Cannabis Is Pushing Change

Tossing a wrench into anything creates change. Cannabis is a wrench. Finally, this past week, the DEA, which has the final authority on cannabis, has recommended easing the restrictions. The hope is when the DEA formally announces changes; it will take cannabis to a schedule three drug vs. schedule one, allowing research, banking, and essentially Federally legalizing it. In classic American form, lawsuits will fly everywhere after this. Cannabis companies, dispensaries, and farms will want to be able to ship their products across state lines. Every single person in the cannabis industry is waiting for this.

Then there is the fact that over 70% of Americans want to legalize cannabis federally, and it is now sold legally in 24 states, and change is happening daily. Remember that each state has its own set of rules, too.

Fun fact: Connecticut sold over $274m of cannabis in 2023 vs. New York at $150m. The states began opening dispensaries roughly at the same time. Over 19 million people live in New York vs. less than 4 million in Connecticut. It is time for NY to figure out how to do the right thing for all NYers, balancing diversity and generating capital for the state. That is the Government’s job. I fear that the next round of licenses will not create the impact that could be made in taxes or make the consumers happy. It is time.

On the other hand, the multi-state operators such as Columbia Care and Curaleaf each paid $5m plus to the state of New York to secure a dispensary license, keeping the number of stores to a minimum, and are opting not to open. Instead, most are only going after the wholesaling of their brands. Why? The market is not that appealing, with 8000 illegal stores operating in New York. I get it.

Then, there are the beverage brands attempting to enter this market. The alcohol market is waning; people consume almost 20% less at arenas and retail. Sales for non-alcoholic beverages have climbed over 30%. When large companies own market share, they do not want to give it up. Cannabis will be a part of their long-term strategies. Recently, Tilray, a cannabis company publically traded on the Canadian exchange, purchased an alcohol brand. What will the arenas do to capture lost revenue?

It should be an interesting 2024 in the world of vices.