“I Don’t Know that a Single Dispensary Owner Can Survive”: Entrepreneurs of Color are Being Left Out of the Cannabis Boom
As marijuana legalization continues to sweet the US, some legal states, such as California and Massachusetts, have been working to bring social equity to their burgeoning cannabis markets. These programs are intended to grant microloans, prioritize locals for cannabis business licensing, consider those with prior cannabis convictions for employment, and improve the communities — mainly communities of color — that have been the most impacted by the War on Drugs.
However with legalization becoming a more mainstream political topic, newcomers to the market are looking to pay their way into the industry, by bringing their private wealth, MBA’s, and connections to Washington D.C. political insiders like former Speaker of the House, John Boehner, who recently joined the board of Acreage Holdings.
New Frontier Data, an analytics firm specializing in the cannabis industry, reported that in 2017, legal cannabis markets had an estimated worth of $8.3 billion. They predict that the market will continue to grow at 14.7 percent annually to reach $25 billion by 2025. And as the industry grows, so too will business operating costs — which are likely to be more of a burden for minority entrepreneurs, who often have less personal or family wealth, and access to capital.
The upward trend of legal cannabis markets is only bound to continue, but as these markets grow, will the cannabis industry turn out to be equitable and inclusive than its mainstream counterparts?
“Women are being pushed out [of the industry] for the basic white guy with an MBA from Harvard,” Wanda James, CEO of Simply Pure, a Denver, Colorado-based dispensary and edible company, told Civilized. “And now that it’s making money, these amazing innovators are getting kicked out. And I think that’s a problem.” James says she is inspired by the young people coming up in the industry, but is simultaneously worried about their future: “I don’t know in [the] current climate and the current boom that a single dispensary owner can survive.”
In the US, white men own 57 percent of privately owned companies, even though they compose only 40 percent of the US workforce. Marijuana Business Daily reports that 19 percent of cannabis business owners and founders are people of color, while women holding executive level positions in the industry fare somewhat better, at 27 percent (though that number is down from 36 percent in 2015).
“Early on [in the industry], women were making amazing inroads,” said James, who’s also president of the Cannabis Global Initiative, a communications and marketing firm working on expunging records and fostering connections among government organizations, individuals, and businesses.
In 2009, James and her husband Scott Durrah became the first African Americans to own a dispensary, edible company, and cultivation facility. “Women were owning at a higher level and now we’re dropping off,” she said. “And why are we seeing that? Because marijuana is making big money.”
People of color face several systemic barriers to entry in the marketplace including access to credit, less family and individual wealth than whites, and fewer assets. Additionally, they experience less favorable loan application outcomes, which can weaken their businesses’ ability to buffer obstacles and survive.
This depends, of course, on if they can receive a loan at all. Because of cannabis’ continued federal prohibition, the Small Business Administration enacted a policy last April, saying they won’t approve loans to businesses that derive any portion of their revenue from sales to marijuana clients. This applies to those who work in ancillary capacities that do not even touch the plant at all, including attorneys, designers, architects, and consultants.
“Right now, if you’re applying for one of the six vertically integrated licenses in New Jersey, it’s going to be a $30 million dollar raise,” James explained. For example, the application fee in New Jersey is $20,000. If the bid is unsuccessful, the state will return $2,000 to the applicant. Ticking off a long list of expenses ranging from attorneys fees to securing the facility, she estimates that to open a cannabis business in the Garden State will cost anywhere from $250,000 to $1,000.000.
This effectively narrows the profile of a company who can own or run a cannabis business. “The amount of money that is in the industry right now is being tailored to large scale sales and acquisitions,” James said. “I’m not sure a single location can exist in the world of cannabis we are creating.” For small-scale, single dispensary owners, the odds may be stacked against them.
James is hopeful that as east coast states continue their growth in legal markets, the social equity programs and micro licenses will allow smaller businesses to exist and thrive. “I hope that in the world of cannabis ‘Cheesecake Factories,’ the local store will do just as well,” she said.
Jacob Plowden is the co-founder and deputy director of the Cannabis Cultural Association (CCA), a New York City-based nonprofit formed in response to the lack of diversity and inclusion in the cannabis industry. CCA is now working to provide resources for disenfranchised communities to enter legal cannabis and hemp markets. Plowden agrees that there are financial barriers, but also deep-seated and long-held fears for people of color when it comes to cannabis.
“The cultural barriers are based in stigma, fear, and misinformation,” Plowden said. “Communities are still afraid that they will be subjected to wrongful arrest and imprisonment due to association with marijuana.”
Despite state-legal cannabis markets across the country, minorities continue to be arrested for cannabis much more frequently than their white counterparts, even though they consume cannabis at approximately the same rate. A criminal conviction for cannabis could bring many sanctions, including reduced access to government benefits like housing and student loans, and can negatively affect a person’s business and employment opportunities.
Cannaclusive is a collective formed by three black women aspiring to facilitate fair representation of minority cannabis consumers. Co-founder and CEO Mary Pryor explains that they encourage communities of color to change the industry through civic participation. They are also launching a database of black and brown cannabis businesses called InclusiveBase.
“It’s about moving bias,” Pryor said of Cannaclusive’s work. “We don’t believe in being quiet about this as people sit in jail.” She bemoans Twitter and hashtag activism, believing it falls far short, given the work that remains ahead. “Community boards, assembly meetings, senate gatherings, we need to be going to those meetings and having those conversations,” she said. “Everyone in this community should be making calls one time a day. When [representatives] come in for town hall meetings, be at that bitch. When there’s a court ruling or a press conference, show up. Don’t play around.”
Both Pryor and James believe that the fall of federal cannabis prohibition is not a matter of if, but when — and whenever that happens, it could be a step toward leveling the playing field. “I mean, let’s be real here,” James said, noting that in the current environment, those who established the industry are being pushed out, while others with criminal records or lack of financial resources, like women and minorities, face steep obstacles to entry. However, she is encouraged by social equity programs like Massachusetts’, working to engage minority communities and ensure their inclusion in the legal cannabis industry.
As for Plowden and the CCA, they have taken the inequity battle straight to the federal government, filing a lawsuit against the Department of Justice and the Drug Enforcement Administration that challenges the constitutionality of the Controlled Substances Act, where cannabis sits as a prohibited Schedule I substance alongside heroin. “The state by state process is taking too long,” said Plowden. “We now must look to changing the mandate on a federal level.”
James, despite her concerns, still finds reasons to be hopeful. “I will bet on the entrepreneur and creativity of Americans,” she said. “I am hoping that even with this big corporate push, we can still see young people do amazing things. That gives me hope.”