Let me be honest: I’ve only been part of the cannabis industry for six months. Before that, I worked at B2B tech start-ups and ad tech companies like Roku and Criteo. The most valuable thing I learned is that most good ad campaigns are linked to seasonality.
When I worked at Criteo, the vast majority of our clients were retail and ecommerce. Seasonality initiatives were critical. The more relevant your ads to an upcoming seasonal event, the more relevant they were to the audience. Think about any window display you’ve seen recently – the CVS near me has had Valentine’s Day products in the window since at least mid-January.
When I worked at Roku, we got to take a look at TV streaming behavior. For example, when Ben Affleck started dating Jennifer Lopez again, searches for their movies and music videos skyrocketed. During the space race, general space-related (think Star Trek) TV content went up.
That’s not seasonality – that’s psychology.
As the cannabis industry matures, businesses should start thinking about what seasonal, psychological and cultural factors impact their consumers. Cannabis consumption could be said to be the art of the business, but understanding what cannabis consumers want is the science. Here are three ways to think about that science:
1. The Science of Stash
One analyst recalls that cannabis sales reached “unimaginable” highs in 2020. He called this “pantry-loading” behavior. Let’s call it “stash” behavior.
The buying behavior of a cannabis buyer who buys an eighth is fundamentally different from someone who buys a six pack. The six pack is gone in a weekend. Which flower buyers are buying an eighth just for a weekend? A week? A month?
Is there a correlation? Well, stashing behavior obviously correlates with couch behavior. When people spend more time inside, they’re more tempted to go through their stash and cannabis sales increase.
Cannabis isn’t affected by just regular old seasons – it’s affected by what we could call personal, seasonal patterns. Just like streaming TV, when consumers spend more time inside, they buy more cannabis because they consume it faster.
What is the stash turnover rate for your different audiences? What factors make that turnover rate go faster or slower?
Analyzing stash behaviors can reveal your most loyal and high value customers, and offer new perspectives on how to market to different groups.
2. The Science of Celebration.
One estimate shows that Illinois cannabis sales jumped up by 10% in July due to Lollapalooza. Makes sense – more than 385,000 people attended.
“When people are coming into cities for events, they’re picking up cannabis then and there, and likely consuming it in true real-time.”
Looking at our own data, there’s a clear spike around St. Patrick’s Day – cannabis sales are 70% higher than average daily sales in February and 54% higher than average compared to March daily sales. This goes against stashing behavior, because the sales happen on the same day.
This is a different science. When people are coming into cities for events, they’re picking up cannabis then and there, and likely consuming it in true real-time.
Event trends can have a huge impact on cannabis sales and psychology. Where there’s a celebration, there’s going to be cannabis buyers. Event trends often translate to tourism trends. And these cannabis buyers aren’t just tourists to cities, a lot of them are likely tourists to cannabis itself as well – novelty consumers who go into a dispensary for the specific event and pick up a little bit of everything.
That’s an opportunity for new brands and more niche categories (beverages, pills, edibles) to connect with a new group of customers. That said, after that initial purchase, how can the brands stay in touch? That’s where dispensaries and cannabis brands need to come up with new strategies for managing cannabis customer data.
3. The Science of States.
Events like Lollapalooza are regional – and so are cannabis markets. In Massachusetts, BDSA data shows continued growth. In the West Coast, analysts call it a “rollercoaster.”
Note the specific pandemic trend lines. Any state that suddenly saw more than 50% sales one year and a sudden slump the next year at the same is bound to see a market crash. It also made it easy to ignore a lot of structural problems – which states like California are now trying to correct.
Legal cannabis sales are radically different depending on the maturity of the market. Let’s not forget that this goes deeper than just states. Only 32% of the California market even has legal dispensaries open right now.
What are regional trends? What are event trends? What are cultural trends?
The more dispensaries and cannabis brands can proactively market to anticipate these needs – and get the message out there to the right audience segments – the better.
Making Cannabis Personal
What keeps becoming apparent is that above all, cannabis is personal. Everyone is looking for something a little different. A consumer’s tastes can change based on all sorts of factors – or not change at all. Different products might suit different occasions. Different messages will talk to different use cases – some people want cannabis that can make a concert better. Others want it to sleep. Dispensaries need to figure out who’s who.
At the end of the day, that’s what makes the cannabis industry so unique. It is an end-to-end experience like no other. From researching products and dispensaries to analyzing brands and products to consuming it, every interaction a consumer has with a cannabis business is very personal. And if they don’t like their personal experience, they won’t come back.
As the industry looks ahead into a competitive 2022, the mission should be simple: make every touchpoint for every customer a great experience, from start to finish.
Back in November of 2020, voters in New Jersey overwhelmingly approved Question 1, the ballot measure to legalize cannabis. On February 22, 2021, New Jersey Governor Phil Murphy signed three bills into law, laying out the framework for how the state would move forward with legalized adult use cannabis.
New Jersey Governor Phil Murphy
The legislation became law once the Governor signed the bills, tasking a five-member Cannabis Regulatory Commission (CRC) with developing regulations for the market by June of 2021. The CRC set a deadline of February 22, 2022, six months after the regulations have been established, for when they wanted to officially launch the adult use cannabis program and commence sales.
It looks as though the Garden State is not quite ready to meet that deadline. According to NJ.com, the setback is due to a couple issues, namely municipalities dragging their feet and worries about a weak supply chain. Before a CRC meeting kicks off today, Jeff Brown, executive director of the CRC, told NJ Cannabis Insider that they still have work to do before they can give the green light. “Feb. 22 is not a concrete date to open,” says Brown. “There is no firm commitment on timing of when recreational sales will begin.”
Among the issues that are causing these delays is local approval. Municipalities need to first approve and adopt the cannabis rules before allowing businesses to open. “One of the biggest deficiencies we’re seeing is a lack of municipal approval,” Brown told NJ Cannabis Insider. “That’s an issue, and supply continues to be issue. It’s the priority of the CRC to get recreational sales started as soon as we can, but we have to do it in a way that’s compliant with the law. We need the industry to get there.”
As Brown noted, the CRC also thinks they need to make sure there is adequate supply before the state opens the market. However, businesses appear to be ready and chomping at the bit to get started with the adult use program. Patrik Jonsson, regional president of the northeast for Curaleaf says they have been ready. “Give us 48 hours, and we can pretty much do whatever the state wants, and we’ll open,” says Jonsson. “We have product, the people and the facilities. There are a few minor things we need clarified around the product. But we are very much ready for turning it on as soon as the state lets us.” Curaleaf is the biggest cannabis company in New Jersey and has two cultivation facilities and three retail locations across the state.
