Dan Haar: Today we celebrate CT's cannabis market. What happens in 5 years?

While some in the Connecticut cannabis community celebrate Tuesday’s long-awaited opening of the first marijuana stores for the non-medical public, Jocelyn Cerda will stay focused on the future, when she and her company hope to sell ganja in Norwalk, in her hometown of Hartford and in a third, unnamed city.

“We’re currently looking for spaces and it’s been a journey,” said Cerda, a Hartford social entrepreneur and principal of Shangri-La CT Inc., which won three of the 12 retail licenses up for grabs in last year’s lotteries after submitting hundreds of applications at $250 a pop.  “We’re looking forward to opening soon.”

Shangri-La and the other “social equity” partnerships – the key players in a system designed to make sure most cannabis businesses are run by local, non-wealthy owners from cities hurt badly by the war on drugs – are not among the seven medical pot stores opening today for adult, recreational use.

The start-ups will have their day to whoop and holler, and ring up cash sales. By the end of 2023, Connecticut could have more than 100 retail cannabis locations open to any adult 21 and over.  Twenty-nine of them have the nod from the state Department of Consumer Protection to sign store leases; most would be controlled (at least in name) by social equity owners. 

For now, the social equity owners like Cerda suffer a disadvantage as the medical dispensaries enjoy a head start. But even some of the people advocating for the social equity owners say that’s okay.

“We’re losing money every day that we don’t start that market,” said Ginne-Rae Clay, executive director of the state’s social equity council.

The broader question, as we light up a fatty to cheer today's launch, is this: What will the Connecticut market look like in, say, five years, long after the excitement dies down? Will the state’s Byzantine efforts to make sure the right people control the market prove worthwhile?

And what about that money Clay and others talk about? Will Connecticut coffers – and the state’s new social equity fund that will go toward helping those targeted areas – see a lasting boon from the marijuana trade?

Two huge challenges

The short answer is we will see less money, and less socially beneficial ownership, than the supporters of this state’s legalization envisioned in the spring of 2021, when the General Assembly passed the law that Gov. Ned Lamont signed with fanfare.

And that’s okay, Lamont and the bill’s co-sponsor both said Monday. Whatever we glean is better than what would have been. And it will decimate the dangerous underground market.

The two core challenges: First, cannabis is fast becoming a fiercely competitive landscape with high up-front costs and thinner profit margins, all the fiercer in a small state where consumers have plenty of options for weed.  

And second, trying to make sure people who aren’t rich and powerful control businesses in a new industry (an effort my colleague Julia Bergman and I have documented) is a bit like stopping the Georgia football offense. Small triumphs are the best we can hope to see.

Sen. Gary Winfield, D-New Haven, a main architect of the law, isn’t discouraged.

“There are realities we have to deal with,” he said Monday, following an event in Hartford when he and Lamont promised to speed up the delayed wiping out of past marijuana convictions.

 “The people that are really in the group that we were thinking of when we did the social equity legislation, many of them don’t start off where they can really participate in this,” Winfield said.

Delaying Tuesday’s launch to let them catch up wouldn’t have helped much. “The question is, are we going to even be able to get them there? Are we working to get them there?”

He’s committed to working in the community and tinkering with a law that’s more naïve than he is.  And anyway, Winfield is really excited about the social equity fund, which is now at $55 million from license fees and will expand hugely from cannabis taxes.

Social equity ownership of the growers, retailers, product makers and other businesses will bring some direct wealth into targeted communities, and that’s great, Winfield said. But minting a few millionaires, he said, “is never going to be enough to undo or walk back some of the policies we’ve had.  And neither is the fund but it’s going to go a much further way.”

The limelight focuses now on ownership, Winfield mused. “What I want to do is the shift people’s attention from the shiny thing, which is important, to the thing that is important without the shine.”

'Not a revenue play for me'

As for the money, nonpartisan legislative budget analysts predict $73 million a year in state revenue by 2026. Some in the industry say it will be a lot more than that.  Based on what other states are seeing, I’d suggest we set our sights lower.

Never before has a state opened for adult-use sales at a time when its entire population could easily buy what they need in a neighboring state, with more nearby states set to launch. In Massachusetts, prices for buds have dropped so sharply and stores have opened so fast – more than 225 so far – that one retailer one of 12 in Northampton, announced late in 2022 it would close shop.

Connecticut already has a robust medical market with 50,000 approved patients, whose purchases tend to be large. And they pay no taxes. Plus, this state will allow all adults to grow their own plants starting later this year; medical patients can already do so.  To top off the difficult climate, New York is close to launching general retail and even before that, trucks rove the streets peddling reefer like ice cream or tacos, apparently unfettered by enforcement.

Some 26 new Connecticut cultivators who will set up their grow labs in the targeted areas are on their way to gaining licenses, plus four "micro-cultivators" on top of the four large, existing producers. 

Lamont, for his part, isn’t worried about the money and he’s confident the social equity market will mature. “It’s not a revenue play for me but a carefully regulated market that’s a lot safer than the alternative out there....I’m just glad that something that belonged to the underworld is now out in public.”

We of course asked, will he buy some ganja on Tuesday, just as he placed a bet on the first day of sports wagering?  “I don’t think that’s what I’m going to be doing,” he told three of us. 

dhaar@hearstmediact.com