Chicago pot giants GTI, Verano quietly team up in joint venture

Rickey Hendon, a former state senator and current dispensary applicant, complained that the deal runs counter to the state’s equity goals and “helps to create the monopoly that we’re trying to get away from.”

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A customer shows off his purchase at Verilife Marijuana Dispensary in southwest suburban Romeoville.

Weed giant Verano has joined forces with competitor GTI in a new venture.

Ashlee Rezin Garcia/Sun-Times

Two Chicago-based firms that have emerged as major players in the country’s increasingly competitive cannabis industry are partnered together in a company that owns two Illinois dispensaries.

Subsidiaries of Green Thumb Industries and Verano Holdings are the registered managers of ILDISP LLC, according to records kept by the Illinois secretary of state’s office. That shell company is listed as the sole manager of NH Medicinal Dispensaries LLC, which holds the licenses for GTI’s Rise dispensary in Effingham and Verano’s Zen Leaf pot shop in Charleston.

The owners of both companies were some of the first to cash in when Illinois legalized medical marijuana in 2015. Since then, their respective businesses have blossomed into multibillion-dollar behemoths, with retail and cultivation operations spread across multiple states.

GTI already trades on the U.S. “penny stocks” market and the Canadian Securities Exchange. And last month, Verano announced plans to follow suit by going public in Canada after raising $100 million in new funding.

As the partnership has grown more lucrative, the state has failed to issue new licenses prioritized to so-called social equity applicants. After being pitched as the first step in diversifying the state’s overwhelmingly white cannabis industry, the stymied licensing process has ultimately given existing operators an even longer head start to sell recreational pot with limited competition.

Rickey Hendon, a former state senator and current dispensary applicant, complained that the deal runs counter to the state’s equity goals and “helps to create the monopoly that we’re trying to get away from.”

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Rise Joliet is owned by Green Thumb Industries, which is now partnering with competitor Verano in two Illinois dispensaries.

Ashlee Rezin Garcia/Sun-Times

In 2016, GTI entered into the joint partnership with Ataraxia, a downstate cannabis cultivator that was co-founded by Verano CEO George Archos. That’s when GTI and Ataraxia collectively purchased half of NH Medicinal Dispensaries, a subsidiary of Toronto-based Nutritional High International that teamed with them to open the medical dispensary in Effingham.

GTI and Ataraxia later bought out the second half in 2018, just a day before Verano launched with $120 million in funding and swallowed up Archos’ other company. The “aggregate purchase price” was valued at $3.5 million, according to a news release.

The law that fully legalized cannabis statewide later allowed the Effingham dispensary to start selling both medical and recreational weed. And it also gave the two power players an additional dispensary license to split. Last December, that license was issued to NH Medicinal Dispensaries and was used to open Verano’s store in Charleston.

However, the partnership effectively limits their individual footholds in Illinois. That’s because the two dispensary licenses “both count toward each company’s respective 10 store cap,” according to GTI spokeswoman Linda Marsicano, referencing a provision in state law that limits the number of pot shop permits a single company can hold.

So why are these competing firms continuing to work together?

Both Marsicano and a Verano spokesman wouldn’t explain why the partnership is mutually advantageous.

But in a filing this month with the U.S. Securities and Exchange Commission, GTI said it has entered into joint ventures “to comply with state regulatory requirements in certain states.” The company also acknowledged that those partnerships “may expose us to risks,” including a lack of operational control and litigation and arbitration arising from disputes over certain joint decisions.

Andy Seeger, a cannabis consultant who previously worked as an industry analyst, said these types of arrangements are attractive because they require less investment and still allow both companies to prioritize selling weed products from their own cultivation sites. State law was designed to require dispensaries to buy from a variety of growers. But under the partnership, the inventory at the stores owned by GTI and Verano could largely come from those companies.

That underlies a growing trend within the industry: Multistate pot firms that were focused on controlling retail spaces are increasingly concerned with branding and marketing their wares, he added. GTI notably announced last August that it was rebranding its dispensary on the Las Vegas Strip as part of a partnership with Cookies, a wildly popular weed firm based in San Francisco.

Seeger, who previously worked for MillerCoors and the booze maker Constellation Brands, compared the shift in focus to the branding model in the alcohol business.

“Bud Light and Miller Lite are sold at the same bars. No need to own the bar.”

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