While the February 22 deadline is still in place, questions still linger about when exactly the state will be ready to launch its adult use cannabis program and commence sales.
Ask any cannabis connoisseur, and they’ll likely tell you that cannabis delivery services have been around for a long, long time. Given the distancing requirements of the COVID years, the increasing number of medical cannabis patients who need or would like cannabis delivered to their door and the surge in recreational adult use sales, cannabis delivery is coming out of the shadows and into the legal cannabis industry.
Proponents of cannabis delivery say that creating a legal structure and guidelines that allow cannabis home delivery encourages people to buy from legal sources rather than the legacy market. In some cases, it’s a way to entice legacy cannabis delivery operators to transition to the licensed and regulated market. While many states remain hesitant to allow adult use cannabis delivery, some do, and others have taken the first step, allowing delivery to registered medical cannabis patients and caregivers.
Where is Cannabis Delivery Legal?
According to Cannabis Business Times, states that permit medical cannabis delivery as part of another license type, retail, for example, or with a specific delivery license include: Arizona, Arkansas, California, Colorado, Maine, Maryland, Massachusetts, Michigan, Nevada, New Mexico, New York, Oregon, Rhode Island and Vermont. Complex reports that delivery service is legally available without any restrictions to anyone 21 years or older in California, Nevada and Oregon.
Medical or adult use, there are restrictions on where cannabis can be delivered, even within states that allow it. For instance, you can’t legally deliver cannabis to college or university campuses. Although many people still discreetly deliver and receive cannabis products on campuses, it’s illegal to do so since cannabis is a federally controlled substance and higher education institutions that receive federal funding must prohibit its use and distribution.
It’s noteworthy that some states without legal cannabis delivery regulations have a “loophole” through which some delivery businesses operate. Gifting, for example, is an established, though not entirely legal, delivery practice. According to NJ.com, New Jersey falls into the gifting loophole category:
Licenses to sell legal weed are still months away, but there’s a handful of entrepreneurs coming into the scene through a possible legal loophole — “gifting” cannabis. It’s a scheme popular in other states and particularly in Washington, D.C. A company lets you buy cookies, snacks or brownies that come with sticker shock of $50 or more. But when they make the delivery, it comes with a suggested gift: maybe a cannabis edible or an ounce of flower.
Although many underground businesses thrive in the Garden State’s “in-between” market, NJ.com also reports that gray market operators have faced legal penalties and even jail time.
Why Are Cannabis Delivery Services Popular?
Cannabis delivery services have a rich cultural history in the underground market. Rather than making a transaction in public, home delivery provides a more intimate and secure way of selling cannabis to consumers.
Cannabis delivery has skyrocketed in popularity due to the COVID-19 crisis. MJBizDaily reports that online cannabis orders boomed during the pandemic, increasing the need for cannabis delivery services.
Historically, cannabis delivery services also help registered medical cannabis patients receive access to their medicine since their disability or chronic condition might prevent them from leaving the house and visiting a dispensary. This can be especially true for seniors, even if they aren’t a registered patient, but live in a state with adult use cannabis.
What’s the Difference Between Cannabis Delivery and Transport Licenses?
There is real confusion surrounding the differences between delivery and transport licenses. Basically, delivery licenses are B2C (business to consumer), and transport licenses are B2B (business to business).
Cannabis delivery and courier licenses allow licensees to deliver cannabis products directly to patients, caregivers, and in some states, consumers. While the name of the license differs depending on the state in which you seek to operate, delivery licenses tend to allow operators to act as a retailer without a traditional bricks and mortar location. Delivery licensees purchase and store wholesale cannabis products and sell them via the delivery model. Couriers, however, are traditionally hired by retailers as their delivery arm. In this model, the retailer takes the order, and the courier delivers, like Door Dash or Uber Eats. One key difference between a delivery and courier license is the significantly lower cost of entry for couriers as they don’t have facility, inventory, or storage costs, and generally have lower operational expenses.
But what about transport licensees? Rather than delivering to individuals, transport licensees typically deliver cannabis products between licensed cannabis facilities, such as a cultivator or manufacturer to a retail dispensary or testing facility.
In Massachusetts, there are three delivery and transport licenses (courier, delivery operator, and transporter) as well as a delivery endorsement that allows certain licensees to deliver directly from a licensed establishment to consumers.
The first step to operate a cannabis delivery or transport business is determining whether you want to deliver for retail establishments, buy product and deliver directly or transport cannabis between licensed cannabis businesses. Each model has its plusses and minuses, just depends on what you want. It’s important to note that Massachusetts delivery operator licenses are currently reserved for social equity participants, as reported in the Milford Daily News:
“The new “marijuana delivery operator” licenses…will be available exclusively to participants in the CCC’s social equity program and economic empowerment applicants for the first three years.”
Once you decide which type of license you want, the next steps are first to familiarize yourself with your state’s cannabis rules and regulations, and then to complete and submit a license application.
How to Apply for a Cannabis Delivery or Transport License
While the delivery and transport license application process looks different in each state that allows them, all states require applicants to be 21 years of age or older and most require operators to be current residents of the state where they intend to operate. There are also required, non-refundable application and licensing fees. While these fees are not insignificant, the good news is that they tend to be lower than the fees required for other cannabis business license applications.
Since compliance with state rules and regulations is a condition of licensure, licenses are awarded to some or all applicants that meet the application and regulatory requirements. Once awarded, cannabis delivery and transport licensees must maintain compliance or risk hefty fines and/or face a temporary or permanent shut down. One regulatory example is that delivery operators must digitally verify any and every customer’s photo ID before and when a cannabis product is delivered to a recipient; missing this critical step can put your businesses at serious risk of legal and financial consequences.
How to Maintain Compliance Once You’re Licensed
Maintaining compliance for any cannabis business can be challenging. There are strict guidelines on marketing and advertising, security, employee training, inventory management and more. Additionally, there are restrictions specific to cannabis delivery services, particularly limits on how much product can be delivered per order/transaction.
What does cannabis compliance specifically look like for cannabis delivery licensees? For one, all merchants must verify ID before an order is fulfilled. In states with medical cannabis, this would require medical card ID verification. Otherwise, for adult use markets, a driver’s license or other state-issued photo ID with a valid birthdate is acceptable. Some states require recipients to sign a manifest or receipt acknowledging that they accepted the cannabis order and for the licensee to maintain a record of that acknowledgement for a specified number of years.
There are many other regulations that delivery operators must adhere to and many ways to stay up to date and compliant. Tasking a staff member to handle all things compliance is one option. Another is hiring a compliance professional to set up and oversee a compliance operating system and/or partnering with a compliance software solution provider.
