-- By Mark Gurarie Cooperative businesses, in which members own a stake in the company, emerged in the US first and foremost as a means of survival. In the face of a consolidating agricultural industry brought on by the industrial revolution, some of the first were formed by small dairy farmers in the 1810s, who found a need to pool together to share costs and increase buying power against larger competitors. An alternative to traditional business structure, founded on altruistic ideas about collaboration and collectivity, they’ve made and continue to make an indelible mark. There are currently about 29,000 co-ops operating in the country within every major industry: agriculture, housing, grocery stores, breweries like Anchor Steam, credit unions, electrical companies, Ben & Jerrys, and many more. According to the USDA, 75% of milk sold in the US comes from coop farms. Though there are different types, their aim is the same: to create profit not for individual business owners or anonymous investors, but for their members, who have a stake in the whole. In an economy in which the scales tend to tip for larger, richer entities, co-ops offer representation, stability, greater democratic control of operations, and another way to think about how businesses run and what social purposes they should serve. Within medical and recreational cannabis—a growing but ever-consolidating industry with a market value projected by Washington D.C.-based cannabis industry analytics firm, New Frontier Data, to reach over $57 billion by 2030—co-ops are also carving out a small but distinct space. Working within the sometimes hazy patchwork of the state and local laws that govern the US trade, producers, growers, members of the legacy industry that preceded legal cannabis, workers, and activists want to see that space grow nationwide. For some, like Brandon Gates, founder of Mass Cannabis Growers Cooperative, a producer co-op setting up operations in South Holyoke, MA, the model is not just “chic, brand new…niche,” but “potent: the answer and savior to our market.” Avery Edmonds of Fire Flower Farm in Willets, CA (started by his “life and business partner,” Hildi Gerhardt) and a founding member of Hive Mendocino Co-op—a small, four-farm co-op of farmer-producers—would concur. In promoting “collaboration over competition” with his community, the “co-op is a model to preserve that dream” of finely crafted, small-batch cannabis made by small, traditional growers. There’s another side to this for Tyler Brown, labor lawyer and activist involved with the recent successful push towards recreational legalization in his home state. To him, co-ops help address the harmful legacy of prohibition, especially its impact on poorer, black and brown communities. The model, he says, “builds actual wealth and ties to those communities,” offering the formerly incarcerated and multiracial working class inroads into a starkly white, male-dominated industry that has high barriers of entry. In their various iterations, then, cannabis co-ops across the country aim to create pathways for legacy and small growers to survive and thrive, to promote sustainable practices, and to create a more just and socially equitable industry. While the specific form such a co-op takes varies every co-op must follow seven principles: 1) open and voluntary membership, 2) democratic control in decisions and policies, 3) member’s economic participation, 4) autonomy and independence, 5) information, education, and training of members, 6) cooperation with other cooperatives, and 7) a dedicated concern for the community. Three cooperative models exist within cannabis. Consumer co-ops—in the vein of your local food co-op—started to crop up in California as medical patients teamed up with sponsor growers to pool licenses and gain access Compassionate Use Act in 1996. The members are both customers and part-owners. In producer co-ops, such as Hive Mendocino and Mass Cannabis Growers Cooperative, profits and expenses are shared among a members of farmers or growers. Lastly, worker co-ops, typically operating in cannabis retail spaces—Chicago Cannabis Company is a long-running example in Illinois—allow worker members to be voting, part-owners of the business. According to Kyle Sosobee, a Hatfield, MA-based attorney and former public defender who works with co-ops and small businesses, variations in these models show that they offer “an intriguing possibility for cannabis because you can really kind of see the flexibility and creativity that comes from…the basic concept.” Despite these possibilities, “there are not very many examples of successful [cannabis] co-ops at this stage,” Sosobee notes, and—echoing the piecemeal, state by state regulation of the industry—very much depends on where you are. The laws that get on the books when a state goes legal have a massive influence. Alongside market pressures that accompanied the rise of the recreational industry, changes in regulations have essentially eradicated early California’s medical consumer co-ops, (though there is a framework and emerging guidance for producer types). Of the 21 states that allow recreational use, only three—Massachusetts, New York, and Rhode Island—offer specific licenses for