For many Connecticut citizens, it is a dream come true: place an order by phone or through a website and have cannabis delivered straight to your door. The legalization law that passed in 2021 included delivery services and the delivery license lottery closed May 18.
Medical marijuana users have been able to get contactless delivery because of COVID-19. Sales of recreational cannabis will soon begin. Home delivery to adult customers is an important step in the legal recreational marijuana process. Cannabis policy makers feel that home delivery would be in high demand in Connecticut.
In the 2021 bill, dispensaries, hybrid retailers, and micro-cultivators can apply to provide home delivery to customers. Once approved by the Department of Consumer Protection, they can immediately make deliveries to their customers on the same date the DCP okays recreational sales. There are no licensed delivery companies currently, but the first licenses will be available in the fall or the winter, and the state believes they will be operating within the next two years.
One of the advantages of cannabis delivery is that cities and towns cannot restrict them from operating in their locality. The delivery business cannot be banned from a specific town or city and customers will get served. There may not be a dispensary close enough for some customers, but they will nevertheless be able to receive their medical or recreational marijuana in a safe and timely way.
Which States Allow Home Delivery?
A dozen states that have legalized cannabis allow for some form of home-delivery, including two of Connecticut’s neighbors, New York and Massachusetts.
Lotteries for delivery licenses are in two parts: one for all cannabis businesses and another for social equity purposes. The social equity lottery will issue 130 licenses, and the regular lottery has 300 applicants to date.
The social equity lottery is a way to impact people disproportionately affected by the War on Drugs. The social equity lottery is separate to ensure those affected by the War on Drugs will have opportunities available in the new market.
The largest and most sophisticated dispensary in Connecticut, Fine Fettle, believes home delivery is a major opportunity for social equity companies to develop their business, which is a requirement of the legalization law in Connecticut. Home delivery requires less capital due to the fact they do not need a retail storefront and they do not have to display product. Massachusetts has had success with its social equity partners as they prioritized delivery licenses. Connecticut would like to partner with businesses in high-impact neighborhoods to help them be successful in the cannabis market. Cannabis is an industry that rights the wrongs of the past and we think delivery is a place where that should happen.”
Cannabis delivery will create jobs related to the product as well as ancillary jobs, like security.
“It remains to be seen how Connecticut’s licensing scheme and the effects it will have on diversifying the cannabis market in the state. Connecticut is all hopeful those efforts will result in a more diverse market with a number of players.
Social Equity Growers and Distributors
In February, Connecticut allowed social equity applicants to apply for a permit that would allow them to build and operate cannabis growing facilities up to 250,000 square feet to satisfy the cannabis appetites of customers in the state. However, there is a hitch: a licensing fee of $3 million per license – a huge barrier to entry for social equity applicants. Connecticut’s social equity program has been considered a model for other states legalizing cannabis, but the licensing fee has become a block for many cannabis social equity entrepreneurs. The fee is by far the highest social equity fee of any state legalizing marijuana.
What’s more, the fee is written into the legalization law and cannot be changed.
Connecticut is estimated to have cannabis sales of up to $250 million in the first year of recreational marijuana, increasing to $750 million in the fourth year.
Critics of the fee cite it as an example of policies supporting and promoting oligopolies. Existing operators will get early and unlimited access to the market. Providers that grow and distribute medical marijuana in the state can apply for adult-use licenses. They have already begun to build their brands and have growing, packaging, and distribution equipment and procedures in place.
Medical marijuana businesses are also required to pay a $3 million fee, but this can reduce to have if they partner with a social equity company. In addition to the fee, the 2021 law includes a requirement that each producer must maintain a $2 million bank escrow account.
The legalization bill provisions include a requirement that half of all adult-use licenses will go to social equity applicants. In addition, a business accelerator and a support specialist will provide technical assistance and mentoring to social equity applicants.
Connecticut is allowing only a 90-day application window for licensing. According to Connecticut, the requirements for social equity applicants is that the social equity applicant must own at least 65 percent of the business. As part of the state’s assistance the Social Equity Council is hosting a set of webinars, including one about “Financing your Cannabis Business.”
The 2021 legalization law included money for cheap loans for social equity applicants. Up to $50 million is provided and the state released the first 10 million in March to help social equity applicants get on their feet. Many investors believe each licensee will need between $750,000 to $1.5 million to properly construct a dispensary or other facility.
From the time an applicant is granted a provisional license to the time you are awarded a final license can be as long as 14 months, with much work and investing going on. You have to have a storefront, you have to get the approval of the town you are setting up the business, and you have to have a business plan that investors can read carefully. There is the supply chain, manufacturing, and build-out, all of which require significant investment.
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