‘I’ve Done Time for This Plant’: Virginia Aims to Diversify Marijuana Industry
Mike Thomas grew up around plants. He remembers summers on his grandfather’s farm in South Hampton, “hands in dirt, watching things grow from nothing.”
His passion eventually led him to marijuana; possessing the plant landed him in jail for a stretch as a young man. He later learned to grow it, as hemp. Now, with the General Assembly poised to legalize recreational cannabis use in Virginia, Thomas wants a seat at the table.
"I've risked my life for the plant,” Thomas said in an interview. “I've done time for the plant.”
Fifteen states and three territories have approved legalizing the adult use of marijuana. But few have found much success in spreading the wealth generated by sales to people and communities who’ve been disproportionately targeted in the War on Drugs. A 2017 survey conducted by Marijuana Business Daily found that 81% of marijuana business owners and founders were white.
“I do think that we are heading to a place where big corporate cannabis for the most part dominates the vast majority of the industry,” said Akele Parnell, an attorney at the Chicago Lawyers' Committee for Civil Rights focused on equity in the marijuana industry. “I think that's probably unavoidable.”
At the same time, the consequences of Virginia’s marijuana prohibition is clear. One state study noted that Black Virginians were 3.5 more likely to be arrested for marijuana charges despite similar usage as white people.
The so-called social equity program in Virginia aims to heal those injuries by prioritizing applicants who’ve been adversely affected by the War on Drugs. The current proposal targets people living in certain neighborhoods, graduates of historically Black colleges and universities, and people with marijuana convictions. Applicants would get access to low or no-interest loans generated by cannabis retail sales, and possibly also from existing medical marijuana licensees.
Chelsea Higgs Wise, director of the advocacy group Virginia Marijuana Justice, said lawmakers have so far been receptive to many of her suggestions toward improving the program. That included scrapping a plan from Gov. Ralph Northam to have the Virginia Alcoholic Beverage Control Authority oversee marijuana sales, which critics said would lead to heavy-handed enforcement.
“We have to realize that what we've normally done around businesses and inclusion has not worked,” Higgs Wise said. “So [it means] being really brave and progressive about doing this right.”
A Head Start
Mike Thomas sees himself as a future small-batch, artisanal cannabis craftsman. He compares his style to breweries -- “like Legend have their craft beer, we can have some craft cannabis.”
He contrasts his plans with the operation at nearby Green Leaf, or gLeaf, Richmond’s first and only medical marijuana dispensary.
The $25 million facility in Manchester is a technological marvel. Roughly 70 strains of 10,000 cannabis plants are cared for by humans and remote-controlled, automated systems that mimic the changing seasons. The crop is eventually harvested, dried, and processed into tinctures, edibles, and vape cartridges.
So far, foot traffic is slow and the facility is operating at half capacity. Just 11,000 people have registered for Virginia’s new medical marijuana program. But Samer Abilmona, the dispenary’s director of operations, said things will pick up, especially if Virginia legalizes all use.
“The pie is big enough for all of us,” Abilmona said on a tour this week. “There’s room for bigger operators, there’s room for smaller operators.”
Two of Virginia’s four operational medical marijuana facilities, or so-called processors, are now owned by Columbia Care, a publicly traded company with a footprint in 18 states, Canada, and Europe led by an all-white executive management team. The company won a license to operate in Portsmouth and in December purchased Green Leaf. Both have a monopoly in their respective regions.
Processors have also become bigger political players. Jushi, the partial owner of a Northern Virginia dispensary, dished out $34,500 in donations in the weeks leading up to this year’s session.
It’s clear those processors see a business opportunity as Virginia considers legalizing adult sales. Columbia Care told investors it’s seen its revenue triple or quadruple in states that have gone from medical to full legalization. In Virginia, the company anticipates its medical marijuana footprint will "establish market leadership in advance of potential adult-use cannabis approval in 2021."
