First article

 

The new year brings renewed optimism and hope for the marijuana industry, which could see a raft of impactful trends for cannabis business executives.

 

Overall, 2022 was a tough year for the cannabis industry, with macroeconomic headwinds including inflation as well as industry-specific obstacles such as overproduction and a lack of capital investment.

 

 

Looking ahead, the marijuana market can expect, to name a few:

 

A prolonged slowdown of mergers and acquisitions.

Calls for moratoriums in mature markets struggling with too much supply.

Product segmentation at the retail level as consumers become increasingly sophisticated in buying habits.

Here are the top 10 marijuana industry trends to watch for in 2023, as determined by MJBizDaily staffers:

 

1. Major consolidation in key markets

 

After the boom times during the COVID-19 pandemic lockdowns, the cannabis industry doesn’t appear as recession-proof as it once did.

 

Companies in mature recreational markets such as Colorado and Washington state are struggling with falling prices.

 

Other markets such as Michigan and Massachusetts – which are on the younger side for adult-use sales – have already reached a saturation point.

 

In response, ancillary and plant-touching companies alike are cutting employees.

 

Despite the cost-cutting measures, many companies will still fail this year, licenses will be absorbed by bigger, corporate-style businesses and only the most-cost-efficient players will survive.

 

2. Mergers and acquisitions grind to a halt

 

In 2022, M&A activity slowed dramatically, and with ongoing reports that access to capital has all but dried up across the U.S., the trend is sure to persist.

 

There was a period where MJBizDaily frequently reported on company deals above $100 million. But those are now few and far between.

 

Many deals in 2022 that we covered were below $25 million.

 

Even the value of all-stock or partly stock deals agreed upon last year has fallen significantly, along with the stock market.

 

It’s not likely that trend will turn around.

 

3. Delta-8 THC remains a burr in the industry’s saddle

 

Almost every state-legal marijuana market made some type of rule to govern delta-8 THC in the past year.

 

States with limited or no legal marijuana markets – and even those with robust laws – saw delta-8 products proliferate nearly unregulated, providing a major source of competition for the licensed industry.

 

According to the 2018 Farm Bill that legalized nationwide hemp production as well as hemp “derivatives” and “extracts,” cannabinoids made from extracted CBD are legal as long as the plant where they began met the legal definition of hemp.

 

So it’s no violation of the U.S. Controlled Substances Act to extract CBD from a hemp flower and then put the CBD through a manufacturing process.

 

Without any change to the law, and that’s unlikely, the delta-8 market is likely to continue as is, which is a major headache for the cannabis industry.

 

 

4. THC potency obsession and lab shopping draw more attention

 

The issue of the industry’s obsession with THC potency will finally come to a head.

 

A long-running problem, the potency issue really bubbled up in 2022, with testing laboratories being sued for misrepresenting THC numbers as well as state regulators from Florida to Nevada moving to fine and suspend labs for violations.

 

Industry watchers hope this could lead to less lab shopping and better consumer education on the many other beneficial components of the cannabis plant.

 

That, in turn, could shift the focus of the industry away from cannabinoid content.

 

5. Calls for moratoriums grow louder

 

As growers in mature markets experience price compression and oversaturation while more cultivation capacity comes online, some are calling for help from state governments.

 

Companies in states such as Colorado and Michigan are asking state regulators to step in and put a moratorium on new licensing.

 

It remains to be seen what the effects of such artificial market controls have on business success.

 

Similar action in Oregon a few years ago did not solve that market’s overproduction problem.

 

6. Product segmentation and consumer sophistication at the retail store

 

Flower sales will continue to grow in virtually every market, but flower is losing market share to other products such as vapes, concentrates and edibles as consumers become more sophisticated.

 

Frequent users are not replacing flower with other products but, rather, are smoking flower at the same rates while adding other form factors into their consumption habits.

 

Live resin will continue to be popular as a consumer-favorite extract, both as a stand-alone concentrate and as something infused into pre-rolls, cartridges and edibles.

 

The product is becoming more popular than distillate, and distillate, while not exactly disappearing, will decline in appeal in the face of live resin preferences.

 

New consumers make up only 6% of the cannabis market and don’t spend that much money, according to Chicago-based cannabis analytics firm Brightfield Group.

