Large-scale cultivation operations are beginning to emerge in California’s newly legal marijuana industry, despite regulations meant to curtail their presence.

A Marijuana Business Daily analysis of the latest licensing data from the state shows that 20% of cultivation licenses are held by just 12 licensees – or 0.7% of licensed cultivation businesses in California.

Advertisement

The data reinforce the fear among many smaller growers in the state that large, well-capitalized and more efficient growers will eventually come to monopolize the cultivation landscape.

Though California will not issue licenses for large-scale cultivation operations until 2023, some businesses are acquiring dozens of licenses for small grow sites, which they use in a single cultivation area.

That ultimately allows big cultivators to amass hundreds of thousands – or even millions – of square feet of canopy space.

The practice – known as “stacking” – is the target of a lawsuit filed by the California Growers Association against the California Department of Food and Agriculture (CDFA), the state agency responsible for issuing cultivation licenses.

Currently, growers can hold one medium cultivation license that allows for up to 22,000 square feet of grow space plus an unlimited number of small cultivation licenses that each allows for up to 10,000 square feet of grow space.

The lawsuit alleges the original intent of Proposition 64 – the 2016 initiative voters approved legalizing adult-use cannabis – was to prioritize small- and medium-sized businesses by giving them five years to establish operations before the state began licensing large-scale cultivators.

But by allowing individuals or companies to hold an unlimited number of small cultivation licenses, the CDFA is effectively violating the initial five-year prohibition on large cultivations, according to the lawsuit.

Here’s a closer look at the situation:

  • As of June 8, 3,535 cultivation licenses had been issued to 1,607 unique license holders, meaning that the average licensee holds approximately two licenses apiece. The top 10 license holders in the state control 646 licenses – or an average of 65 each.
  • With 147 cultivation licenses – over 4% of all cultivation licenses issued in California – Organic Green Farms is the largest license holder in the state. Its licenses allow for nearly 1.5 million square feet of total canopy. By comparison, the average grower in the state is authorized for about 24,000 square feet of cultivation space.
  • Based on the current number of licenses issued, annual license and application fees for the average cultivation business in the state is just over $35,000. Annual license and application fees for the top 10 license holders in California is approximately $657,000; fees for Organic Green Farms’ 147 licenses is nearly $2 million.

Eli McVey can be reached at elim@mjbizdaily.com