Outlook for the cannabis industry in 2022

In December 2020, I wrote an article on the Cannabiz Media blog that looked ahead to the cannabis industry in 2021. Twelve months have passed and we have seen progress on many of the predicted trends that dominated the news and conversation throughout 2021. including federal decriminalization, expanded legalization, acquisitions and consolidation, and more. At the same time, 2021 brought more to the cannabis industry – the “hurry up and wait” environment that has become the norm for the industry.

As the final days of 2021 go by, let’s take a look at some of the trends and expectations people who work in and with the legal cannabis industry expect in 2022.

Convergence of illegal markets, taxation and restrictive regulations

What if growing problems related to illegal markets, excessive taxes, and restrictive regulations reach a breaking point – the point where legal cannabis companies can no longer afford to keep their doors open? The year 2021 is drawing to a close and we are nearing the answer to that question in states like California and Oregon.

In California, cannabis industry leaders warned Governor Gavin Newsome on December 17, 2021 that the state’s legal cannabis industry will soon collapse unless tax cuts and legal retail stores expand immediately. Industry leaders say these changes are needed to help license holders not only survive but also compete against the black market.

In a state where excessive taxes cause cannabis prices to be 50% (or more) above black market prices, it is not surprising that an estimated 66% -75% of cannabis sales are in illegal stores. Changes are definitely needed and hopefully some of those changes will happen in 2022.

In Oregon, illegal operators not only undercut prices, they steal water, exploit immigrant workers, and intimidate residents and legal cannabis companies with armed shooters. The illegal cannabis industry in Oregon is funded by drug cartels and foreign criminal gangs.

Some steps are being taken to help. Oregon lawmakers allocated $ 25 million in December 2021 to help law enforcement agencies crack down on illegal operators over the coming year. Also, the governor signed SB408 (it will come into effect January 1, 2022) which will help update existing regulations and resolve some issues with the state’s cannabis industry. However, much more needs to be done to make regulations less restrictive and to reduce the tax burden on legal operators so that they can effectively compete against the black market.

Power of Multi-State Operators (MSOs)

Mergers and acquisitions are showing no signs of slowing down in 2022, and large MSOs are gaining more power and dominance every day. As a result, it is becoming increasingly difficult for smaller operators across the supply chain to stay in business.

Expect MSOs to continue making strategic acquisitions over the course of the coming year to target states with cannabis programs that are not yet open for sale (especially states with high market potential such as New York and New Jersey) and states where consumption by adults Legalization is likely to come in the not too distant future (as in Pennsylvania).

Slow road to federal legalization

The question that everyone wants an answer to is when will cannabis be legalized at the federal level, but it is unlikely that we will get an answer to that question in 2022, based on events in late 2021 related to cannabis legislation, especially abolition from the SAFE Banking Act from the National Defense Authorization Act.

Moreover, the success of some political-led efforts in halting voter-approved cannabis legalization initiatives (medical and adult use) in states like South Dakota and Mississippi shows that the partisan divide is far from being closed. In fact, it could get worse before it gets better. As long as the gap is large enough and the government’s efforts not to convert votes into law are successful, there will be no federal legalization.

Growing investment in research and development

As the cannabis industry becomes more competitive, brand differentiation becomes more important. We have come to a point where cannabis companies need to prioritize innovation and differentiation. As a result, companies will have to invest more in research and development in 2022 than in previous years.

We are already seeing innovative technologies in the cannabis market, including novel ways to deliver cannabis to patients and consumers in consistent dosages with fast-acting effects. In addition, a growing interest in the uses and effects of lesser-known cannabinoids and terpenes opens up new opportunities for the development of innovative products. The bottom line is that companies need to stand out in the cannabis markets of the future, and research and development is a crucial piece of the puzzle.

More consumer and micro-business licenses

Micro business consumption and licensing became hot topics in 2021 and this will continue in 2022. While COVID-19 and widespread quarantines brought the consumption of licenses to a standstill in 2020 and 2021, the world will open up again in 2022. As a result, consumption licenses will gain in importance again.

California, Colorado, and Michigan already have active consumption licenses, while Alaska, Illinois, and Nevada have approved the consumption licenses. In addition, New York and New Jersey will each approve usage licenses when their cannabis programs start. You can bet that these won’t be the only states to allow some form of consumer licensing in the future.

The story of micro-business licensing is a little different. Three states offer micro-enterprise licenses – California, Massachusetts, and Michigan. Micro-business licenses have restrictions on canopy size, number of plants grown, type of extraction, and more. You also have restrictive requirements, such as: B. Michigan’s micro-business license, which requires its own cultivation, processing, packaging, and sale.

While micro-business licenses should allow smaller operators to participate in any state’s cannabis industry, restrictions and requirements have created some problems and have actually limited the ability of micro-business license holders to compete in the marketplace.

For example, in California, where there is no limit to the number of micro-business licenses, larger operators can obtain multiple micro-business licenses to expand their canopy. In Michigan, the restrictions on microbusiness made them unprofitable for operators, but there is some hope. In 2021, Michigan marijuana regulator proposed changes to micro-business licensing rules to address the problems of small operators.

As Ed Keating, Cannabiz Media’s co-founder and chief data officer, told MJBizDaily earlier this month, more states will introduce micro-business programs in the future, and the rules for those programs will evolve based on what works and doesn’t work in other states.

Key takeaways about the cannabis industry in 2022

In 2020 and 2021, COVID-19 made cannabis an essential business, but as the world recovers from the pandemic and life returns to a new normal, what’s next for the cannabis industry? Further growth is expected as we head into 2022, but there are still obstacles to overcome and questions to be answered. During the uncertainty, rest assured that Cannabiz Media will keep track of all license and intelligence data along the way.

Subscribe to the Cannabiz Media License Database to track all cannabis license data and connect with legal operators to grow your business in 2022 and beyond. And to track mergers, acquisitions, and more in the cannabis industry, subscribe to Cannabiz Intelligence ™. Schedule a demo to get started.