78.2
18.9 7.3 7.2 6.0 3.9 2.4 2.2 1.7 1.4 1.3
0
50
100
150
200
250
300
350
400
Licensed Cultivators Per Ten Thousand Patients
State Program Licensed Cultivators Per Ten Thousand
Patients
Oklahoma MED 934.5 Washington State MED + REC 372.2 Oregon MED + REC 319.8 California MED + REC 264.3 Colorado MED + REC 158.1 Montana MED 147.5 Nevada MED + REC 78.2 Rhode Island MED 18.9 Massachusetts MED 7.3 Arizona MED 7.2 New Mexico MED 6.0 Illinois MED 3.9 Pennsylvania MED 2.4 Maryland MED 2.2 Minnesota MED 1.7 Connecticut MED 1.4 New York MED 1.3
934.5
60
39.8
35.8 32.6
28.9
24.9
15.5
2.9 2.6 1.4 1.2 1.0 0.4 0.3 0.2 0.1 0.1 0.0 0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
Licensed Cultivators Per Million Potential Purchasers
State Program Licensed Cultivators Per Million Potential
Purchasers
Oklahoma MED 39.8 Montana MED 35.8 Oregon MED + REC 32.6 California MED + REC 28.9 Washington State MED + REC 24.9 Colorado MED + REC 15.5 Nevada MED + REC 2.9 Arizona MED 2.6 Rhode Island MED 1.4 Massachusetts MED 1.2 New Mexico MED 1.0 Connecticut MED 0.4 Maryland MED 0.3 Illinois MED 0.2 Pennsylvania MED 0.1 Minnesota MED 0.1 New York MED 0.0
61
56.4
36.0
16.8 14.7 13.4
11.4
3.8 3.2 1.2 1.1 1.2 0.7 0.4 0.3 0.3 0.2 0.0
0.0
10.0
20.0
30.0
40.0
50.0
60.0
Licensed Cultivators Per Thousand Square Miles
State Program Licensed Cultivators Per Million Potential
Purchasers
California MED + REC 56.4 Rhode Island MED 36.0 Washington State MED + REC 16.8 Oklahoma MED 14.7 Colorado MED + REC 13.4 Oregon MED + REC 11.4 Massachusetts MED 3.8 Montana MED 3.2 Maryland MED 1.2 Arizona MED 1.1 Nevada MED + REC 1.2 Connecticut MED 0.7 Illinois MED 0.4 New Mexico MED 0.3 Pennsylvania MED 0.3 New York MED 0.2 Minnesota MED 0.0
62
ADDENDUM II - AVERAGE PRODUCT PRICING
STATE COMPARISONS METRICS
Several states, during the course of program operation, have released average product pricing per
pound. These states include both medical only and recreational states. The information below includes states
that have released such information and the graph shows the average price per pound as a function of the
number of licensed cultivators in each state. To create these graphs, the number of licensed cultivators was
normalized to a value between zero and one. Due to the sheer amount of cultivation licenses issued by
California (9,249), this skews the normalization. Therefore two graphs are featured, one which shows all
states with data, normalized between zero and one, as well as a detail view.
State Program Licensed
Dispensaries Licensed
Cultivators Patients
Average Price Per
Pound
Ratio of Cultivators to Dispensaries
Arizona MED 130 130 180,000 $2,069 1.00 California MED + REC 377 9,249 350,000 $1,006 24.53 Colorado MED + REC 1,019 1,391 88,000 $860 1.37 Connecticut MED 9 4 29,000 $3,014 0.44 Illinois MED 55 21 54,500 $3,054 0.38
Maine MED 8 Caregiver Model
and Vertical Integration
41,000 $1,910 N/A
Massachusetts MED 40 40 55,046 $2,524 1.00
Michigan MED No Provision Prior to Rec
Caregiver Model 300,000 $1,880 N/A
Nevada MED + REC 62 121 17,000 $2,799 1.95 New Mexico MED 81 35 58,000 $2,874 0.43 Oregon MED + REC 606 1,115 34,869 $626 1.84 Washington DC MED 5 8 6,000 $2,787 1.60 Washington State MED + REC 485 1,191 32,000 $595 2.46
63
Arizona ($2,069)
California ($1,006)
Colorado ($860)
Connecticut ($3,014) Illinois ($3,054)
Maine ($1,910)*
Massachusetts ($2,524)
Michigan ($1,880)*
Nevada 1 ($2,799)
New Mexico ($2,874)
Oregon ($626)
D.O.C. ($2,787)
Washington State ($595)
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1
Pri
ce P
er
Po
un
d
Normalized Number of Licensed Cultivators
Average Price Per Pound
* Utilizing Caregiver Model
1 Nevada has seen a price increase from
$1,800/pound to the current high of
$2,799/pound since 2017 and the
commencement of adult use sales.
64
After viewing the detail view and data above, it is clear to see a trend that seems to correlate a higher
price per pound with limited licensed cultivators and limited programs. When considering the market forces
at work, the data supports the idea that limited competition with limited operators artificially inflates prices
and drives purchasers to the black market.