 

Rather, most sales come from frequent marijuana users: 47% of cannabis users consume multiple times daily, 17% consume once per day and 10% consume five times per week or more.

 

That trend will only roll on.

 

A couple of other segments to watch:

 

Sales of infused pre-rolls have grown by a multiple of 5 since January 2020, according to data-analytics firm Headset.

Vapes have not only bounced back from the 2019 vape crisis, but they also are now the No. 2-selling marijuana item.

7. New York will struggle to contain the illicit market after launch of recreational cannabis

 

The conventional wisdom has long been that it’s easier to order cannabis delivered to your New York apartment than it is to order a pizza.

 

Couple that with the exuberance entrepreneurs showed this year in the state by setting up pop-up cannabis shops, unlicensed dispensaries and vans selling marijuana out of their backdoors, and the licensed market has its work cut out for it.

 

The state is trying to think outside the box to distinguish between licensed and illicit cannabis companies, but slapping a QR code on a store window likely won’t be enough.

 

To lure consumers away from the illicit market, regulators will need to make business conditions friendly and keep taxes low.

 

Simply leaning on the safety and testing of licensed products won’t cut it.

 

8. Canada business woes might be cut short

 

In recent years, large Canadian companies have been selling cannabis at a loss, losing billions of dollars and undercutting competitors in the process – with the help of Wall Street financing.

 

That trend might come to an end if Wall Street’s easy money runs dry, forcing large companies to sink or swim on their own.

 

On the cultivation front, Canada has produced far more cannabis than it can sell. That won’t change in 2023, but inventory might peak and start falling thereafter.

 

By way of retail, some stores have started closing in certain provinces, particularly in parts of oversaturated urban markets.

 

Retail consolidation and closures will continue, but despite that, more stores will continue to open in other places. Expect a net gain in stores.

 

9. Unionization efforts will see sustained success

 

Unionization of the cannabis industry will continue.

 

Organizers such as the United Food and Commercial Workers and the Teamsters view the cannabis industry as ripe for their efforts, considering it’s one of the largest industries in the United States with abundant growth.

 

In Canada, labor organizers say unionization and strikes among cannabis retail employees are being driven by worker concerns including low pay and health and safety issues.

 

Not all cannabis companies are friendly to union efforts, so expect to hear about more fights between workers and businesses.

 

10. Legalization efforts redouble after mixed success of 2022

 

Marijuana legalization’s momentum hit a red wall in conservative states in the South and West, but the 2022 election did bring victories in Maryland and Missouri.

 

On the federal front, industry watchers were hopeful for the incremental success of banking reform. That didn’t happen, but this year will bring another opportunity.

 

Of course, the ultimate goal is federal legalization, and President Joe Biden’s announcement that his administration would review whether marijuana should remain a Schedule 1 drug is going to put wind in the sails of advocates and reformers.

 

Also worth watching are the states that failed to legalize via their legislatures in 2022, including, Delaware, Kansas and North and South Carolina.

 

 

THE SECOND ARTICLES (2nd)

What can SoCal cannabis consumers expect to see happening in the legal weed market in 2023? What forces are shaping the local landscape? What products are in the pipeline? What surprises are coming down the pike? To find out, a handful of California-based industry power players weighed in.

The consensus? The sixth year of the Golden State’s legal recreational cannabis market is going to see some things disappear, specifically smaller businesses and product offerings from dispensary shelves, and at least one thing — old-school hash — reappear.

“Cannabis has always been a roller coaster, and I think it’s going to be a little turbulent in 2023,” said Gilbert Milam Jr. (better known as Berner), co-founder and chief executive of San Francisco-based global cannabis brand Cookies.

Here are six predictions for L.A.’s cannabis industry for 2023.

1. Consolidation likely to continue and accelerate

One of the top trends of 2022 was a shakeout in the California cannabis industry — closures, consolidations and mergers and acquisitions. And all those surveyed about the 2023 landscape expect that trend to continue — if not accelerate. “I think you’re going to see a lot of consolidation,” said Berner. “A lot of people have jumped into cannabis who didn’t really understand the business. They [just] kind of saw the gold rush aspect and they have a lot of assets, and those assets aren’t performing as well as they’d like them to.”