Cannabis delivery services can be very profitable. In comparison to other cannabis licenses, they don’t require as much finance capital to get started. Once a license is obtained, your priority will turn to maintaining compliance. Too many delivery services exist in a precariously legal gray area; don’t let yours be one of them.
Dalwhinnie Enterprises is a cannabis brand that started in Ridgeway, Colorado. Based in the San Juan Mountains in Western Colorado, the company includes brands like Dalwhinnie Farms Cannabis, Shift Cannabis, Ridgway Hemp Company and the Dalwhinnie Farms Boutique in Aspen, Colorado.
Brandon Barksdale has about a decade of experience in cannabis. He has worked for small startups and large multi-state operators. Most recently, he has worked with CohnReznick’s Advisory Practice. At CohnReznick, he worked alongside the Dalwhinnie team, helping them launch their boutique in Aspen. Since joining the team as their new CEO, Barksdale has shifted his focus to expansion, scalability and operational excellence, using things like GMPs and other certifications to improve quality and consistency.
We caught up with Barksdale to learn about his experience, his new role, entrepreneurship, social equity and what it means to be a minority leader in the cannabis space.
Cannabis Industry Journal: You have an impressive background before joining the cannabis industry full time. What made you take the leap into this space? Tell us about your background.
Brandon Barksdale: The majority of my background is driven around transforming businesses cross functionally, specifically in operations and finance. When it comes to the cannabis industry, it still lacks maturity; so being able to apply key performance indicators, benchmarking, controls and analytics can drive the industry, and more specifically, our organization, to operational excellence.
Brandon Barksdale, CEO of Dalwhinnie Enterprises LLC
While I was in the professional service space, I was an advisory leader within our cannabis industry group. I was able to be involved and work with organizations at differing levels of maturity, guiding corporate strategy and functional and operational improvement before fully jumping in to lead this organization. Dalwhinnie was the perfect opportunity to use my previous experience to instill value to the company as it continues to scale and grow.
CIJ: With a such a big portfolio of cannabis clients, why leave all that behind to take the reins at Dalwhinnie?
Barksdale: Simply put, I was eager to roll up my sleeves and drive a single organization through its growth lifecycle. When you’re working with and cycling through multiple clients, you’re supporting them from a strategic perspective and providing value and direction but the execution is left to the operational teams internally to follow through. No matter how detailed the plan or deeply you are involved you are still third-party. During scope changes and ramping up and down there’s always some momentum that gets lost. I want to focus on one company, to really tie myself to its DNA, so that I can better be in the driving seat toward success and operational excellence.
Dalwhinnie stands out because of their unwavering focus on quality and the integrity of the brand. To that end, I want everyone within the organization to succeed and to nurture a healthy company ecosystem that allows for professional development, training and being an industry leader. We have a really big opportunity here to set the standard for what quality looks like going forward and what it means to really care about the product that you’re putting out into the marketplace.
CIJ: Dalwhinnie Farms has a cool location in Ridgway, Colorado at the base of the San Juan Mountains and sustained by the snowmelt from the Uncompahgre River. How does this make Dalwhinnie cannabis different?
Barksdale: There is no doubt that growing at a high elevation with different seasonalities is a challenge. However, every region on Earth presents its own benefits and challenges as it relates to cultivation. You can use the comparison to different regions of wines. Wine from Bordeaux and wine from Napa are going to have different profiles because of all the unique factors of climate, water, humidity, aging practices, etc.
Dalwhinnie Farms in the Sun Juan Mountains
This is one of the things that will make the future of cannabis very interesting. There are multiple elements and variables that help tell the story of the product through its experience of growth. Just like there are tons of wine regions and varietals, there are hundreds of cannabis strains and exponentially more crosses where one can discuss multiple facets of what makes that particular product unique. It is one of the things that will continue to evolve in the cannabis market and one of the most exciting components—knowing that we are still on the way to creating a unique and original marketplace!
CIJ: The Dalwhinnie Farms retail store in Aspen is a unique cannabis dispensary. What is the retail strategy moving forward?
Barskdale: Every cannabis wholesaler, and most markets, are feeling the pressure of price volatility and retail is one of the best-known ways to help stabilize an organization. Our strategy is to stay as nimble and creative as we can, focusing on continuing to build out the success of our flagship Aspen dispensary as well as partnering and entertaining retail expansion opportunities. Our strategy is not to ignore that fact, but to act as perceptively as we can to broaden our retail footprint.
The Dalwhinnie Boutique in Aspen, CO
CIJ: Tell us about your short-term goals for Dalwhinnie.
Barksdale: When I came onboard with Dalwhinnie, I hit the ground running. I had some history with Dalwhinnie and the family of companies so I was lucky to have a head start and insight toward necessary changes. Short term goals included attention to production expansion initiatives, operational changes that moved us closer to excellence, and fine-tuning our GMPs. My eye is also focused on company culture, performance management, and constantly pushing the envelope on quality. While always of importance, we want to continue as a pioneer on cultivation and manufacturing standards as it relates to quality in organics.
CIJ: And what are your long-term goals for the company?
Barksdale: Mentioned as a short-term goal, I want to move toward GMP and GACP manufacturing standards and create a continual cycle of improvement as we move through our expansion and growth plans. In the future, multi-state operations and partnerships are also a big part of our strategic direction. We aim to continue to provide an elevated cannabis retail experience at our flagship location and to expand our retail footprint in the marketplace.
CIJ: There’s been a focus on racial disparities in the cannabis space and the need to improve social equity and opportunities for minorities. How do you hope to support equity and help drive change?
Barksdale: We are at a turning point in the industry where substances are becoming legal, yet so many people are still suffering from nonviolent, non-serious offenses related to cannabis. It is unavoidably apparent and it is something that deserves significant attention and commitment. Every company that is operating in this space should take a level of responsibility to help address or support reparations in some fashion whether that be through jobs, access, and/or partnerships.
There should be an obligation to support some type of social equity improvement project as it relates to the cannabis industry. Some legacy states and now new states coming online, are attempting to course correct by making it a part of the compliance or access components for licenses.
There is still a lot of work to be done. I am working through the strategies that work for us as a company. I am actively exploring how to incorporate opportunities into our operating and business model.
As a women-owned company and myself being a minority leader, it is on the forefront of our priority list to come up with a comprehensive plan and commitment to supporting social and equities in this space.
