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Why Are There So Few Black-Owned Cannabis Companies?

It’s no secret that legal cannabis is now a multi-billion-dollar industry, so it’s hardly a surprise that so many entrepreneurs are getting involved. In response to this gold rush, activists and politicians alike have called for measures to be put in place to ensure that those who have been most affected by the War on Drugs get a fair slice of the market share. Unfortunately, however, social equity targets are not currently being met, and the barriers faced by minority communities have made it difficult for black-owned cannabis companies to gain a foothold.

Black-Owned Cannabis Brands Are Severely Underrepresented

According to the 2021 Leafly Jobs Report, cannabis sales in the US hit $18.3 billion last year, resulting in an explosion of new market opportunities. The industry now has twice as many full-time workers as there are dentists in America, yet while African-Americans make up around 13 percent of the national population, less than 1.7 percent of cannabis companies are black-owned[i].

The picture is particularly grim in places like Illinois, where cannabis sales topped $1 billion last year and more than 8,000 new jobs in the legal weed industry were created. The state is set to issue 75 new dispensary licenses this year, yet not a single black-owned cannabis company has been named as a finalist for one of these permits.

In Massachusetts, meanwhile, only around one percent of the state’s 260 cannabis retail stores are black-owned. It’s well documented that prior to legalisation, African-Americans were disproportionately targeted by prohibitionist laws across the US, so for these communities to be so underrepresented in the legal market is truly a travesty.

Addressing this injustice requires an understanding of the social and economic factors that have prevented minority businesses from accessing the market, and taking measures to level the playing field. For example, the fact that weed remains illegal at the federal level in the US means that banks cannot provide business loans to cannabis companies, so only those wealthy enough to cover their own start-up costs are able to get off the ground.

As a result of historical discrimination, the US has an extraordinary wealth gap, with the average black family earning around ten percent the annual income of the average white family[ii]. That being the case, it’s not exactly a shocker to learn that black-owned cannabis businesses remain few and far-between.

How Social Equity Programs Can Help Black-Owned Cannabis Brands

It’s clear that systemic change is needed if minority communities are ever going to stand a chance in the cannabis market, and several states have begun to create a framework for social equity. New York, for example, legalised weed earlier this year with a bill that includes a number of clauses that are specifically designed to assist black-owned cannabis companies.

Half of all business licenses granted by the state are legally required to be awarded to communities that have been victimised by the War on Drugs, while forty percent of all taxes from cannabis sales are to be invested in these communities.

Elsewhere, the city of Los Angeles has launched its own Social Equity Programme “to promote equitable ownership and employment opportunities in the cannabis industry in order to decrease disparities in life outcomes for marginalised communities, and to address the disproportionate impacts of the War on Drugs in those communities.” This includes the creation of a fund to assist minority applicants for cannabis licenses, and an obligation for the city to produce regular reports documenting the success of the programme.

However, as promising as this all sounds, none of these initiatives have had the desired impact. The LA Social Equity Program, for example, has been hit with a number of complaints about the application process, which resulted in many licenses being snapped up by online bots.

Earlier this year, Bonita Money, founder and executive director of the National Diversity and Inclusion Cannabis Alliance (NDICA), summed up the situation by explaining that “we don’t have one successful social equity [licensing] program yet [in the US]”.

Jay-Z recently launched his own cannabis brand, and has also helped to set up a fund for other black and minority cannabis entrepreneurs.

What Does The Future Hold For Black-Owned Cannabis Companies?

While it’s clear that so far, not enough has been done to ensure fair representation for African-Americans in the cannabis industry, the movement for social equity is growing. The NDICA, for example, has been funded by the California Governor’s office to provide assistance to businesses applying for cannabis licenses via the Social Equity Programme.

Meanwhile, a number of high-profile activists and entrepreneurs have introduced their own initiatives to help minority communities gain entry to the market. For example, in addition to launching his own cannabis brand earlier this year, hip-hop star Jay-Z has also teamed up with an investment firm called the Parent Company to assist black owned-cannabis businesses.

The Parent Company has set aside an initial $10 million, which it says will be used “to give Black and other minority entrepreneurs an equal opportunity for participation in the legal cannabis industry”.

Across the US, it’s estimated that there are now between 30,00 and 40,000 companies operating in the cannabis space, although there is no official register documenting how many of these are black-owned. However, anyone wishing to identify and support these businesses can do so thanks to an initiative called Cannaclusive, which aims to create a database of all black and minority-owned cannabis companies in the US.

Known as InclusiveBase, the catalogue currently lists around 920 minority, woman and black-owned businesses within the cannabis space, including retailers, media companies, advocacy groups and other enterprises. Supporting these companies is an important step towards improving black representation in the cannabis industry.

[i] https://leafly-cms-production.imgix.net/wp-content/uploads/2021/02/13180206/Leafly-JobsReport-2021-v14.pdf

[ii] https://www.brookings.edu/blog/up-front/2020/02/27/examining-the-black-white-wealth-gap/

Cultivation information, and media is given for those of our clients who live in countries where cannabis cultivation is decriminalised or legal, or to those that operate within a licensed model. We encourage all readers to be aware of their local laws and to ensure they do not break them.

This post is also available in: French

Ben Taub