Troy Datcher, chief executive of Jay-Z-backed, San Jose-based the Parent Co., feels the same way. “I think it’s going to be a really tough environment for most operators,” Datcher said, citing the lack of regulatory movement at the federal level in 2022, specifically the failed efforts at passing any cannabis-related banking measures. “Especially for small operators without access to capital.” (That’s a result of the plant’s illegal status federally.)

 

Dec. 29, 2022

“I actually think [the consolidation] will accelerate,” said Chad Bronstein, co-founder, president and chairman of the Tyson 2.0 cannabis brand, who also cited the impact of the drug’s federal status. “Even [without passing] the SAFE Banking Act, even if they’d just removed 280E, businesses would have been in much better shape,” he said, referring to the section of the Internal Revenue Service code that prohibits writing off business expenses for cannabis businesses.

“Last year was a tough year psychologically for California cannabis businesses,” said Caroline Yeh, co-founder and chief executive of TSUMo Snacks, an Oakland-based maker of THC-infused savory snacks. “And this year is going to be a tough year financially.” Yeh based her assessment on several factors including a historic oversupply of cannabis, the state’s high taxes and challenging regulations.

Dec. 21, 2022

“Someone at a smaller brand I know said that you can buy [cannabis] flower for $300 a pound now, and it costs more than that to grow it, process it, package it and put it on the shelf,” she said. “So what’s the point? You’re just creating a net loss at that point. So that company decided to shut down.” Yeh said those are the kinds of distressed companies that will be ripe for mergers and acquisitions in the coming months.

2. A looming deadline for social equity applicants

Kika Keith, chief executive and founder of the Crenshaw Boulevard dispensary Gorilla Rx Wellness and longtime activist on behalf of the city’s social equity licensees, pointed to another regulatory factor that will profoundly shape the Los Angeles cannabis landscape in the coming year: the end of provisional state licensing, which will make it more challenging for equity applicants to open their doors and start generating revenue.

“You talk about consolidation and people closing their doors … there are people who are still trying to open their doors,” she said, explaining that local equity applicants who haven’t filed an application for a provisional license with the state by a March 31 deadline will instead have to apply for an annual license the requirements for which are much more costly and time-consuming. And with only about 60 of L.A’s 305 equity dispensary licensees fully up and running, Keith predicts the year ahead will be shaped as much by the businesses that never appear as by the ones that disappear. (Currently, once a provisional license is applied for, the clock starts ticking and applicants have three months — with a possible three-month extension — to complete a temporary approval application with the city, which requires, among other things, securing a location.)

“In just going through the red tape of licensing, a lot of folks have had to renegotiate with their investors because it ended up being so long, and now they don’t have the money to open their stores and [are] having to get new investors. And I definitely think we’re going to see a bloodbath for 2023,” Keith said. “The grim reality is we’ve waited so long for equity to totally be in full swing. It’s a big barrier. … [State] Sen. Bradford introduced SB 51 that pushes to extend [provisional licensing] for equity [applicants] but, as it stands, it’s really bad news.”

 

April 14, 2022

3. Shrinking product choices

The same conditions shrinking the number of players in the market will also result in fewer products on dispensary shelves. “A lot of retailers will cut the number of SKUs [or stock keeping units] they carry and the number of brands they carry,” Yeh said. “So what you’ll see is fewer offerings and more of the higher-performing items.” Likewise, she said, brands will pull back distribution efforts. “Last year, we were focused on growth and [growing] awareness, and that succeeded for us. This year we’re following the 80/20 rule: focusing 80% of our effort on the top-performing 20% of dispensaries.”

This survivor-mode mentality, as Yeh described it, will also result in fewer new products hitting the market. “You’re not going to see products released at the rate they were [previously],” she said. “There were SKUs I was thinking about releasing into the market this year, but investing in releasing products is actually an expensive thing to do. And, to be cash conscious, I have to say, ‘Well, OK, maybe we don’t do that this year.’”

4. An emphasis on new and different

Despite the market contracting, consumers in the maturing recreational cannabis market likely will be on the hunt for things that are new and different, and brands will try to deliver. “I think people want to explore new things,” Keith said. “I think for a minute, everything was so brand-centric. But now people are just about, ‘Is the weed good?’ They’re just asking their budtender what’s good.”

Berner echoed that sentiment. “What I’m looking for — and what I noticed other brands looking for — is something different, something unique.” He thinks some of that newness could come in what flavor profiles consumers gravitate toward. (“Right now it’s all about [the] Purple Terps [cultivar], but I think the OG stanky gas [flavor profile] is going to make a comeback,” he said.)

