WORKWEEK

1. “As we look ahead towards 2023, there are some key themes we’re tracking at Jane. Consolidation will be a natural evolution of the market, and will impact stakeholders across the entire value chain. Tighter market conditions will require advertisers to stay disciplined with where they commit their resources – and it will put a premium on digital platforms that can prove the best attribution and return on investment. The line between online and offline will continue to blur, with dispensaries having the capabilities to connect their ecommerce and in-store experiences like no other industry in the world.”  – Socrates Rosenfeld, CEO and Co-Founder of Jane Technologies

TGP’s Perspective: Hard agree from me. On all fronts. Consolidation WILL be a natural evolution of the market: whether we want it or not. Tighter market conditions are inevitable, and operators must carefully choose where to invest. I will be interested to see how the line between online and offline blurring plays out in 2023. 

2. “Since 2023 is not an election year, there will be a lot of discussion of banking reform and federal legalization, but there likely won’t be much movement until late 2023 or into 2024. More states will also move toward legalization.”-Jason Vegotsky, CEO of Petalfast

TGP’s Perspective: I couldn’t have said it better myself. 2023 won’t see much traction with federal reform, especially since it’s not an election year, but there will be plenty of discussions. States continue to act outside the federal government and under their voters’ wishes, and I don’t expect that to stop next year. 

3. “As cannabis businesses look to gain market share in this economic climate, streamlining operations, driving efficiencies and cost effectively entering new markets will no longer be a ‘nice to have’ – but a ‘must have.’ Already we are seeing consumers demand more bang for their buck. As competition increases, low-cost production and manufacturing capabilities will undoubtedly be forced to take center stage. In 2023, strategic manufacturing and distribution partnerships also have potential to enable more businesses to quickly enter new markets and get their brands and products in front of consumers. In addition, we believe that the industrial commercialization of cannabis manufacturing will not only dramatically improve the health and stability of supply chains, but also decrease the overall cost of packaged goods for consumers.”– Brandon Mills, 4Front Ventures Executive Vice President

TGP’s Perspective: I would never have pegged entering new markets as a “must-have,” but Brandon is much closer to this sort of thing than I am. I will be interested to see just how much pressure is put on these operators to enter new markets in 2023 or if 2023 will be the start of heavy pressure in the years to follow. Consolidation for most businesses is inevitable, so the need to enter new markets as a means to survive isn’t surprising. 

4. “2023 industry momentum will be somewhat determined in the next month or so. If any form of SAFE is passed in the lame duck period that is currently running until the new Congress is sworn in on 01/03, we could see a lot more capital inflow, M&A uptick with the available cash, and valuations re-rating. If we don’t, we’ll likely see more weathering the storm and minimizing expenditure to keep the lights on while we wait for slower Federal reform. ‘Distressed’ opportunities would flow in either way given how tough 2022 has been, but will be more plentiful with slower reform. It’s a fool’s errand to predict Federal progress, given how disconnected action is from rational decision making / how progress is purely a political pawn – this similarly means it’s difficult to predict how the next Congress will agree/disagree on cannabis reform.”– Matt Hawkins, Founder and Managing Partner of Entourage Effect Capital 

TGP’s Perspective: I agree entirely that any 2023 industry momentum will be determined over the next month or so – should any momentum happen. It’s looking like a “now or never” situation for federal cannabis banking legislation in 2023, especially as SAFE Banking hopes were dashed just this week. And it very much is a fool’s errand to predict federal progress – we’ve been trying to (unsuccessfully) do it for years! 

5. “For many that have been in the industry, 2023 is bound to be a bittersweet year. California’s fractured marketplace continues to face an endless stream of unaddressed challenges, including sky-high taxes, a booming illicit marketplace, counterfeiters, licensing delays and an oversaturated supply chain. Unfortunately, the results of these hurdles will likely result in a mass extinction event for many legacy operators who helped develop both the movement and industry.” – Jigar Patel, Co-Founder and Co-Chief Executive Officer of NorCal Cannabis Co

TGP’s Perspective: Hearing that legacy operators might exit the cannabis industry in a “mass extinction” (as Jigar said) is frustrating: but entirely unsurprising. I always think about the letter from operators to the California government begging for help. It’s so raw, and cannabis businesses are desperate for relief. Unfortunately, the pandemic and economic circumstances have made things 10x tougher for these businesses, and 2023 might see a major downsize in California cannabis.