Cresco Labs Inc (CRLBF)

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Illinois Cannabis Supply Runs Thin After First Blockbuster Week in Sales

https://cheddar.com/media/cannabis-supply-runs-thin-after-first-blockbuster-week-in-sales

January 7, 2020
2h ago
By Chloe Aiello

One week into adult-use cannabis sales in Illinois and supplies are already running thin as hordes of cannabis enthusiasts continue to swamp local dispensaries. Most cannabis shops in the city closed on Monday as companies restocked their products and gave workers a much-needed rest.

"A lot of our patient care specials are patients themselves, so, working 14 hours a day, five straight days, it was important that we rest them, get the store back in a presentable manner, and make sure we had enough supply going forward," said Joe Caltabiano, president and co-founder at cannabis multistate operator Cresco Labs.

The state of Illinois sold a whopping $10.8 million in recreational cannabis across more than 271,000 transactions within the first five days of sales, according to the Illinois Department of Federal and Professional Regulation. IDFPR reported that sales were lowest on Sunday — clocking in just under $1.2 million — when some dispensaries had already stopped selling recreational cannabis.

With only six months to gear up for additional sales, supply shortages were expected. The market exploded 10 times literally overnight — from just under 100,000 medical patients on Dec. 31, 2019, to an estimated one million potential recreational customers on Jan. 1, 2020. Plus, shortages have a history of roiling newly recreational markets, like Canada and Michigan.

"Preparing for a 10x increase in business is something any industry would struggle with," Caltabiano said. "The last thing we want to do is have others wait in line for four hours, get up there, and not be able to purchase anything. So [we're] putting some limits in place to make sure we have supply that meets a little bit of demand, and we'll continue to fill demand on a go-forward basis."

Cresco's Sunnyside-branded dispensaries were among those closed Monday, but they opened up for business bright and early on Tuesday. Caltabiano said that although he expects Cresco shops to continue to enforce transaction limits, he doesn't anticipate having to close again in the future as the company ramps up hiring and supply.

Some shops, like Midway Dispensary haven't opened back up to adult use customers. The shop, which announced on its website and social media that it stopped recreational sales on Sunday, likely won't reopen to adult-use customers until Friday at the earliest, according to the Chicago Tribune. The Herbal Care Center (THC) on Chicago's Near West Side also plans to remain closed until staff can restock, perhaps by Thursday, Chicago Sun Times reported.

Of course, those cannabis customers who don't want to deal with long dispensary lines, cannabis product shortages, and sticker shock from product taxed at about 30 percent can always stick to getting their product from less formal sources. In states like California, regulatory roadblocks and high taxes have contributed to the strength of an illegal market that is as hazardous to consumers as it is to companies' bottom lines. In Illinois, however, Caltabiano said he thinks the state's bill has enough provisions — from homegrow to law enforcement involvement — baked in to avoid a similar fate.

"The various departments that regulate cannabis as well as the Illinois state police are very involved in this program and want it to be as successful as possible — and with that comes enforcement," Caltabiano said. "We also address the needs of some of the medical patients where they can actually do some homegrow to offset some of their needs and desire for additional product."

Cresco Labs operates five dispensaries in the state of Illinois — four of which currently sell adult-use cannabis. The company also won a lottery to open stores in Chicago's coveted Central District, and has three additional shops planned across the broader state.