Many cannabis entrepreneurs are hopeful Issue 2 will pass because they believe legalizing recreational marijuana will be good for business.
These small business owners in Ohio say that multi-state operators have benefited more than they have since Ohio legalized medical marijuana in 2016. Issue 2 would not only legalize recreational marijuana for adults, but it also has some components that many marijuana entrepreneurs are hoping will help small businesses.
Issue 2’s social equity and jobs program would give preference to economically or socially disadvantaged applicants in granting licenses, according to the Coalition to Regulate Marijuana Like Alcohol, which got the measure on the ballot. Being a disadvantaged applicant is based on factors ranging from race and gender to being from high-unemployment areas to having prior arrests or convictions for some marijuana or related offenses.
Without Issue 2, a lot of smaller operators in Ohio don’t have a chance of surviving another year or two.
Fadi G. Boumitri, CEO of Ascension BioMedical, LLC, a small marijuana cultivator in Oberlin.
Ohio grants several licenses for the medical marijuana industry, including those for cultivators, or growers, retail dispensaries and processors, which manufacture marijuana products such as oils and edibles. Issue 2 would expand this to recreational use. It would also grant 50 new dispensary licenses and 40 new cultivator licenses, with preference to social equity applicants.
The additional licenses can help small businesses, said entrepreneur Fadi G. Boumitri of Broadview Heights. He is CEO of Ascension BioMedical, LLC, a marijuana cultivator in Oberlin. He said his business will get a dispensary license if Issue 2 passes.
Many in the cannabis industry say vertical integration, which includes owning licenses in more than one facet of the industry, is essential. It prevents operators from being cut off from consumers. Having a dispensary would mean that Ascension BioMedical would not only be able to grow marijuana, but it also could sell directly to consumers. Boumitri said the company now has to rely on the whims of dispensaries agreeing to sell his product, which has sometimes been challenging
Boumitri said obtaining a dispensary license has been difficult. Because of the limited number of licenses the state has granted under medical marijuana, many independent entrepreneurs say landing one without partnerships with multi-state operators is nearly impossible. They say independent entrepreneurs often lack the money, knowledge and connections to successfully compete for a limited number of licenses.
If Issue 2 doesn’t pass, Boumitri said the future of small businesses in the industry is grim.
“Without Issue 2, a lot of smaller operators in Ohio don’t have a chance of surviving another year or two,” he said.
Why it’s difficult for small businesses to get marijuana licenses
The Ohio Department of Commerce is the primary regulator of the Medical Marijuana Control Program. The department doesn’t have a small business designation for cultivators, said Mikaela Hunt, chief communications officer. However, it does grant cultivation licenses based on the size of the cultivation area. Level I is 25,000 square feet and Level II is 3,000 square feet. The state currently has 37 licensed cultivators; 14 of them are Level II.
There are roughly 100 medical marijuana dispensaries throughout Ohio and nine in Cuyahoga County, according to the State of Ohio Board of Pharmacy website. The board didn’t respond to Signal Cleveland’s request about how many of them are small businesses.
Boumitri said getting a dispensary license will be a gamechanger for Ascension BioMedical. Without it, the company was poised to grow from 16 to about 30 employees. If Issue 2 passes, he said the staff would increase to about 60.
As multi-state operators began gaining ownership in more dispensaries, Ascension BioMedical had seen its partnerships with dispensaries drop to one-third or what they had been, Boumitri said. The company “had to claw our way back” through persistence and finding new retail outlets.
“They would say, ‘Sorry, but we’re just not going to be carrying that many brands anymore,’” he said. “‘We want to carry our own.’ All of a sudden, those multi-state operators were not interested in carrying a small brand like ours.”
How marijuana could boost the state economy
The Coalition to Regulate Marijuana Like Alcohol says passing Issue 2 would be good for the economy. Proponents say it could be a boon for employment in the cannabis industry since legalizing recreational marijuana for adults could expand the customer base for marijuana dramatically. Only people with roughly 25 qualifying conditions, ranging from Alzheimer’s disease to glaucoma, can buy medical marijuana in Ohio. They must be registered with the state in order to do so.
There is potential for economic spinoff from the new and expanded marijuana businesses, according to Tom Haren, spokesman for the coalition. Payroll taxes will be generated by hiring new employees. Additional jobs and taxes will be created by constructing new facilities or renovating vacant ones to house new and expanded businesses.
He said economic activity would also be generated as a result of a fund set up for communities in which dispensaries are located. Issue 2 would create a 10% point-of-sales tax for marijuana. Thirty-six percent of that tax would go toward the fund for communities with dispensaries.
Haren said communities can choose to use the money for infrastructure and economic development projects, hiring staff and other things that could potentially benefit the local economy.
Why some businesses oppose Issue 2
The Ohio Chamber of Commerce believes Issue 2 supporters are creating an idealistic image of the measure’s economic impact. In September, the chamber’s board of directors overwhelmingly voted to oppose the ballot issue. Its members believe legalizing recreational marijuana would increase absenteeism and workplace injuries.
“At a time when Ohio companies are struggling to fill open positions, the legalization of recreational marijuana would exacerbate our current workforce shortages,” said Steve Stivers, the chamber’s president and CEO, in a statement on the board’s vote.
In a YouTube video, he summed up the impact the board believed the ballot measure would have if it passed.