Curaleaf Holdings, Inc., a Florida-based cannabis company operating in 23 states and Europe, made two big announcements earlier this morning. First, they acquired Bloom Dispensaries for $211 million. As part of the acquisition, Curaleaf is purchasing Bloom’s four dispensaries in Phoenix, Tucson, Peoria and Sedona. They also acquired Bloom’s cultivation and processing facilities outside of Phoenix.
Bloom’s revenue last year was near $66 million, with EBITDA margins above 40%. Boris Jordan, executive chairman of Curaleaf, says the Bloom acquisition is huge for the company’s position in Arizona, a state with a billion-dollar-market. “Bloom is an excellent strategic fit for Curaleaf as it further expands our capacity and retail footprint in Arizona with an attractive set of assets, enabling us to better serve the state’s US$1.4 billion-plus annual market opportunity,” says Jordan. “Adding to these benefits, Bloom will be immediately accretive to our adjusted EBITDA margins.”
Now that they have 121 retail locations across 23 states and over 5,000 employees, Curaleaf is on a path to become one of the largest cannabis companies in the world.
According to Matt Darin, president of Curaleaf, their growth strategy is continuing well into 2022. “We are excited to kick off this year continuing our momentum of expansion and growth in Florida,” says Darin. “Throughout this year our patients can expect to see Curaleaf continue to lead the Florida market with new innovative products and convenient new locations.”
Canadian cannabis giant Tilray (NASDAQ:TLRY) announced its fiscal second quarter of 2022 results last week. The company reported net revenue of $155 million in Q2 which was an increase of 20% year over year. Tilray attributed these gains to its expansion in verticals that include alcohol as well as hemp-based wellness.
Despite an uptick in sales, Tilray’s gross margin reduced by 7% to $32.8 million as the Canadian cannabis market continues to wrestle with oversupply issues resulting in lower-priced products. Alternatively, Tilray claimed its cost-reduction program is running ahead of schedule and it expects to save $100 million by 2023, up from its earlier forecast of savings of $80 million.
Tilray reported a net income of $6 million in Q2, compared to a year-ago loss of $89 million. The fiscal second quarter was also the 11th consecutive quarter where Tilray reported an adjusted EBITDA. This figure stood at $13.8 million in Q2.
Tilray stock rose by 15% in the two trading days following its Q2 results.
What impacted Tilray in Q2 of fiscal 2022?
Tilray explained its Q2 results were solid as it has successfully built a cannabis and lifestyle brand. Further, the company continues to benefit from its scale, global distribution capabilities as well as operational excellence allowing it to increase sales and maintain profitability despite macro-economic headwinds.
The company enjoys strong brand recognition and is focused on ensuring an adept pricing environment. It also believes marketing adjustments will allow Tilray to aggressively capture market share going forward.
Germany is the largest medical cannabis market in Europe where Tilray has a 20% share. It’s well-positioned to capture the adult use cannabis market as well in Europe, if and when cannabis is legalized in this region.
Tilray, similar to most other producers aggressively acquired companies in the past. Its acquisition of the U.S.-based SweetWater Brewing and Manitoba Harvest provides it a foothold in the world’s largest cannabis market. These two companies have invested in product innovation to enhance awareness and distribution.
Further, SweetWater and Manitoba Harvest are profitable and provide Tilray an opportunity to launch THC-based products in the U.S. when pot is legalized at the federal level.
What next for TLRY stock?
During its earnings call, Tilray disclosed its new parent name called Tilray Brands. It reflects the company’s evolutions from a Canadian licensed producer to a global consumer packaged goods company with a leading portfolio of cannabis and lifestyle CPG brands.
Tilray aims to post annual sales of $4 billion by 2024 which is quite optimistic given analysts expect revenue to grow to $980 million in fiscal 2022 and $1.2 billion in fiscal 2023. In order for Tilray to reach its lofty goals, it will have to acquire other licensed producers resulting in shareholder dilution.
Germany is expected to legalize marijuana at the federal level, making it the largest country to do so in terms of population. Tilray already has an EU GMP-certified facility operating in Germany which can increase production capacity to accommodate demand from the adult use segment.
Bottom Line: Is Tilray Stock a Buy Post Fiscal Q2 Results?
While Tilray’s stock gained pace, following its Q2 results, investors should understand that it was estimated to report revenue of $171 million in the quarter. Despite the cost synergies enjoyed by Tilray, the adult-use market in Canada is crowded as well as highly fragmented and should consolidate in the upcoming years which will allow companies to improve the bottom line.
Tilray stock is valued at a market cap of $3.2 billion which suggests its forward price to sales multiple is over 3x. Unlike most cannabis producers in the U.S. Tilray continues to post an adjusted loss making it a high-risk bet at current multiples.
By Abraham Finberg, Simon Menkes, Rachel Wright 1 Comment
When Montana became a territory in 1864, its legislators chose as its motto the Spanish words “Oro Y Plata” which means “Gold and Silver.” Gold and silver discoveries brought people to the new territory in droves, and everyone expected to get rich.
Near the North entrance of Yellowstone in Park County, Montana
Nowadays, the newest gold rush to open up in Montana is the state’s adult use cannabis market, which began operation this past January 1, 2022. The Cannabis Control Division (CCD) of the Montana Department of Revenue expects total adult sales in 2022 to top $130M. With a population just over a million residents, that works out to about $120 per person, which would be more than California’s benchmark $111 per person. Montana’s cannabis industry is expecting exciting and enriching times ahead!
We advise our Montana clients to be cautious, however, and to keep an eye on the “cannabis tax ball.” Why? You can be killing it in sales but still get dragged under by a heavy tax burden, especially in adult use sales, or worse, not keep up with your tax obligations and run afoul of the Department of Revenue or Big Brother IRS.
Montana’s initial foray into cannabis began in 2004, when the state passed Initiative I-148, allowing patient cultivation and use of marijuana but left the legality of commercial sales ambiguous.1 The government reactionaries jumped in and used legislative action to tighten and limit that law.2 Then, in 2016, Montana voters legalized the medicinal sale of cannabis with I-182,3 and in 2021, adult use was legalized with I-190, allowing existing dispensaries to sell recreationally beginning January 1, 2022 in counties which voted yes on the initiative.4,5
From a federal taxation standpoint, of course, Montana’s cannabis operators are only allowed to deduct Cost of Goods Sold under Internal Revenue Code (IRC) 280E, and in general, the state of Montana’s tax code conforms with the Internal Revenue Code.6,7 However, the Montana Department of Revenue departed from the IRC in 2017 and allowed normal business deductions for licensed (legal) cannabis corporations.8 The Montana Department of Revenue also interpreted the law for pass-through entities and individuals with licensed cannabis operations to allow deductions of ordinary and necessary business expenses.9 This is what makes it possible to do business in cannabis in the state of Montana.
