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Last week I wrote an article for the Cannabiz Media blog which summarized Cannabis industry 2022, and now it’s time to look ahead to 2023. We can all agree that 2022 has been a tough year for the cannabis industry, and a possible recession, lower cannabis prices, oversupply and other problems will continue in the months to come. However, it is a resilient industry that is not going away anytime soon.
That said, let’s take a look at what we’re likely to see happen in the cannabis industry in 2023, so everyone working in and with the industry can prepare and weather the storm.
1. The continued expectation of a move on banking and legalization
Any article on the future of the cannabis industry would be incomplete without a discussion of banking and federal legalization. In 2022, there was more hope than ever that some form of SAFE banking law would be passed. Last week, Senate Majority Leader Chuck Schumer made a “last ditch push” to include cannabis banking reform in omnibus credit legislation during the lame duck session.
Unfortunately, many Republicans in Congress are still adamantly against banking reform of the cannabis industry. It seems unlikely that Schumer will succeed this year, but the subject will still be on the table in 2023. With Bipartisan lawmakers urging President Biden to support federal legalization as part of his administration’s timetable review, 2023 could well be the year we see quantifiable action taken on both banking issues and legalization.
2. All roads lead to mergers and acquisitions
The United States faces a possible recession in 2023, and the economy will continue to struggle. At the same time, cannabis prices have fallen throughout 2022, with oversupply and illicit market issues set to continue into 2023. As a result, you can expect to see mergers and acquisitions continue and even occur more frequently over the next 12 months.
While we may not see as many large-scale mergers or acquisitions in 2023, there will be plenty of opportunities for small and medium-sized cannabis operations to be acquired by larger players. Again, the economic, supply and price issues will not end in the short term. As a result, many licensees will want to exit the market, creating opportunities for acquisitions that can give single-state (SSO) operators the ability to expand their footprint and multi-state (MSO) operators the ability to expand. to enter new markets.
Cannabiz Media has been tracking and researching the details on over 500 M&A transactions in cannabis, hemp and ancillary products via Cannabiz Intelligence™ (available in the Cannabiz Media Licensing Database), and this number will certainly increase in 2023.
3. The Delta-8 threat
Brightfield Group has published a report on the Delta-8 threatens the cannabis industry recently, and data shows that Delta-8 products are already stealing market share in the CBD market, with 35% of CBD consumers reporting having purchased some sort of hemp-derived psychoactive product in the past six months.
Although the report determined that it is too early to quantify the increased accessibility of Delta-8 products on legal cannabis product sales, 23% of cannabis consumers in states with legal cannabis who responded to the Brightfield Group survey said they were likely to purchase Delta-8 products in the future. Therefore, it can be assumed that the increase in sales of Delta-8 products will steal sales from legal cannabis sales. Suffice it to say, Delta-8 is something everyone in the cannabis industry should watch closely.
4. Changing consumer preferences
Flower still dominated sales of legal cannabis products in 2022, and this trend is expected to continue in 2023. However, market share in the nine cannabis product categories tracked by Headset is changing. Flower has lost a small market share since 2019 to other product categories, including pre-rolls, drinks, edibles, vape pens and capsules.
According to Headset’s November 2022 Cannabis Beverage Report, the Cannabis Product Category Market Share Breakdown in the United States is as follows:
- Flower: 40.8%
- Vapor pens: 23.5%
- Pre-roll: 12.2%
- Edible: 11.8%
- Concentrates: 8.0%
- Beverage: 1.1%
- Tincture and Sublingual: 1.0%
- capsules: 0.9%
- Topical: 0.7%
As younger consumers enter the legal cannabis market and adult-use sales open up in more states, market share will continue to shift. For example, as Headset researchers explain in category trend reports published throughout 2022, younger consumers are spending more on vape pens than on flowers. Men are more likely to buy flowers than women, and women are much more likely to buy topicals than men. Changing consumer preferences will drive future sales of cannabis products, and brands need to pay close attention to these trends in 2023 and beyond.
5. Growth of micro-enterprises and consumer licensing
The expected increase in micro-business and consumer licensing in the US was one of the trends included in the Cannabiz Media study 2022 Cannabis Industry Trend Forecastand it’s also included in the 2023 list – albeit with an expanded focus.
At Episode #44 From Cannabiz Media’s Cannacurio podcast, Jason Kikel, Director of Regulatory Research for Cannabiz Media, shared some thoughts on the future of microenterprise licensing in the United States:
“I think in six months to a year, maybe beyond, New York is going to be a state [to watch]. The microenterprise license is already in the books. In the short term, their cannabis commission works with early adult growers, but beyond those early adult starter licenses, there’s a pretty decent opportunity for many small mom-and-pop operators in New York.
“Beyond that, I think there is a decent chance for micro business licensing to act as a counterbalance against some of the larger MSO-dominated states, but through the lens of attracting smaller operators. The national conversation and politics around social equity will really drive that.
“[Regulators] could have the opportunity to allow a large number or an unlimited number of micro-enterprises to enter markets already largely dominated by large players. I think they might find a way to make this work in some of these states, and they might surprise us.
And in Episode #46 from the Cannacurio podcast, Jason shared what he expects to happen in the future for consumer licensing:
Nevada will likely become the home country [consumption license] leader. They will quickly eclipse some of the other markets and some of the other states. Las Vegas will likely be at the heart of this. There will be interactive shows, other activities to do, not just a room with a dirty bong sitting on a table. It will be much, much more. They will live a “Vegas experience” in some of these lounges.
“Beyond Nevada, Illinois is laying the foundation for a great regulatory environment. Chicago could become a leader nationally. California, for all its challenges and problems over the past five years, also enables local governments to emerge and innovate in lounges.So, while Los Angeles has yet to allow lounges and consumption spaces, its smaller neighbor, West Hollywood, has already emerged with individual restaurants, on-site consumption with fairly advanced restaurants and menus with edible and infused items on the menu.
“Looking at the East Coast, New York will likely emulate Las Vegas and pick up pretty quickly. And there could also be other surprises. Denver could always pick up and become a key player in that area as well.
“I think consumers are going to start speaking up and saying, ‘Hey, we’d love to see this in our city or our state.’ And patient advocates are always very valuable in the conversation.It’s also about social equity.
“So I think in 10 years, at least 25 to 30 states will probably have some form of presence. Some states might say, ‘You know what? We don’t want to deal with that, but counties, cities, if you want to take care of it, it’s up to you. And allowing cities to make that decision will probably be the path the majority of states will go. And there will always be states that probably won’t allow trade shows.
While it will take time for micro-enterprise and consumer licensing to reach the points Jason predicts for the future, we will certainly see these types of licensing become more common and popular in 2023.
Key takeaways about cannabis industry trends in 2023
As we head into 2023, the cannabis industry is about to experience its version of the dotcom bubble burst of 2000. After years of rapid growth, the industry is facing a reset. A global pandemic was not the pinprick that would burst the bubble, but the struggling economy might be. The good news is that the industry will survive. First we have to navigate to 2023.
Cannabiz Media will track all licensing and business intelligence data in the Cannabiz Media licensing database. Schedule a demo to see how you can use it to grow your business in 2023 and beyond.