“Recreational marijuana just creates too much risk for the Ohio economy,” he says. “That’s why we oppose Issue 2.”
The Greater Cleveland Partnership, the local chamber of commerce, hasn’t taken a position on Issue 2 , according to a GCP spokeswoman.
Black entrepreneurs optimistic about Issue 2’s impact
Harvest of Ohio is the only majority Black-owned vertically integrated cannabis business in Ohio. The company is based in Cleveland, but it currently doesn’t have operations here. Amonica Davis, chief operating officer, said the company opened where it could get licenses. Harvest’s facilities include dispensaries in Columbus, Athens and Beavercreek. Its cultivation and processing operations are in Ironton in southern Ohio.
Ariane Kirkpatrick of Cleveland, who owns 51% of the business, is CEO. Her sister, Amonica Davis of Warrensville Heights, is chief operating officer. They’re delighted their business has been successful. During the two years the three dispensaries have been open, they’ve had a combined 25,000 patient visits, Davis said. The sisters are concerned that they don’t have Black counterparts.
“We don’t want to be the only one in this industry, because there’s so much opportunity,” Davis said. “If Issue 2 passes, we expect that our business will increase significantly because the access will be widened to include many more individuals.”
She said having business owners from different backgrounds makes a difference.
“People will tell our team members when they visit our store, ‘We only shop here. We want to advocate for people who have been underrepresented in the cannabis industry and who have been over-penalized for the use of this plant,’” Davis said.
The sisters are hoping expansion, if Issue 2 passes, will eventually include opening a facility in Greater Cleveland.
Fifteen percent of licenses under medical marijuana were supposed to go to Black and Latino business owners and others from historically economically disadvantaged groups. Harvest was able to get licenses under this provision but opened its businesses a few years later.
The Franklin County Common Pleas Court struck down the provision in 2018, after a multi-state operator challenged giving 15% of licenses to economically disadvantaged groups.
The coalition believes its plan for ensuring that businesses representing historically disadvantaged groups get licenses will withstand any court challenge, said Haren, who is also a lawyer. He said the court struck down the 15% as an unlawful quota that wasn’t based on a study showing disadvantage or how the program sought to address it.
Haren said Issue 2 doesn’t set up a quota but, rather, a social equity program. An equity study, funded through the 10% point-of-sales tax, would be conducted. It would also fund financial and training assistance for social equity applicants.
Lenny Berry is founder and CEO of OCHBS, the Ohio Cannabis Health and Business Summit. He started the summit, which took place in Cleveland in October, with small businesses and minority-owned businesses in mind. For example, Barry intentionally made OCHBS affordable. People could attend for as little as $30, compared to the more than $1,000 he said cannabis conferences often charge. OCHBS’ goals include educating attendees about the industry and creating opportunities for entrepreneurs to network.
Berry is optimistic about Issue 2’s social equity component. He wanted to obtain licenses for medical marijuana. After the court struck down the 15% provision, Berry said it was nearly impossible for Black entrepreneurs such as himself to get licenses, especially if they weren’t relying on the money and knowledge of multi-state operators.
“If you had not been in the industry before, the application was very, very, very, very difficult,” he said.
Ohio-grown marijuana businesses could grow with passage of Issue 2
Jack Grover was a 24-year-old who saw opportunity when medical marijuana was legalized in Ohio.
His family had been in the packaging business for years, so he had an understanding of how the right packaging could slow the deterioration of fruits, vegetables and other plants. Grover was confident that he could develop a niche for marijuana packaging. His Bedford Heights-based company, Grove Bags, developed TerpLoc, The technology’s uses include packaging that keeps cannabis fresh during curing and storage.
“I knew that was something that a lot of mainstream supply companies would not touch or support,” the CEO said of his rationale in developing the niche.
The company started with three employees. At first, business was fairly slow. Then, in 2018, there was a marijuana glut, Grover said. Cultivators had to make sure the overproduction didn’t go bad. TerpLoc technology was in demand. Today Grove Bags has more than 30 employees, mostly here but also in other states and Europe. Grover sees his business growing should Issue 2 pass.
He said Grove Bags offers an example of how expanding marijuana legalization in Ohio can potentially strengthen the state’s economy. Grover emphasized the impact of businesses that are ancillary to cultivators, dispensaries and other operations licensed and regulated by the state.
“Dedicated suppliers across the supply chain have been critical in the cannabis industry, in creating an infrastructure for it to develop and thrive,” he said.
Boumitri of Ascension BioMedical said when Ohio-based businesses grow, the local economy benefits. This is why he says provisions in Issue 2, which many are hoping will help small businesses in the cannabis industry, are so important.
“When you shop with a larger operator, those profits don’t stay in Ohio,” he said. “They end up in other states.”
Davis of Harvest agrees, and so do many of their customers. Davis said the partner owning 49% of the businesses isn’t based in Ohio. She’s hoping that current litigation, unrelated to this matter, will eventually result in “full ownership by Ohioans.”
“Our customers tell us, ‘We like to shop local,’” Davis said.
She said she hears this from Havest’s current medical marrijuana customers. Davis said she also hears it from would-be customers, whom she said have had to shop in Michigan because they have medical conditions that don’t qualify under Ohio’s program.
In the waning days of the Issue 2 campaign, Grover likes to focus on what its passage could mean for small businesses in the cannabis industry and the state’s economy.
“I remain bullish,” he said.