 

Dec. 7, 2022

That hunt for the unique is also why Berner said Cookies is launching a line of cannabis flower grown on-site and only available at a single Cookies dispensary in Maywood. “We’re going to dial in this microbrewery kind of concept and have an exclusive menu that has been curated and hand-selected, things that I’ve smoked personally and signed off on, batch by batch.”

On the edibles front, Yeh predicts a move to cater to culturally diverse palates. “One of the trends from the last few years is cannabis brands and entrepreneurs getting better at putting out flavors that are reflective of their own ethnicities,” she said, pointing to companies such as La Familia, an L.A. company that makes infused chocolate bars in flavors including Horchata Hot Chocolate and Fresas Con Crema, and Potli, maker of Cannabis-Infused Shrimp Chips. ”What I love about those shrimp chips is, if you’re an Asian person who grew up with those products, you can look at that package and be like ‘Oh, I know this product. I grew up with this,’” Yeh said.

“I think you’re going to see that trend continue in the edibles space where there’s a certain consumer you’re targeting, you’re not aiming for mass appeal,” she said. “I think that will be particularly strong in Los Angeles where you have this multi-ethnic community, high immigration rates and all these shops and restaurants.”

5. Hash’s moment

One of the hot new things on the horizon may be something that’s actually been around for thousands of years. “I think hash is going to be huge in 2023,” Berner said, referring to the concentrated form of cannabis made by separating the sticky THC-containing part from the rest of the plant. “Maybe I’m being a little biased because I’m obsessed with it right now, but it’s all I really enjoy smoking. … I really want to get into that market. I think 2023 is going to be about hash — hash collaborations between different brands as well as new hash products.”

Aug. 18, 2022

Roger Volodarsky, founder and chief executive of L.A.-based Puffco, a company that caters specifically to the cannabis concentrate crowd (its flagship product is a sleek upscale vaporizer called the Peak), agrees. “We believe that 2023 is the year that people will start to love hash more than they ever have. … There are a lot of variables to that. One is the [ongoing] normalization of concentrates in the United States. The other is the concentrates market. I hear from my personal hashmaking friends that the hash market is expected to bottom out.” Volodarsky said wider acceptance combined with lower prices, which he believes consumers should start to see by the middle of 2023, bodes well for a boom.

6. Celebrity brand challenges

Over the last several years, the ranks of celebrity-affiliated weed brands has swelled to head-scratching absurdity (famous folks in the weed game at the end of 2022 included “Family Matters” actor Jaleel White, former pro wrestler Ric Flair and actress Bella Thorne) as a way of quickly and easily turning existing fan bases and social media followings into potential customers. Now, some think that the era of the celebrity cannabis brand may be heading toward a saturation point.

“I think we’re already there,” Keith said, explaining that instead of pursuing traditional consumer product marketing techniques, many brands jumped on the celebrity bandwagon as a way getting in front of eyeballs. “They come with the celebrities and they think that that’s going to make people want to buy it,” she said. “And it works for that moment when [the celebrities] are in store and hyping it up and all of their fans come out. But then after that, it’s just about the weed.”

Berner, himself a successful product of the celebrity weed-branding machine (before he helmed a worldwide weed brand he made a name for himself as a Bay Area rapper), said it’s not simply a license to print money.

“I think the problem with celebrity brands is a lot of them don’t understand the industry,” he said. “So they get in, drop a strain, get excited, and then there’s no money. And then they get unexcited. I think if it’s an organic situation, and there’s real [cannabis plant] genetics behind it and there’s purpose behind it, and [if] the celebrity understands what kind of business this is, it can work. But if they’ve just jumped into it for the gold rush, I think you’ll see celebrity brands come and go.”

Nov. 17, 2022

But not everyone believes celebrity cannabis branding will peak in 2023. Chief among the evangelists is Tyson 2.0’s Bronstein, whose stable of celebrity brands include not only Mike Tyson’s but partnerships with Ric Flair and Evander Holyfield that launched in 2022 and an upcoming partnership with what he calls a “well-known national icon” that will be announced in the not-too-distant future.

