Worcester Business Journal

8 Worcester Business Journal | November 28, 2022 | wbjournal.com BY LAURA FINALDI Special to WBJ W ith his purchase of four established Massachusetts marijuana locations, rapper, producer and mega entertainment mogul Sean "Diddy" Combs entered the state's growing market without having to go through the arduous process coming with opening a new facility. Earlier in November, Combs picked up cannabis establishments in Worcester, Leicester, and Greenfield – including one of the first two dispensaries east of the Mississippi River – in a $185-million transaction that also included pot businesses in New York and Illinois. Combs' purchase came as a result of an acquisition of Columbia Care of New York City by Chicago- based multistate operator Cresco Labs, which required both companies to divest some of their assets. By purchasing well-established stores, Combs is buying into already profitable Skipping costly cannabis regulations In acquiring three Worcester County marijuana businesses, musical mogul Diddy avoided the start- up headaches plaguing Mass. pot entrepreneurs establishments with a proven track record. His investment creates the first minority-owned, vertically-integrated multi-state cannabis operator in America. "If you can pick your stores that have already proven to be successful, maybe you pay a premium, but at least they're in the market," said Robert Munnelly, shareholder and cannabis attorney at Davis Malm law firm in Boston. "You get to come on in and expand the company from there." Massachusetts cannabis regulations place restrictions on how many licenses a holder can own, in an effort to level the playing field. Still, inequalities remain in the young but lucrative industry. Legal requirements for the pot delivery-only business, which at this point is only open to entrepreneurs adversely impacted by the War on Drugs, mean those businesses are oen run in the red. Big-money players that existed in the preceding medical market had all the advantages of being established before law approving recreational use had even passed. And because of the cost to open, many entrepreneurs put their fate in the hands of deep-pocket investors, who oen want a larger piece of the pie. "Essentially what happens is you're going to have those big vertical multi-state operators prepared for recreational, and then they're going to have to institute an equity bill with a foundation built on billion-dollar corporations with dispensaries," said Ulysses Youngblood, founder and president of Worcester cannabis business Major Bloom. "How do you compete with that?" Regulatory environment Before voters approved adult-use cannabis in the 2016 Massachusetts election, state officials, including Gov. Charlie Baker and now Governor- elect Maura Healey, advocated against legalization. So when the majority of state voters said "yes" for adult-use, a strict regulatory environment with multiple stages of approval was created, Munnelly said. Creating an industry that involved a lot of approvals but also rectified some of the wounds of the War on Drugs was a priority, he said. "ey decided, 'Okay, we're going to do our duty and have an industry, but make sure it's safe and fair to consumers,'" he said. Under state law, license holders can control no more than three licenses in a particular category. Simply put, that means three retail stores, three cultivation licenses, three product manufacturing licenses, et cetera, with a few exceptions for things like microbusinesses. at's why Columbia Care and Cresco Labs had to drop some assets when they merged. "ey do not want a limited number of people exercising control over lots of Massachusetts licenses," Munnelly said. "ey wanted a diverse cannabis business, where no one can really exercise complete market power." But to create a new equitable industry out of a smaller, more exclusive medical market, was flawed from the start, Youngblood said. Major Bloom sells marijuana out of its Worcester retail store, but it also manufactures products and sells to about 40 dispensaries across the state. e company does home delivery, at least to cities that allow it, he said. Aer self-funding the business for many years, and weathering several storms like local governments that turned up their noses at the sheer concept of allowing weed within their borders, Youngblood said he fundraised through friends and family, ultimately crowdsourcing $1.3 million. But his situation, he said, is rare. Other entrepreneurs have to take money from investors, which can put PHOTO | COURTESY OF CRESCO LABS After it was purchased by Cresco Labs in September 2021, the Leicester cannabis dispensary originally known as Cultivate switched its name to Sunnyside. Robert Munnelly, cannabis attorney at Davis Malm Sean "Diddy" Combs' $185-million purchase of cannabis businesses in Massachusetts, New York, and Illinois created the first minority-owned, vertically- integrated, multi-state cannabis brand.

• Cover