New Illinois Report Shows Sharp Improvement In Marijuana Industry Diversity Amid Prioritization Of Social Equity

The latest data on the legal cannabis industry in Illinois shows diversity numbers up significantly since adult-use sales began in January 2020, according to state’s Cannabis Regulation Oversight Officer (CROO). It’s a sign that efforts in recent years to prioritize social equity license applicants is making a measurable impact.

When recreational marijuana sales began in 2020, the “initial businesses were 100% majority White owned and only one majority woman-owned businesses,” says the office’s diversity survey report that was published last week. Since then, measures of diversity have improved markedly.

Among the key changes, Black-owned companies increased from 0 percent to 27 percent of the market during the period from 2020 to 2023, while Latino/a or Hispanic-owned companies climbed from 0 percent to 5 percent. Asian-owned companies, went from 0 percent to 3 percent. Women-owned businesses, meanwhile, now make up 16 percent of licensed cannabis companies.

The findings result from two surveys sent by CROO in May: a mandatory poll that was sent to all 227 licensed marijuana businesses in the state and a separate, voluntary survey for employees. A total of 132 companies responded, representing roughly 224 licensees. On the employee side, 2,307 people responded—roughly a quarter of the nearly 10,000 email addresses that CROO sent the survey to.

For companies that had several owners, ownership was categorized by the identities of those who held at least 51 percent equity.

Among individual cannabis owners, the proportion of Black marijuana business owners climbed to 26 percent, up from just 1 percent. Latino/a and Hispanic owners, meanwhile, now make up 7 percent of the market compared to 1 percent in 2020. Asian owners went from “an unknown number,” CROO’s report says, to 2 percent. Women owners grew from 18 percent of the market to 25 percent.

Companies’ responses, a summary of the report notes, “were not verified but accepted as accurate.” Further, CROO said it’s possible that because not all companies returned the poll or answered every question, “survey responses may not be representative of the total cannabis industry in Illinois.”

“However, the results are the most accurate information available,” the office said.

As for employees, about 10 percent said they worked in a company’s headquarters or corporate office, while 50 percent worked in dispensaries and 28 percent worked in cultivation centers. The remainder worked at infusion companies, testing labs or transporters—or left the question blank, CROO said. Almost all reported working within Illinois.

Of workers who returned the current survey, 11 percent are Latino/a or Hispanic, according to the CROO report—up from 5 percent in 2020. The share of Asian workers, meanwhile, increased from 1 percent to 2 percent. The proportion of workers who identified as Black, however, fell slightly, from 10 percent in 2020 to 9 percent in 2023. Sixty-five percent of those who returned the survey identified as “frontline employees” rather than supervisors or middle managers, senior managers or C-suite employees.

Black people were far better represented in higher levels of company leadership in 2023 than they were in 2020, however. The proportion of Black people in C-suite positions climbed from 1 percent to 19 percent, while the proportion of Black people sitting on cannabis boards of directors rose from 6 percent in 2020 to 20 percent this year, according to the report, which was previously covered by the Illinois News Joint, a local cannabis industry publication.

The latest survey is the third round of diversity polling conducted by CROO since the legal market opened. The first was conducted from November 2020 to April 2021, the second spanned December 2021 to August 2022 and the most recent survey went from December 2022 to this past August.

While the new report often compares 2020’s lack of diversity to this year’s better numbers, CROO’s report released in 2022 also found a severe lack of industry diversity, with white people disproportionately represented in every market category. Black and Latino/a people, meanwhile, accounted for less than 10 percent of most supervisory positions.

While marijuana sales and tax revenue have begun to plateau in Illinois is recent months, the industry is still expanding in terms of open businesses and number of products sold. An October report in from the state’s Department of Financial and Professional Regulation (IDFPR) said the state industry experienced “unprecedented growth” in fiscal year 2023 and predicted future growth in the year ahead.

All told, the legal cannabis industry brought in about $451.9 million for the state in fiscal year 2023, which ran from July 1, 2022 to June 30, 2023, according to separate numbers from the Department of Revenue. And as in past years, Illinois made significantly more revenue from cannabis than from alcohol, which brought in about $316.3 million.

Over the entire fiscal year, 200 conditional licenses were issued. In December 2022, the department also finalized rules for a new Social Equity Criteria Lottery, aimed at prioritizing people who have been disproportionately impacted by the war on drugs. More than 2,600 individuals applied for 55 new social equity dispensary licenses.

For fiscal year 2024, IDFPR said, it aims to issue 55 social equity licenses, hire and onboard eight new inspectors and processors “to decrease the time to license individuals and businesses” and increase public outreach. The agency also intends to implement a new seed-to-sale tracking program, the report says.

“IDFPR stands ready to continue issuing dispensary licenses and is committed to promoting social equity, safety, and growth into the regulated cannabis market,” the department said.

The current fiscal year got off to a busy start, according to recently released state sales data showing that retailers sold a record $140 million worth of adult-use cannabis products in August. In September, the state set a record for the number of individual products sold on the adult-use market, though total receipts were slightly lower, at $139.5 million.

Gov. J.B. Pritzker (D) pointed to the industry growth and strong sales numbers in September downplaying the state’s comparatively steep retail prices. According an analysis by the Illinois Policy Institute, Illinois is the third-largest retail marijuana market after Michigan and California.

“We still have a growing industry, as you know, it is one that I initiated in 2019 that has brought in almost $450 million to state and local governments,” Pritzker said. “We want to encourage all industries to grow.”

Pritzker, who supported legalization in the state, also recently signed a bill allowing licensed marijuana businesses to claim state tax deductions as a partial fix to Internal Revenue Service (IRS) tax code 280E.

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Photo courtesy of Chris Wallis // Side Pocket Images.

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