But what about Montana’s cannabis taxes? How big are they, and how do they compare with other states?
Montana charges a regular sales tax as well as either a 4% cannabis tax on medical sales or a 20% cannabis tax on adult use (recreational) sales.10 Some good news: wholesale sales are exempt from this tax.11 More good news: Both the retail tax and the regular sales tax are exempt from the taxable price i.e., the state does not charge “tax on tax.”12,13 However, be warned: be careful of offering discounts as it is assessed on the regular retail price rather than the actual discounted price.
Pray, a town near Livingston, Montana
Montana assesses the Cannabis Tax on the retail price and excludes discounts or even product given away.14 As of this writing, Park, Yellowstone and Missoula (medical only for Missoula) Counties have an additional 3% Local Option Tax based on the same state retail price definition with an exclusion for discounts or gifted products.15
So, with all these different taxes, is Montana actually a low tax state for cannabis? To begin with, the state is at least “in the ball game” by allowing the deduction of regular operating expenses on state income taxes. In addition, Montana has a relatively low tax which only applies at the retail level for medical sales and a relatively high tax on adult use. Adult use tends to be the vast majority of sales for dispensaries, so this does not bode well for retail cannabis operators.16
But before you throw in the towel and start looking to move to California (or Oklahoma, another cannabis-friendly state), a look at the whole Montana cannabis picture provides a rosier outlook. Montana income tax is relatively low, and since cultivators and manufacturers do not have to pay any cannabis excise taxes (especially as compared to California, with its cultivation tax and a functional 27% excise tax charged to retailers – a tax theoretically assessed to the consumer but in reality charged by a distributor to a retailer) or cultivation taxes on weight that enters the commercial market. All-in-all, Montana is actually a low-tax state for cannabis operators!
Disclaimer: This article has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice.
Author’s experience with clients from California Oregon, Washington State and Nevada; states with both adult use and medical sales as of this writing. Montana does not have a commercial adult use program as of this writing.
Cannabis remains one of the fastest growing industries with no signs of slowing down. According to a recent article in Forbes Magazine, the legal cannabis market is poised to grow 20-30% per year to the tune of $50 billion by 2026.[1]With great opportunity comes numerous risks. Claims and lawsuits against cannabis businesses are increasing in frequency and magnitude. As an insurance broker who specializes in the cannabis industry and works with a wide variety of cannabis, hemp and CBD businesses in every state where cannabis laws are established, our recent analysis has unveiled the top five insurances your cannabis business needs in 2022.
General Liability
General liability is the most essential coverage your business needs to protect you from a variety of claims including personal injury, bodily harm, property damage and other situations that may arise including slander, libel, copyright infringement and more.
Since general liability is not always required to obtain a cannabis license, many businesses are tempted to forgo the expense. This is one of the biggest mistakes you can make as one single lawsuit has the potential to cripple your business. With a comprehensive, cannabis-specific general liability insurance policy in place, your insurance company, not you, will pay medical expenses and property damage claims from third parties, in addition to hefty legal fees and fines.
Property & Casualty Insurance
P&C insurance is an important part of your security and protection plan.
If you own a dispensary, grow operation, warehouse, testing facility or any other type of cannabis business with inventory, you need to protect your assets from potential loss or damage. Property & casualty (P&C) insurance safeguards your business against common and costly perils such as a fire, lightning, explosion/implosion, and even less common – but still possible – risks like riots, strikes and terrorism.
P&C insurance not only pays for damages to your business property resulting from a covered loss but it also covers the contents within your place of business, including office furniture, computers, inventory and other assets essential to your business operations. There are policies that will also provide the funds required to keep your business afloat until the damages from the loss are repaired. Any cannabis business with a physical property and location(s) should have a comprehensive property and casualty P&C policy in place.
Product Liability/Product Recall
Recently, we’ve seen a dramatic influx of product liability claims, and in particular, product recalls. Lawsuits have ranged from a single plaintiff seeking damages for personal injuries to class action lawsuits where a defective product is tied to an entire group of claimants.
Preventing contamination can save a business from extremely costly recalls. Having the right insurance can prevent a recall from becoming costly in the first place.
As a cannabis business owner, you can be sued for any damage resulting from products that cause harm to others, this includes false advertising, mislabeled or defective products. No matter where you are in the supply chain, your business could be held liable. The process of defending litigation or reaching a settlement agreement can completely drain a company’s resources. You’ll have to deal with regulatory compliance, producing and distributing product warnings, recalling products, claim investigation, product testing and additional risk assessment.
Product liability insurance is often overlooked, especially by small to mid-size businesses. However, your cannabis business needs this type of coverage if you sell any goods or products that end up in the hands of the public. In fact, your business may be contractually obligated to have product liability insurance. One such lawsuit is enough to fold a business due to costly legal fees and fines, as well reputation damage beyond repair.
Product liability insurance is designed to protect your cannabis company from claims that can happen anywhere along the supply chain, including product contamination, mislabeled products, false advertising or defective products. With proper coverage, your insurance company will pay for damages and legal expenses if you are sued, up to your policy limits. Your product liability policy will also cover any medical expenses for those who are harmed by your business. Making sure your insurance policy includes product liability insurance should be a top priority in 2022.
Cyber Defense/Data Breach Insurance
Cyber fraud and data breaches are two of the greatest risks facing cannabis companies in 2022. With so much cash pouring into the space, cannabis businesses of all sizes are bulls-eye targets for cybercriminals. Even the smallest of cannabis businesses are at risk of data breaches because they are part of a larger interconnected network of seed to sale vendors. These types of crimes can have detrimental effects on your business in numerous ways. In the case of a data breach resulting in the disclosure of a third party’s private information, the third party could sue your business. The SEC could also find your company negligent in cyber fraud cases and impose significant fines.
By forgoing cyber defense & data breach insurance, your business will be solely responsible for expensive legal bills, significant revenue losses and hefty fines and penalties from regulators. Cyber defense & data breach insurance is a must-have coverage in 2022, and beyond, to protect your business from cybercrimes.
Directors & Officers Insurance
If you are looking to secure venture capital or funding from investors in 2022, and/or attract and retain qualified leadership, you need directors & officers (D&O) Insurance. D&O protects corporate directors and officers, as well as their spouses and estates, from being personally liable in the event your company is sued by investors, employees, vendors, competitors, customers, or other parties, for actual or alleged wrongful acts in managing the company. In the event of litigation, your D&O insurance will cover legal fees, fines, settlements and other expensive costs.
