Week in Review: Nature’s huge toll on cannabis growers, Illinois social equity questions, legalization efforts & more

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Wildfires in the West have devastated a number of marijuana farms in Oregon, Washington state and California, while an early freeze hit Colorado, threatening outdoor marijuana and hemp cultivation.

MJBizDaily takeaway: It’s too early to attach a dollar figure to the damages, but costs will be in the millions. In Colorado, it’s likely the early cold snap will disrupt the supply chain for THC and CBD extraction.

These extreme-weather events, which climate scientists and meteorologists have been calling the “new normal” for a number of years now, also need to be heeded as an industry wake-up call to the potential impacts of climate change.

Outdoor cannabis growers increasingly must take stock of weather risks in their cultivation plans.

Illinois cannabis licensing raises concerns

Only 21 applicants – who submitted more than 300 applications combined – qualified for a final lottery for 75 retail marijuana licenses in Illinois.

MJBizDaily takeaway: The scoring system favored applicants that qualified with social equity “status” – and that’s who made the cut out of more than 1,660 applications. Although some claim only 13 of the 21 finalists are majority owned by minorities.

In a state lauded for its social equity program, critics argue the licenses essentially will fall to a concentrated number of big businesses.

Legal challenges already are underway about the transparency of the process – challenges that could delay the awarding of the permits in a new adult-use market that existing medical cannabis operators have controlled since Jan. 1.

One federal lawsuit claims that the 75 retail licenses are worth more than $1 billion and that “many, if not most” of the companies that will get them are owned by “politically connected insiders.”

Legalization efforts face obstacles

Residents of Mississippi will participate in what is expected to be a close vote for medical cannabis legalization, while the Nebraska Supreme Court pulled the plug on a medical marijuana ballot initiative in that state.

MJBizDaily takeaway: Both examples reflect the difficulty of legalizing medical marijuana in some of the country’s most conservative states.

In Mississippi, lawmakers have put forth a restrictive, competing measure that presents a higher hurdle for the citizen measure to pass. In Nebraska, legalization opponents were able to thwart an initiative on technical grounds.

Despite the obstacles, progress is being made, and the Mississippi citizen initiative, if it passes, would be business-friendly with a free-market approach.

New CEOs tackle difficult environment

Canadian cannabis operators Cronos Group and Aurora Cannabis appointed new chief executives to help navigate difficult economic conditions that have led to revenue pressures and massive inventory write-downs.

MJBizDaily takeaway: Toronto-based Cronos, like many cannabis companies, went with a consumer packaged goods veteran, Kurt Schmidt.

Schmidt, who has merger-and-acquisition experience, will lead a company that has a war chest of cash but must prove it can execute its strategy.

So far, Cronos has failed to acquire meaningful market share in Canada’s growing adult-use cannabis industry.

After failing to meet customer and investor expectations, most Canadian cannabis producers have replaced their CEOs or chief financial officers since legalization in late 2018.

Aurora is no exception. The Alberta company signaled to investors that it expects to report declining quarterly revenue and write-downs of up to 1.8 billion Canadian dollars ($1.37 billion).

Germany faces likely harvest delays

Germany’s first domestic harvest of medical cannabis flower is likely to be delayed until at least early 2021 because of the coronavirus pandemic.

MJBizDaily takeaway: The development will mean that companies growing medical cannabis in Germany will be delayed in generating revenues from their operations, while the country itself must continue to rely on imports for the time being.

Canadian-based Aphria and Germany’s Demecan both confirmed to Marijuana Business Daily that harvests would be delayed until early 2021.

Canadian-based Aurora Cannabis didn’t specify a timetable but said it’s working toward cultivating medical cannabis as soon as possible.

Maryland still might face diversity issues

A six-month independent investigation of Maryland’s 2019 medical cannabis licensing round that was designed to boost minority participation found no evidence of bias or improper influence.

MJBizDaily takeaway: But the industry still faces the perception of systemic barriers in a state with a large minority population. At least one unsuccessful minority applicant has an ongoing legal challenge against the state.

Lingering diversity issues could make it more challenging when lawmakers, including the powerful Black caucus, discuss adult-use legalization as expected in the next year or so.

Jeff Smith can be reached at jeffs@mjbizdaily.com

International Editor Matt Lamers contributed to this report.