While higher prices for adult use cannabis and those that use such for other benefits aside from
medical purposes can be rationalized as an inherent vice tax, medical patients that require cannabis to treat
their debilitating conditions which do not have the benefit of insurance for purchasing their medicine and
often are operating on a strict and limited budget, should not be victim to pricing manipulation by large
operators. In many cases, access to their medication can quite possibly be the difference between life and
death, both immediately in cases of epilepsy as well as in the long-term in the case of cancer.
Arizona ($2,069)
Connecticut ($3,014) Illinois ($3,054)
Massachusetts ($2,524)
Nevada 1 ($2,799)
New Mexico ($2,874) Washington DC
($2,787)
$1,500
$1,700
$1,900
$2,100
$2,300
$2,500
$2,700
$2,900
$3,100
$3,300
0 0.005 0.01 0.015 0.02
Pri
ce P
er
Po
un
d
Normalized Number of Licensed Cultivators
Average Price Per Pound Detail View States with less than 180 cultivator licenses
1 Nevada has seen a price increase from
$1,800/pound to the current high of
$2,799/pound since 2017 and the
commencement of adult use sales.
65
ADDENDUM III - LICENSED DISPENSARY OPERATIONS
STATE COMPARISONS METRICS
173.8
151.6
115.8
93.8
38.82
14.0 10.8 10.1 8.9 7.3 7.2 6.9 6.7 3.1 2.8 1.6 0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
160.0
180.0
200.0
Licensed Dispensaries Per Ten Thousand Patients
State Program Licensed Dispensaries
Per Ten Thousand Patients
Oklahoma MED 581.8 Oregon MED + REC 173.8 Washington State MED + REC 151.6 Colorado MED + REC 115.8 Montana MED 93.8 Nevada MED + REC 38.82 New Mexico MED 14.0 California MED + REC 10.8 Illinois MED 10.1 Maryland MED 8.9 Massachusetts MED 7.3 Arizona MED 7.2 Pennsylvania MED 6.9 Minnesota MED 6.7 Connecticut MED 3.1 New York MED 2.8 Rhode Island MED 1.6
581.8
66
24.8
22.7
17.7
11.4 10.2
2.6 2.2 1.4 1.2 1.2 1.2 0.9 0.4 0.2 0.2 0.1 0.1
0.0
5.0
10.0
15.0
20.0
25.0
30.0
Licensed Dispensaries Per Million Potential Purchasers
State Program Licensed Dispensaries Per Million Potential
Purchasers
Oklahoma MED 24.8 Montana MED + REC 22.7 Oregon MED + REC 17.7 Colorado MED + REC 11.4 Washington State MED 10.2 Arizona MED + REC 2.6 New Mexico MED 2.2 Nevada MED + REC 1.4 Massachusetts MED 1.2 Maryland MED 1.2 California MED 1.2 Connecticut MED 0.9 Illinois MED 0.4 Minnesota MED 0.2 Pennsylvania MED 0.2 Rhode Island MED 0.1 New York MED 0.1
67
9.8 9.1
6.8 6.2
4.8
3.8
3.0
2.3 2.0 1.6
1.1 0.9 0.8 0.7 0.6 0.4 0.1
0.0
2.0
4.0
6.0
8.0
10.0
12.0
Licensed Dispensaries Per Thousand Square Miles
State Program Licensed Dispensaries Per Thousand Square
Miles
Colorado MED + REC 9.8 Oklahoma MED 9.1 Washington State MED + REC 6.8 Oregon MED + REC 6.2 Maryland MED 4.8 Massachusetts MED 3.8 Rhode Island MED 3.0 California MED + REC 2.3 Montana MED 2.0 Connecticut MED 1.6 Arizona MED 1.1 Illinois MED 0.9 Pennsylvania MED 0.8 New Mexico MED 0.7 Nevada MED + REC 0.6 New York MED 0.4 Minnesota MED 0.1
68
ADDENDUM IV – VERSION UPDATES
March 2019 - Version 1.3
General typography changes throughout covering grammatical errors and stylistic changes
Freedman and Koski report additions including AGR data on current canopy of licensed medical
cultivators as of Dec 2018 throughout report
Adjustment of Colorado 2017 sales figures from 603,500 pounds annually to approximately 665,000
pounds annually due to a metric ton vs. ton conversion error
Colorado changes in pounds sold follows through to Illinois total demand estimate, increasing from
approximately 1.3 million pounds to approximately 1.4 million pounds
Clarify 1.4 million pound demand figure is based on MPG report of dry cannabis flower equivalent,
which accounts for extracts, edibles, infusions, and all non-flower based products
Section 3.1 – Addition of Eaze and IWSR data on usage rates of up to 40% of adults in legalized
states
Section 3.2 – Entire section covering Illinois Adult Use Licensed Production Space
Section 3.3 – Entire section covering Illinois Adult Use Additional Licensed Operators Required
Section 3.4 – Entire section covering Illinois Adult Use Program Implementation Notes
March 2019 – Version 1.4
Section 3.3 – Addition of Washington Canopy Report regarding active and licensed plant canopies in
Washington State
Inserted Section 4.0 – Critical Analysis of Alternative Demand Studies
Renumbered additional sections accordingly
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