D&O is often the most overlooked coverage because many cannabis businesses are independently run, and no one foresees the potential for operational failures and mismanagement. However, businesses with any sort of vision for growth should make D&O a top priority. It not only protects your current executives and board members but is critical in attracting leading talent in the space, as well as drawing in new investors to scale up your business. In fact, we’re seeing more prospective investors and board members requiring D&O insurance prior to engaging with a company to ensure they are fully protected in the event of litigation.
When it comes to mitigating risk in this business, the stakes are sky high. Cannabis companies that have not incorporated risk management into their business/operational plans will need to in 2022. It all boils down to the THREE P’s: being “Proactive, Prepared and Protected.”
Federal legalization of adult use cannabis is still out there as a potential, but ultimately, there are no guarantees that come with such a move. Further, even with legalization, the state-to-state variations in regulations for everything from cultivation standards to packaging and transportation will make marketing country-wide a difficult proposition for most cannabis businesses. The businesses that will grow and thrive will be ones that embrace trends and opportunities that are on the horizon for 2022 and beyond.
Economic resilience even in challenging times
Large scale companies are dealing with the issue of state-to-state differences in regulations by building branded verticals in each state: from growing to packaging, as well as building stores, in order to avoid the issue altogether. It’s an expensive proposition that is out of reach for the smaller entrepreneur, but it creates an almost regulation-proof setup for these organizations.
One interesting trend that would never have been as clear if the pandemic had not occurred is that cannabis is being generally viewed as a recession-proof industry. The pandemic has put the same types of constraints on consumer activity as a recession does and the results are clear: people are still interested, perhaps more so, in cannabis-related products and will choose to continue using them, even in times of restraint.
This economic resilience has also encouraged the growth of investment opportunities in the cannabis industry. ETFs (exchange-traded funds) that cover the industry are growing in number, as more cannabis related businesses grow in size and go public.
While banking through traditional institutions will continue to be difficult for cannabis businesses, pending federal legalization, there is a lot of money being funneled into the industry, through venture capital and angel investments. There is no question that it is still a growth industry now, and into the next decade.
Technological advancements
Now more than ever, cannabis has gone mainstream. The medical uses for it in terms of stress reduction, mental health and so on, have built up markets that might have otherwise looked to more traditional pharmaceutical options. There is an interesting portion of this new mainstream market that is interested in the therapeutic effects of cannabis but not in the traditional consumption method of smoking. In addition to wanting to avoid inhaling smoke, this same section of the market is acutely aware of what they put into their bodies and what impacts their choices have on the environment at large. The result? Organic, ethically sourced and developed cannabis products are becoming more and more the norm.
Some of the many infused products on the market today.
Products that include oils, tinctures, topicals and edibles are all within the scope of what the discerning cannabis consumer is looking for. The only downfall for many of these types of products, versus a smokable, is the effectiveness of the THC. For example, edibles can take upwards of an hour to produce any psychoactive effects. That limits the function of these types of products, so the next generation of these requires technological innovation to find a solution to that limitation, such as nano emulsions.
For example, we have innovated by leveraging technology that reduces THC particles to a nano size and creates a barrier around the particle so that they can be absorbed into the bloodstream, bypassing the neutralizing effects of the digestive system. This effectively creates edibles that produce a high that is comparable to what can be obtained by smoking a joint, therefore solving the issue that edibles have had in the past.
Multinational growth opportunities
With the inability to export from the US to other growing markets, there is the opportunity for cannabis companies to expand as multinationals. Growing and marketing cannabis products elsewhere and exporting to other countries that will accept the imports, is a big opportunity. To use an existing example, Uganda has established a government sponsored program to produce and export medical cannabis to Germany. This is an important change that has other countries in particular watching to see how this evolves. Certainly, from the point of view of local economic development, it’s too good an option to ignore.
We are partnering with a chain of medical clinics in Tanzania—“Your Local Clinic”—to provide local medical practitioners with the ability to prescribe medical cannabis, once legalization is realized. This is the first step in a longer term plan that will allow us to build up legal exports to Europe.
Export to the European Union (EU) is expected to grow dramatically by 2025, leaving plenty of expansion opportunities for US companies to take their growing practices, as well as available technology for irrigation, to the next level, via Africa and potentially even Latin America.
This is the second piece in a two-part conversation with the founders of Veda Scientific, CEO Leo Welder and CSO Aldwin M. Anterola, PhD. To read part one, click here.
In part one, we chatted about their backgrounds, their approach to cannabis testing, their role in the greater industry and how they came into the cannabis industry.
In part two, we’re going down a few cannabis chemistry rabbit holes and realizing that what we don’t know is a lot more than what we do know. Join us as we delve into the world of volatile compounds, winemaking, the tastes and smells of cannabis, chicken adobo and much more.
Aaron: Alright so you mentioned the GCxGC/MS and your more advanced terpene analysis. How do you envision that instrument and that data helping your customers and/or the industry?
Leo: Some of the things that we envision will help is a better understanding of what compounds and what ratios will lead to desirable outcomes, things like better effects, aroma and flavor. By better understanding these things it’ll help the industry create better products.
I have a personal connection to this. My wife has some insomnia and she’s always had to take various forms of OTC pharmaceuticals to help with sleep. She tried using a 1:1 vape pen and it was a miracle worker for her for several months. The local dispensary had a sale on it, and she bought some extra. Unfortunately, even though she used it the same way as before, she got very serious anxiety, which obviously didn’t help her sleep. Every time she used the vapes from this same batch, she felt the same extreme anxiety. Sadly, she now had a lot of this product that she couldn’t use because it kept her awake rather than helping her sleep, so she went back to trying other OTC solutions. That’s a problem for both consumers and the industry at large. If people find something that works and provides a desired effect, they need to be able to rely on that consistency every time they purchase the product, leading to similar outcomes and not exaggerating the problem. That’s why I think consistency is so important. We’re taking two steps forward and one back when we have inconsistent products. How do we really grow and expand the availability of cannabis if we lose trust from our consumer base? What a lab can do and what we can do is provide data to cultivators and manufacturers to create that consistency and ultimately allow the market to expand into other demographics that are currently wary and less tolerant of that variance.