“I disagree,” he said about the waning power of the celebrity brand. “I’ve always said what makes a celebrity brand successful is how invested they are in it. It’s not like the beauty business. [The celebrity] needs to be involved in the day-to-day. Consumers are picky, and there needs to be a reason they’re buying.”

The Parent Co.’s Datcher is another one who’s still bullish on the celebrity cannabis partnerships. “There’s a lot of folks who crap on the celebrity brands,” he said. “However, I do think this is the year of the influencer. … If you [partner] with the right influencer and the product is authentically integrated into their life, I think there’s a tremendous amount of opportunity to connect your brand to [their] followers.” Such relationships remain important, he said, because many of the traditional avenues of generating brand awareness aren’t available due to the plant’s illegality at the federal level.

“That’s why we’re excited about our restructured relationship with Roc Nation,” he said, referring to the New York-based entertainment agency founded in 2008 by Jay-Z. “And having an ability to tap into their artists, which has always been part of the conversation with Jay and the team.”

 

 

THE third articles

5 Cannabis Industry Predictions for 2023

The new year is upon us. The beginning of January always brings a sense of reflection, curiosity, and for many, hopeful anticipation about what’s possible over the next 12 months and beyond.
Cannabis professionals have experienced a real roller coaster with the industry seeing trials and tribulations in 2022 interspersed with glimmers of hope. Falling wholesale prices, widespread layoffs, and the death of the SAFE Banking Act (at least for now) led many in the space to wonder if we’ll ever catch a break.

However, 2022 wasn’t all bad news. The Biden administration in October announced plans to closely examine cannabis scheduling, offering cautious optimism that federal reform may be lurking. That same month, the DEA declared it would dramatically increase the allotment of cannabis produced for research purposes, another small step in the right direction.

In November, voters in Missouri and Maryland approved adult-use legalization. The following month, New York’s recreational market officially opened kickstarting what is likely to be one of the most significant cannabis markets in the world.
With so many ups and downs in 2022, it may be hard to know what’s next for the nascent cannabis industry.

We asked a handful of industry thought leaders to share their predictions for 2023. While many remained hesitant to predict full legalization, one thing was abundantly clear: this industry will continue to evolve and expand, slowly but surely inching toward nationwide acceptance from citizens and politicians alike.

Here’s what the experts had to say.
New York will change the game
The commencement of adult-use cannabis sales in the Empire State was big news in 2022, and all eyes are focused on the East Coast as we head into 2023. Brands from across the country are hoping to see their names on dispensary menus in New York sooner than later, thanks in part to a projected market value of over $7 billion within two short years.

It’s not just the promise of big numbers that has everyone excited about the New York market—it’s also the increased visibility and legitimization that comes along with legalization in one of the largest media markets in the world.
Veteran journalist Ricardo Baca, CEO of cannabis marketing and public relations agency Grasslands, predicts more mainstream earned media coverage of the industry in 2023 and beyond.

“I feel very confident that 2023 will be the year we finally see New York media start to embrace writing about cannabis in a different fashion,” Baca said. “We will see a significant uptick in the amount of coverage about cannabis from these New York-based publications. That will include not only the business and finance coverage that’s so essential but also the hard-hitting journalism that will be holding industry and governments accountable.”
Baca believes journalists in the global media hub of NYC will help change the narrative by covering the space more seriously, creating a ripple effect in the way the world views cannabis.

The Midwest and South are poised to ramp up
While it may be New York getting the majority of the spotlight, it’s not the only new market drumming up excitement. Many of the experts we spoke with highlighted emerging markets as ones to watch, often viewed as low-hanging fruit with new consumers and opportunities for operators and investors alike. Missouri in particular was called out several times, thanks in part to the unexpected success of the state’s medical market in 2022.
“We are optimistic about developments in the Northeast, of course, but also continuing growth in the newer markets in the Midwest,” said Roy Bingham, CEO and cofounder of cannabis data analytics firm BDSA. “There’s optimism from our market forecast team with regard to the developments in Missouri—perhaps it will actually exceed our expectations.”

There’s also growing enthusiasm about markets in the southern portion of the U.S. Florida is seeing robust growth in its medical market and has a strong chance of legalizing adult-use cannabis in 2024. Mississippi’s medical cannabis program is also already gaining steam, and political shifts throughout the region are fanning the flames of reform.

