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State warns vertically integrated cannabis companies about inventory limits

Monday, Jan 13, 2020

* We talked last week about vertically integrated cannabis companies with growing centers and retail outlets. A spokesperson for one such vertically integrated company claimed it had no product shortage problems at all while other retailers which didn’t also own growing centers were reporting shortages.

Well, yet another retailer with no growing license [Nope. Thanks to commenters for pointing out that this retailer is also vertical] has announced a temporary closure

HCI Alternatives in Springfield will suspend recreational cannabis sales for the day on Monday.

The dispensary at 628 E. Adams St. will remain open regular business hours Monday (9 a.m. to 8 p.m.) to serve medical cannabis patients.

It based its decision on the need to replenish recreational use inventory and allow staff to recharge.

HCI’s Collinsville dispensary is also suspending recreational sales Monday. Both dispensaries are expected to resume recreational use sales on Tuesday.

* The state has taken notice. From an email sent Friday by Bret Bender, the deputy director of the Illinois Department of Financial and Professional Regulation’s Cannabis Control Section

Dear Licensees,
 
The Department has become aware that some adult use dispensaries have inventory from a single cultivator center entity in excess of the 40% limit mandated by the Cannabis Regulation and Tax Act (“Act”).  410 ILCS 705/15-70(p)(5).  The Department is currently investigating the scope and extent of these potential violations.  In addition, it has been reported that many dispensaries are experiencing a shortage of cannabis products, including products for medical cannabis patients.  The Department takes seriously the availability of product for medical patients and dispensaries are required by law to prioritize providing products to medical cannabis patients.  
 
Dispensaries in violation of the 40% limit must immediately remedy the problem and come into full compliance with the Act.  In addition, the Department expects dispensaries to immediately take affirmative steps to avoid future violations of this requirement.
 
Any dispensary that had or currently has inventory exceeding the 40% limit is in violation of the Act and may face potential non-disciplinary or disciplinary action by the Department.  Prompt remediation of this violation will be considered a mitigating factor regarding any discipline the Department may impose for these violations.  Future or continued violations will be viewed by the Department as avoidable and intentional, and dealt with accordingly. 

I do not like vertical integration in that industry. This was wholly predictable, even with state limits.

- Posted by Rich Miller        

13 Comments »
  1. - NotRich - Monday, Jan 13, 20 @ 11:48 am:

    Yes, we are a capitalistic society, and businesses will try to do what is best for them..but, this vertically integrated system was not fully addressed by the Administration and the bill sponsors. The independent dispensaries warned about this gamesmanship in April and May, and they were dismissed. It is very easy to look on your computer and find the big boys offering bud/flower product every day, while the indies are closed to rec customers. If they do this now, just imagine how easily they can manipulate the new wave of social equity dispensaries


  2. - Dotnonymous - Monday, Jan 13, 20 @ 12:08 pm:

    - NotRich - Monday, Jan 13, 20 @ 11:48 am:

    Yes, we are a capitalistic society…

    No, we are not…we are a society who currently employs the economic strategy known as Capitalism…for the benefit of a select few at the top of a failing Pyramid Scheme.

    Vertical integration is a Capitalistic money grab…for those who have the courage to see the greedy truth.


  3. - Rabid - Monday, Jan 13, 20 @ 12:44 pm:

    Homegrown ok now for cardholders


  4. - Collinsville Kevin - Monday, Jan 13, 20 @ 12:46 pm:

    Maybe HCI should invest in a growing center?


  5. - Juvenal - Monday, Jan 13, 20 @ 12:58 pm:

    I am sorry, I do not see the problem?

    Cannabis is a legal product. Independent retailers are unable to sell it because independent manufacturers cannot keep up with the demand. A problem they created themselves by not growing enough cannabis that they say will be remedied by April. But so we are cracking down on the companies that retail their own product?

    This is like cracking down on microbreweries because Walgreens can’t keep White Claw stocked. FWIW these independent growers swore they had plenty of capacity as I recall. The shortage might be an intentional effort to drive up prices?


  6. - the Patriot - Monday, Jan 13, 20 @ 1:14 pm:

    License applications are not public and there was not public tranparency in the selection process. People were given licenses without applying in back room deals in with the Department of Ag. Some are held by shell corporations.

    Nothing it going to happen. This is still a cash business regulated by the most corrupt state government in the nation and the media is too pro legalization to write about it.


  7. - Curious George - Monday, Jan 13, 20 @ 1:29 pm:

    Pretty sure Ascend owns both HCI and a growing facility in Barry per this recent SJ-R Article: https://www.sj-r.com/news/20191214/ascend-illinois-cultivation-center-gears-up-for-recreational-pot-sales


  8. - Maryjane - Monday, Jan 13, 20 @ 1:47 pm:

    - Rabid: “Homegrown ok now for cardholders”

    It surely is my friend, it surely is. :-) We’re trying our level best to help ensure there’s plenty of herb left for adult-use stakeholders by doing a perpetual (monthly) harvest for us. Learning, improving and enjoying more every day. Yield and quality improving with each blessed plant we come to know and love. To do this legally is a dream come true.


  9. - Kentucky Bluegrass x Featherbed Bent x Northern California Sinsemilla - Monday, Jan 13, 20 @ 1:58 pm:

    Curious George is correct.

    Supply cannot keep up with demand, even one of the CEOs of a cultivation center said it may take up 18 months for things to finally get close to meeting the demand.


  10. - XonXoff - Monday, Jan 13, 20 @ 2:47 pm:

    It was predictable but consumers have historically been buying cannabis smuggled in tires, tanker trucks, stuffed down someones pants, and all manor of unhealthy conditions. As a potential future customer, I’m not sure I would care what percentage of dispensary cannabis was grown somewhere within that company and what came from another grower so long as it’s clean and tested as claimed, labeled accurately and legal to buy at its premium and highly taxed price. The fewer miles it has on it, and less handling, the better. That regulation stems from some administrative layer they feel is important to the model they’ve created.

    ==Homegrown ok now for cardholders==

    Sure but medical has become a another form of individual annual license revenue for the state, with qualification and fee requirements, now offering personal homegrow, tax, and implied supply advantages. I suspect it’s great if you don’t mind that sort of twist. Adding the original homegrow option back as written for responsible (and healthy) adult Illinoisans would go a long way toward changing my opinion that the entire supply chain architecture is a money-grab by the state and the “industry.”


  11. - Jeff - Monday, Jan 13, 20 @ 3:24 pm:

    HCI owns Ascend cultivation center…. And they’ve been selling rec flower while no one can get ascends products.


  12. - Rich Miller - Monday, Jan 13, 20 @ 3:55 pm:

    Jeff and others, thanks. Corrected!


  13. - Sandy - Monday, Jan 13, 20 @ 7:18 pm:

    =Homegrown ok now for cardholders=

    Not every patient or caregiver will want to grow their own. For some, this may be due to physical constraints, living restraints, maybe they don’t have a green thumb, or just plain don’t want to. It seems like a given all would grow, but it’s a false interpretation and shouldn’t be the fall to answer due to shortages… These are very sick people.

    The correct answer is: FIX THE SHORTAGE/OPEN THE AMOUNT OF LICENSES.


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