Vials of cannabis samples being prepped for collaborative research with the CESC
On a similar note, we have been having a lot of discussions with the CESC [Clinical Endocannabinoid System Consortium] down in San Diego. They are an advanced cannabis research group that we have been working with for over a year. We’ve started looking at the idea of varietals. To be more specific, because I’m not a wine connoisseur, varietals are the pinot noirs, the cabernets and sauvignon blancs of the industry. In the cannabis industry, consumers have indica and sativa, though we still argue over what that concept really means, if anything. But for the sake of argument, let’s say we have this dichotomy to use as a foundational decision tool for consumers- call it the red and white wine of the cannabis industry. How inaccessible would wine be if we just had red or white? Imagine if you went to a dinner party, really liked the wine you were drinking, and the host could only tell you that it was a red wine. You can’t go to a wine store and expect to find something similar to that wine if the only information you have is “red.” At a minimum, you need a category. So that’s what varietals are, the categories. The data that we can produce could help people in the industry who identify and establish the varietals based on their expertise as connoisseurs and product experts to find what those differences are chemically. Similarly, we’re also looking at appellation designations in California. So, we want to help provide tools for farmers to identify unique characteristics in their flower that would give them ability to claim and prove appellation designation.
Aldwin: The GCxGC/MS allows us to find more things besides the typical terpene profile with 20 or 40 terpenes. It allows us to go beyond those terpenes. The issue sometimes is that with a typical one-dimensional GC method, sure you could probably separate and find more terpenes, but the one dimension is not enough to separate everything that coelutes. And it’s not just terpenes. Some terpenes coelute with one another and that’s why people can see this inconsistency. Especially if you use a detector like an FID, we can see the compound limonene on the chromatogram, but there’s another terpene in there that is unknown that coelutes with limonene. So, this instrument is helping us get past the coeluting issue and solve it so that we know what peaks represent what terpenes.
The other bonus with our GCxGC/MS is that the coeluting compounds that were masked behind other terpenes are now revealed. There is a second dimension in the chromatogram where we can now detect some compounds in cannabis that would be hiding behind these large peaks if it were just a one-dimensional GC. Besides terpenes, we’ve found esters, alkanes, fatty acids, ketones, alcohols and aldehydes, as well as thiols. The terpenes are so plentiful in cannabis that these other compounds present at lower levels cannot be seen with just one-dimensional GC. There are just so many compounds in cannabis that the ones in small amounts are often masked. My analogy to highlight the importance of these minor compounds is like a dish; I am from the Philippines and I like chicken adobo. My father does it differently from my mom and someone else will do it differently in a different region. The base of the sauce is vinegar and soy sauce, but some people will do it differently and maybe add some bay leaf, garlic, pepper, or a touch of another spice. It’s still chicken adobo, but it tastes differently. Just like in cannabis, where yes, you have the same amount of THC in two different plants, but it’s still giving you a different experience. Some people say it’s because of terpenes, which is true in a lot of cases, but there are a lot of other volatile compounds that would explain better why certain dishes taste different.
2-D chromatogram showing four peaks separated by the GCxGC. With a traditional 1-D chromatogram, these peaks would coelute and not separate.
Leo: There’s been some recent developments too here that show it’s very significant. It’s like the difference between bland and spicy. And it could be the thiol. We identified a thiol in cannabis at the same time as other scientists reported an article that just came out on this subject.
Aldwin: Thiols are sulfur containing compounds that produce very powerful odors, giving cannabis the skunky smell. Skunks also produce thiols. It is very potent; you only need a little bit. It turns out that yes, that paper described thiols and we also saw them in our GCxGC/MS. These are the kinds of things that the GCxGC can show you. Those very tiny amounts of compounds that can have a very powerful impact. That’s one that we know for sure is important because it’s not just us that’s finding out that GCxGC can detect this.
Not everything is about THC or the high amount of the compounds in the flower. This paper and our concurrent findings indicated that the skunkier smelling strains contained very small amounts of thiols and you can recognize their presence quite readily. It’s not a terpene, but it’s producing a distinct flavor and a powerful smell.
Aaron: Okay, so why is this useful? Why is it so important?
Leo: I would say two things in particular that we know of that are issues currently, both related to scents. We mentioned this earlier. We do know that farmers with breeding programs are trying to target particularly popular or attractive scent profiles, whether it be a gas or fruity aroma. Right now, when they get the flower tested and review the terpene profile, it isn’t enough information to help them identify what makes them chemically distinct. We hear time and again that farmers will say their terpene profile is not helpful in identifying specific scents and characteristics. They are looking for a fingerprint. They want to be able to identify a group of plants that have a similar smell and they want a fingerprint of that plant to test for. Otherwise, you have to sniff every plant and smell the ones that are most characteristic of what they’re targeting. For larger operations, walking through and smelling thousands of plants isn’t feasible.
Once we can identify that fingerprint, and we know which compounds in which ratios are creating the targeted aroma, we can run tests to help them find the best plants for breeding purposes. It’s about reproducibility and scalability.
Another value is helping people who are trying to categorize oils and strains into particular odor categories, similar to the varietals concept we’ve been talking about. Currently, we know that when manufacturers send multiple samples of oils with the same or similar scent to be tested, the results are coming back with significantly different terpene profiles. There is not enough data for them to chemically categorize products. It’s not that their categories are wrong, it’s just that the data is not available to help them find those boundaries.
Those are two issues that we know from conversations with customers that this particular piece of equipment can address.
Aldwin: Let’s start from what we find, meaning if you are using the GCxGC/MS, we are finding more terpenes that nobody else would be looking at. We have data that shows, for example, that certain standards are accounting for 60% or so of total terpene content. So a large percent is accounted for, but there is still quite a bit missing. For some strains there are terpenes that are not in common reference standards. Being able to know that and identify the reason why we have different terpenes in here unaccounted for is big. There are other things there beyond the standard terpenes.
Dr. Anterola working with the GCxGC/MS
What excites me sometimes is that I see some terpenes that are known to have some properties, either medical or antibacterial, etc. If you find that terpene looking beyond the list, you’ll find terpenes that are found in things like hardwood or perfumes, things that we don’t necessarily associate with the common cannabis terpenes. If you’re just looking for the limited number of terpenes, you are missing some things that you might discover or some things that might help explain results.
Leo: It’s also absolutely necessary for the medical side of things. Because of the federal limitations, cannabis hasn’t been researched nearly enough. We’re missing a lot of data on all of the active compounds in cannabis. We are finally starting to move into an era where that will soon be addressed. In order for certain medical studies to be successful, we need to have data showing what compounds are in what plants.
Drs. John Abrams and Jean Talleyrand of the CESC launched the Dosing Project in 2016. They have been studying the impact of cannabis flower for indications such as pain mitigation and sleep improvement, and now more recently mood, and appetite modulation. They categorize the THC & CBD content as well as flower aroma into 3 cannabinoid and 3 odor profiles. They are able to acquire quite a bit of data about how odor correlates with the outcomes. Because they were initially limited in terms of underlying natural product content data, they contacted us when they found out we acquired this equipment in 2020, and have stated that they are certain the data we will now be producing will take their research to the next level of understanding.