“The South is closer to legalization than some know,” said Lance Lambert, market expert and CMO of Grove Bags. “Texas and Tennessee are both just an election away from ending the failed War on Drugs.”

The canna-curious will come out to play
As more markets open and the cultural narrative around cannabis continues its shift toward normalization, the number of people trying the plant in some form will continue to increase.

According to Bethany Gomez, managing director at market insights provider Brightfield Group, just under 20 percent of Americans over the age of 21 currently identify as cannabis consumers.

Furthermore, a recent Gallup poll found 16 percent of Americans report smoking cannabis, with non-smoking consumers unaccounted for in the study likely pushing the figure higher. Thirty percent of respondents between the ages of 18 and 34 reported smoking cannabis, pointing to an increasingly strong future with a growing number of Gen Z consumers alongside a strong Millennial market. However, the number is expected to grow significantly as people in prohibition states continue to rely on hemp products.

“In 2023, we expect the hemp-derived THC market to hit $3.2 billion,” Gomez said.

Bingham also has his eye on widening market diversification, especially as brands seek to attract more nuanced consumer demographics in their fight for market share. He believes minor cannabinoids like CBN and CBG will lead the charge.
“One thing that we’re seeing across categories is the incorporation of minor cannabinoids and terpenes along with clear labeling of products to draw attention to this content,” Bingham said. “All of the top 10 gummy brands in California, for example, in the third quarter of 2022, offered at least one product with CBN or CBG.”

Current cannabis consumers will level up
It’s not just new consumers brands will want to chase in 2023. Mature consumers, who make up a significant percentage of the market, will remain key targets as their preferences and consumption habits evolve.
“In the past six months, when we survey cannabis users themselves, nearly 75 percent of them are using at least five times per week and 50 percent of those consumers are using multiple times per day,” Gomez said, adding that potency will remain a key differentiator for this segment.

“We’ve seen an explosion in infused pre-rolls, and we expect this to accelerate through next year. Retailers need to be catering to that heavy user and making sure they’re shopping through the dispensary.”
Bingham predicted premium options like terpene-rich rosin concentrates will also explode in popularity as high-end consumers seek out quality over quantity.
“Solventless products will grow rapidly, he said. “We’ve seen good growth in dabbable and vapable rosin, for example, across many markets in the last few months, and we expect that to continue.”
The battle of the brands will intensify

As more brands aim to tighten their holds in an increasingly crowded and often desperate marketplace, it’s clear that operators will do whatever it takes to reign supreme. Diversification of products isn’t enough, according to the experts we spoke with—retailers must also rethink the ways they’re engaging with their customers.

“This is the year to have retailers and cultivators partner in more creative ways to sell flower without just putting it on the shelves,” said Matthew Joseph Pasquale, owner of Alpaca Club cannabis delivery in Sacramento.
Gomez agreed, believing that demand for authenticity will drive the battle of the brands.

“I think that this year, it’s going to be a battle of branding,” she said. “Brands like Cookies come out and sweep some of the MSOs in terms of brand awareness, brand loyalty, and purchase rates in new markets that they’re entering into. I think we’re going to see a lot more disruptions from some of those more cannabis culture-focused brands who are really starting to give MSOs a run for their money.”

3 ways to jumpstart 2023
As the industry heads into a new year after a turbulent 2022, many operators are setting their own resolutions to ensure it’s smooth sailing ahead. For most, this means doing more with less and getting back to basics in order to reignite growth.
Make the most of what you have
It’s no secret cannabis companies are stretched incredibly thin, with teams and budgets reduced to bare bones. That’s why it’s more important than ever to focus on your strengths and develop new ways to be more efficient.
This may include deploying automation tools, whether it’s in the greenhouse or the marketing office. Having operations on auto-pilot leaves more time and space to dedicate to the bigger picture.

Think outside the box
Cannabis professionals are used to being creative, especially when it comes to brand visibility. Consider ways to attract attention that may feel more under the radar, and commit to being louder on platforms such as LinkedIn where the industry is gathering more frequently.
More brands and retailers are also teaming up to help amplify the message. Consumers love a collab, so don’t be afraid to connect with a would-be competitor—the unified front may be just what your customers want to see.
Remember the assignment
One issue plaguing operators in cannabis is trying to be too many things at once. While product diversification is necessary, brands still need to stick to their roots.