The federal government has given small rays of hope to the cannabis industry, is it ready?
The last 2.5 years have been tough for the recreational marijuana industry. Flower prices have plummeted, New York had a fiasco of a recreational rollout, and some major companies have been on the edge of collapse. But things are changing. The slow moving Biden administration has finally agreed to talk about rescheduling and SAFE Banking again goes before a Congress in turmoil. Is the cannabis industry growing up and starting to act and perform like other mainstream industries?
Despite the trouble, consumer use it up with the long term base of customers growing. While 90% believe it should be legal in some form, about 46% of adults have used marijuana at least once. The under 40 set sees it almost like beer, sodas and fast food, just a life option. One key positive for this information is they are more likely to try new products unlike the 65+ who are much less likely to try new things.
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Signs of the industry emerging from its growing pains are clear. The industry is adjusting reality. As a $22+ billion industry in 2022, it wants to act like a $250+ billion industry. But market forces are right-sizing in a variety of ways. There were over 750 conferences/trade shows/ investor conferences in 2018, now there are roughly 200. Indoor grow companies, the most expensive way to produce, are having to adjust pricing. Some are threatened with closing because of their assumption of always high premiums. Commodity fluctuating pricing used in everything from oil to butter has come to weed. But consumers are still buying in droves, even Montana boosted high sales.
“In most industries, at first everyone wants in and thinks they can make a quick fortune immediately. When that happens people are misguided by false information and the wrong people from other shady pasts thinking they know it all. The cannabis industry is no different and it will act like other successful ones. We needed this readjustment, most of the bad players are out, the misinformed are on the sidelines and the ones who put the time and proper energy into the space are still around and will thrive.” says Andrew Laub, managing partner of Keneh Ventures.
Big names have also struggled recently. Medmen, King’s Garden, The Parent Company, and others all closed or are a faction of where they were. The early days with promises of easy money, private jets, crazy parties, and hot eye candy swarming around have passed and now it is spread sheets, hard work and focus. Canopy Grow has moved operations from Canada to the US and is applying all the learnings from a highly successful alcohol company to a major player in marijuana.
The industry has also slowly moved to listening to consumers. Marley brands have fallen away to Wana Brand’s products which appeal to a younger, diverse audience. As the future looks to legalization, product companies are increasingly looking at what will do well on the shelves of Walmart and Target and not something to snicker about with bro friends.
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“The industry is evolving at a quicker pace today due to the assumed changes to cannabis scheduling with the Controlled Substance Act and possible SAFE Banking Act passing in Congress in some form of tandem news. This is causing mainstream investing to get excited again about cannabis, but mainstream does their due diligence and only wants to invest their money in competent and honest people.” shares Curt Dalton, founder of Cannabis.net.
While the industry still has work, large investors see the future where there are fewer products with large distribution, indoor grow and cheap base prices, and a giant consumer base who will look to familiar places to purchase products.