coops, with California laws allowing smaller growers to attain specific business licenses. In Massachusetts—whose Craft Cannabis Co-op law came about due to lobbying from farmers in the state—there are only four provisionally licensed producer co-ops, none of which are yet active. Sosobee attributes this to two factors. He says that state regulations lack clarity “as to what a licensed co-op is and how it works” and the state’s Cannabis Control Commission has done an insufficient job promoting and educating about this option. For a small businessperson or entrepreneur that lack of information and uncertainty is a killer; “when you’re already embarking on something that entails a lot of risk and is expensive,” says Sosobee, “vagueness in the regulations is not what you’re looking for.” In neighboring New York state, which is currently establishing its recreational program, co-op licenses are available, though the language defining what they are is more specific but may be limiting. The coming years will no doubt test the models and the efficacy of laws in these states. After years of crisscrossing the country as part of both legacy and legal cannabis operations, Brandon Gates of Mass Cannabis Growers is midway through the process of establishing a 22,000 square foot producer co-op facility that will have up to 26 members in a low-income neighborhood in South Holyoke, MA. Seeing “millions of pounds of mids” flooding the local recreational market, and lacking enough capital to compete against bigger businesses, the co-op model is proving to be a way in. In the face of an industry straying from its clandestine, craft roots, the co-op aims to help legacy growers get their “high potency, exciting intellectually property to actually reach the shelves.” Members need $10,000 to join, a large figure, but one that pales in comparison to the astronomical amounts needed to set up regular cannabis businesses. As a result of that lowered barrier of entry, he’s found that membership in his co-op naturally became much more diverse than the industry overall—a “cornucopia …that the industry needs,” he said. Despite some challenges navigating local laws and building permits, preliminary purchase orders are in, and products should be on shelves by the end of the year. Where for Gates the cooperative model has proven necessary for gaining entrance into a difficult business, Avery Edmonds of Mendocino Hive Co-op, established in 2018, views it as critical for the survival of those already there. In November of 2017, a provision in the recreational cannabis law, Prop. 64, that limited individual grows to one acre was changed, creating a loophole for large operators to work with multiple licenses and expand production. Despite soaring sales, prices of product crashed, and many legacy producers were forced to pack it in. In the face of this, the co-op model has allowed Gates and his fellow farmers to share the burden of costs, have a greater presence in the community, and be resilient in the face of uncertainty. When asked if new co-ops were emerging in his state, he answered “no” but added, “far and away, the majority of small producers that I know who formed coops or joined coops are still operating.” This hasn’t been his experience with those who haven’t. In keeping with his background in sustainable agriculture—which he practices at Fire Flower Farm—Edmonds sees a model that has strong roots and will last. With the passage of the Rhode Island Cannabis Act, in May of 2022, that state may well become the vanguard of the cannabis co-op model. The law divides the state into six geographic zones, and of the four licenses granted in each, one must be reserved for social equity applicants, and another for a worker-owned co-op applicant. This was the result of organizing by broad coalition of community groups and organizations, including Reclaim Rhode Island, Yes We Cannabis Rhode Island, Break the Cycle, UFCW Local 328, the Formerly Incarcerated Union, and the Marijuana Policy Project, among others. “You can’t do racial and social equity without economic equity, and you can’t do economic equity without social and racial equity: the two go hand in hand,” says Tyler Brown, treasurer of Reclaim Rhode Island and part of the Rhode Island Cannabis Justice Coalition, a splinter organization focused on the economic equity part of the equation. Co-ops are an ideal model, in his view, because “the profits of the business go directly to the workers who are from the community…so it builds individual wealth for working class and people of color.” Though the law has just gone into effect, the work for Brown and the Rhode Island Cannabis Justice Coalition now is ensuring that it’s effectively implemented, regulatory agencies are amenable, and that resources are available for aspiring co-ops. Cannabis co-ops have and will continue to play a unique and crucial role within the broader industry. Whether inspired by a desire to preserve legacy cannabis quality, protect local communities, or promote sustainability and social equity, when you talk to people involved with cannabis co-ops, you can’t help but become infected by their enthusiasm. Perhaps, then, it’s time to buy in.
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