In the legislature, however, the processors and their backers have expressed fears about being crowded out if they’re not allowed to “co-locate” medical operations with broader sales to all adults.
The processors argue their scale will help keep costs down for customers when Virginia legalizes. They say they’re committed to social equity goals, including possibly paying into a fund to help social equity applicants who are just getting started.
“You don't want to just give out licenses to minorities and say, ‘We've taken care of our quote-end-quote ‘minority problem’ with a lack of diversity in the cannabis industry,’” said Phil Goldberg, CEO of gLeaf. “It definitely needs to go beyond that. Otherwise, you're setting these minority groups up for failure.”
Not everyone is convinced Virginia should allow these large, “vertically-integrated” companies, which grow, process, and sell marijuana, into a future adult market.
“We want to have local businesses that are locally owned, we want that social equity ownership piece to be strong and to work, and we want companies to be as Virginian as possible,” Del. Schuyler VanValkenburg (D-Henrico) said in the House meeting.
Avoiding Other States’ Mistakes
Early states that passed recreational marijuana largely ignored equity concerns. More recent pushes have attempted to address that oversight.
Massachusetts is handing over all of its licensees for delivery to social equity and “economic empowerment” applicants in a move that has sparked a legal challenge. Lawmakers in New Jersey have proposed setting aside 70% of tax revenue generated by marijuana sales to fund programs to help communities impacted by the war on drugs, compared to the current 30% plan in Virginia. Illinois set aside a portion of its licenses to go to social equity applicants.
Akele Parnell, the Chicago-based attorney who also sits on the board of Chicago NORML, said Illinois’ plan has fallen short of its goals. Medical dispensaries were able to quickly convert to adult sales when marijuana became legal last year. Social equity applicants, meanwhile, became mired in a complicated lottery that was delayed by the pandemic. Of 21 social equity applicants that earned perfect scores in Illinois, most are majority owned by people of color, but they’re waiting on approval from the state.
Parnell said Virginia can avoid Illinois’ missteps.
“The first thing they need to do is slow down and don't rush,” Parnell said.
A delay would give smaller players a chance to get set up, Parnell said. It’s one reason Virginia lawmakers pushed back retail marijuana sales until 2024. Parnell said lawmakers should also be careful about who is included in the commonwealth’s social equity program.
“Illinois defined social equity probably too broadly, in my opinion,” Parnell said. “And what that did is it allowed lots of folks who aren't actually disproportionately impacted by the War on Drugs to qualify as a social equity applicant.”
‘A Little Bit of Love’
Even with big cannabis companies at the table, Parnell and others agree that people of color who work or own businesses stand to benefit from a well-crafted social equity plan in Virginia and elsewhere.
“Even if Black and brown folks walk away with ten percent of the market share, that’s still billions of dollars,” Parnell said.
Parnell said that in a limited license state like Virginia, even applicants who don’t know much about business won’t have trouble finding investors. Lawmakers’ current proposals call for 400 retail licenses, 25 wholesale licenses, 60 manufacturing licenses, and 450 cultivation licenses. The current legislation does not set aside quotas for social equity licenses or a requirement for all licensees to have Virginia residency -- two priorities for Higgs Wise of Marijuana Justice. She also wants to see a way to expedite the expungement of marijuana convictions for future entrepreneurs in the cannabis business.
Goldberg, the CEO of gLeaf, said dispensaries could help applicants come up with business plans, pay into seed funding, or help train future entrepreneurs.
“A lot of people think the cannabis industry, if you get a license, it's gold, and you're just going to make money,” Goldberg said. “It is extremely difficult.”
Mike Thomas has no delusions about how hard it could be. It’s one reason he wants to teach other people what he’s learned. And he believes he has a leg up some of the bigger players.
“You're trying to mass produce something that really deserves care and needs a little bit of love thrown in there,” Thomas said.
The debate in Richmond may be coming soon to Washington, D.C. Top Senate Democrats announced earlier this week that they plan on pushing for national marijuana legalization later this year with a focus on equity.