Aldwin: For quality control you are looking at specific things that would reflect properties in cannabis. There should be a 1:1 correspondence between properties observed and what we are measuring. The current assumption is that the terpenes we are looking at will tell us everything about how people would like it, with regards to flavor and smell preference. But we know for a fact that the limited terpenes most labs are measuring do not encapsulate everything. So, it is important for QC purposes to know for this particular strain or product, which everyone liked, what is it in there that makes everybody like it? If you just look at the typical terpene profile, you’ll find something close, but not exact. The GCxGC/MS shows us that maybe there’s something else that gives it a preferred property or a particular smell that we can explain and track. In one batch of flower, the consumer experiences it a certain way, and for another batch people experience it another way. We’d like to be able to understand what those differences are batch to batch so we can replicate the experience and figure out what’s in it that people like. That’s what I mean by consistency and quality control; the more you can measure, the more you can see.
Aldwin: Speaking to authenticity as well, in a breeding example, some growers will have this strain that they grew, or at least this is what they claim it to be, but what are the components that make those strains unique? The more analytes you can detect, the more you can authenticate the plant. Is this really OG Kush? Is this the same OG Kush that I’ve had before? Using the GCxGC/MS and comparing analytes, we can find authenticity in strains by finding all of the metabolites and analytes and comparing two strains. Of course, there is also adulteration- Some people will claim they have one strain that smells like blueberries, but we find a compound in it that comes from outside of cannabis, such as added terpenes. Proving that your cannabis is actually pure cannabis or proving that something has added terpenes is possible because we can see things in there that don’t come from cannabis. The GCxGC/MS can be used as a tool for proving authenticity or proving adulteration as well. If you want to trademark a particular strain, we can help with claiming intellectual property. For example, if you want to trademark, register or patent a new product, it will be good to have more data. More data allows for better description of your product and the ability to prove that it is yours.
Leo: One thing that I think is a very interesting use case is proving the appellations. It is our understanding that California rolled out a procedure for growers to claim an appellation, but with strict rules around it. Within those rules, they need to prove uniqueness of growing products in specific regions. The GCxGC/MS can help in proving uniqueness by growing two different strains in two different regions, mapping out the differences and seeing what makes a region’s cannabis unique. It’s valuable for growers in California, Oregon, Colorado to be able to prove how unique their products are. To prove the differences between cannabis grown in Northern California versus plants grown along the Central Coast. And of course, for people across the world to be able to really tell a story and prove what makes their cannabis different and special. To be able to authenticate and understand, we need to have more comprehensive data about properties in those strains. It could be terpenes, it could be esters or thiols. That’s what we’re excited about.
Aaron: From your perspective, what are some of the biggest challenges and opportunities ahead for the cannabis industry?
Aldwin: Getting ready for federal legalization is both a challenge and opportunity. A challenge because when it is federally legal, there will be more regulations and more regulators. It is also a challenge because there will be more businesses, more competition, that might get into the industry. It is opening up to other players, much bigger players. Big tobacco, mega labs and massive diagnostic testing companies might participate, which will be a challenge for us.
But it’s also an opportunity for us to serve more customers, to be more established at the federal level, to move to interstate commerce. The opportunity is to be ready here and now while other people are not here yet.
Another challenge and opportunity is education. Educating consumers and non-consumers. We have to realize and accept that cannabis is not for everybody, but everyone is a stakeholder, because they are our neighbors, parents or part of the medical establishment. It would be a disservice not to educate the non-consumers.
The medical establishment, they don’t have to be consumers but they need to know about cannabis. They don’t know as much as they should about cannabis and they need to know more, like how it could affect their patients for better or for worse, so they know how to help their patients better. There could be drug interactions that could affect the potency of other drugs. They need to know these things. Educating them about cannabis is a challenge. It’s also an opportunity for us to now come in and say that cannabis is here to stay and be consumed by more and more people, so we better know how to deal with it from a medical perspective.“This bucking bronco of a growth style will throw a lot of people off. We need to figure out what we can grab on to and ride out these waves.”
Law enforcement needs to be educated too. What THC level in the blood indicates impairment? It is still a challenge because we’re not there yet, we don’t have that answer quite yet. And it’s an opportunity to help educate and to find more answers for these stakeholders, so we can have regulations that make sense.
Leo: To Aldwin’s point, the biggest opportunity comes along with federal legalization as well as expanding the customer base beyond the traditional market. Since adult use was legalized in CA, we haven’t yet seen the significant expansion of the consumer population. We’re primarily seeing a legal serving of the market that already existed before legalization.
The reality is cannabis can be used in different ways than what we think of. We know it has medical benefits and we know it is enjoyed recreationally by people looking for high THC content and the highest high. But there is also this middle ground, much like the difference between drinking moonshine and having a glass of wine at dinner. The wine at dinner industry is much bigger than the mason jar moonshine industry. That’s really where the opportunity is. What’s the appeal to the broader market? That will be a big challenge, but it’s inevitable. It comes from everything we’ve talked about today, consistency in products, educating people about cannabis, normalizing it to a certain degree, varietals and appellations.
As an entrepreneur, I’m looking at this from a business perspective. Everyone talks about the hockey stick growth chart, but it is a very wavy hockey stick. I expect to see very significant growth in the industry for a while, but it will have a lot of peaks and valleys. It’ll essentially be whiplash. We are seeing this in California right now, with sky high prices in flower last year down to bottom of the barrel prices this year. We have to all figure out how to hang on. This bucking bronco of a growth style will throw a lot of people off. We need to figure out what we can grab on to and ride out these waves. The good ones will be fun and the bad ones will be painful and we know they are coming again and again and again. That’s the biggest challenge. People say ‘expect tomorrow to look a lot like today,’ but you really can’t expect tomorrow to look anything like today in the cannabis industry. Tomorrow will be totally different from today. We need to figure out, within all this chaos, what can we hang on to and keep riding the upward trajectory without getting thrown off the bronco.
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During the height of the pandemic, with nowhere to go and a lot of anxiety, dispensaries provided at-home entertainment for cannabis consumers. That’s why sales grew by 46%. Cycles of consumption naturally went up. In this case, I think of streaming TV, too – Netflix added 36 million subscribers in 2020 and Roku saw 58.7 billion hours streamed in 2020.
Note the specific pandemic trend lines. Any state that suddenly saw more than 50% sales one year and a sudden slump the next year at the same is bound to see a market crash. It also made it easy to ignore a lot of structural problems – which states like California are now trying to correct.
