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Does the MSO Curaleaf Chair Endorse a Limited Market?

The cannabis business publication Green Market Report recently reported that Boris Jordan, Chairman of Curaleaf, a cannabis corporation that is a Multi-State Operator (MSO), endorsed a limited market.

Curaleaf has several cannabis dispensaries in NJ. They have since clarified some of their position to the contrary after the outrage.

At the MJ BizCon cannabis convention in Las Vegas last month, Jordan endorsed the idea that there will only be a few MSOs.

Jordan thinks the cannabis industry needs a massive economy of scale to sell cannabis at a reasonable price.

Consolidation

“This industry has to consolidate. There’s no way there’s going to be 35 or 40 or 50 or 100 cannabis companies ten years from now,” Jordan said. “It’s probably going to be three to four large operators, all of whom are probably going to be closely doing what the tobacco industry has done.”

He seemed to assume Curaleaf would be one of them.

“They all use the same packaging. They all use basically everything the same, and they have different brands,” he explained.

Jordan seemed to think that the more than 100 strains of cannabis are as interchangeable as tobacco seems. He certainly did not endorse the idea of a lot of smaller companies competing for customers as a way to lower prices.

He also seemed to endorse the idea of an oligopoly or cartel.

Devil in the Details of the New Jersey Cannabis Industry

A monopoly is when one company dominates an industry. An oligopoly is when a few companies dominate an industry. The tobacco industry is arguably an oligopoly. If they work together to push products, it is a trust or a cartel. Oligopoly and cartels operate at the expense of small businesses, usually to their detriment.

While the United States enacted laws to prevent trusts, they are often selectively enforced. Far too often, an industry can hire lobbyists and lawyers and spend a lot of money to charm politicians and other government officials to prevent laws from being enforced that they don’t like. This is known as Regulatory Capture.

One could argue a trust has been operating in this fashion in New Jersey due to the regulations developed and enacted under former New Jersey Governor Chris Christie (R).

Christie, who supported medical cannabis legalization very reluctantly, set up a system that allowed too few companies to sell a mediocre product for far too much money.

Curaleaf has benefited from that regulatory structure.

Under Governor Phil Murphy (D), New Jersey has made incremental progress towards a free market in the state cannabis industry that gives small businesses owned by minorities a more competitive playing field. Given the nature of politics and bureaucracy, it has taken him two terms.

While some will inevitably argue the structure has survived and will continue to thrive, they cannot dispute that the NJ Cannabis Regulatory Commission has approved almost 1,000 adult-use cannabis companies. Locals, minorities, and women own many of them. The more companies in an industry, the harder it is for a trust to form.

Congress and Cannabis Industry Legalization

Jordan endorsed the SAFE Banking Act. The cannabis industry desperately wants to be passed by Congress.

“We’re hearing from our people in Washington (DC) that they’re targeting a 2024 rescheduling of cannabis, from Schedule I to III, IV, or V,” he explained.

MSOs are not alone in wanting some federal cannabis reform to primarily improve their profit margin. Many diverse and small cannabis companies would like federal cannabis reform to make it easier for them to deduct from their taxes and access banking services.

“If we don’t get SAFE, you’ll see swaths of companies go out of business next year,” Jordan said.

Curaleaf Clarifies and Makes Progress

When the news broke that the Curaleaf Chairman endorsed an oligopoly cartel, his corporation released a press release.

“Curaleaf supports a diverse and inclusive industry,” their press release said. “Boris has repeatedly said there is and should be room for players of every size in this industry.”

“Curaleaf … has partnered with minority and small business operators, craft, and legacy farmers,” they added.

Curaleaf’s Director of Social Corporation Responsibility, Raheem Uqdah, cited New Jersey as a state with progressive cannabis legalization. The law now allows those whose crimes were expunged to get jobs in the industry on a podcast. He noted they wanted to hire 10 percent of their workers to qualify to be Social Equity.

Uqdah noted the problem with spreading legalization is on the local level. He even urged people to advocate for their towns to allow cannabis companies.

“Be collaborative,” he urged.

Social Issues

Since cannabis legalization made good progress due in part to social justice advocates in the wake of Black Lives Matter protests, it makes sense they would make token efforts. Some of their efforts were interesting.

Curaleaf pointed out that “the top five operators in cannabis represent less than two percent of the US cannabis market. In alcohol and tobacco, the top players represent 80% of the market.”

While it is inevitable that a few MSOs win a large market share, it remains to be seen which one. In addition, smaller companies have great potential to create “craft cannabis” products. For example, while many people like cheap beer and wine, some will buy from smaller companies.

In the early days of the 20th Century, the Biograph Company and the Motion Pictures Patent Company dominated the film industry. However, by the 1920s, Universal Pictures became the dominant film company along with others that have survived in some form, like Paramount, among others. Biograph faded away, and the Motion Pictures Patent Company was dissolved after it lost an anti-trust lawsuit.

It remains to be seen which MSOs are Biograph and Motion Picture Patents Company and which are Universal and Paramount.

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