Outlook for the cannabis industry in 2023

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Last week I wrote an article for the Cannabiz Media blog summarizing the cannabis industry in 2022 and now it’s time to look ahead to 2023. We can all agree that 2022 was a challenging year for the cannabis industry and a potential recession. falling cannabis prices, oversupply, and other issues will continue for months to come. However, this is a resilient industry that is not going away anytime soon.

Let’s take a look at what we’re likely to see in the cannabis industry in 2023 so that everyone working in and with the industry can prepare for and weather the storm.

1. The continued wait for movement in banking and legalization

Any article on the future of the cannabis industry would be incomplete without a discussion of banking and state legalization. In 2022, hope was greater than ever that some form of the SAFE Banking Act would be passed. Last week, Senate Majority Leader Chuck Schumer made a “last-ditch effort” to get cannabis banking reform included in the omnibus funds legislation during the lame duck session.

Unfortunately, many Republicans in Congress are still strongly opposed to cannabis industry banking reform. It seems unlikely that Schumer will be successful this year, but the issue will still be on the table in 2023. As bipartisan lawmakers are urging President Biden to back federal legalization as part of his administration’s planning review, 2023 may be the year that we think will see quantifiable steps taken on both banking problems and legalization.

2. All roads lead to M&A

The United States is facing a potential recession in 2023 and the economy will continue to struggle. At the same time, cannabis prices have been falling throughout 2022, with oversupply and illicit market problems expected to persist in 2023. As a result, you can expect mergers and acquisitions to continue, and even 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 opportunity for small- and medium-sized cannabis operations to be acquired by larger players. Again, the problems with the economy, supply and pricing will not end in the short term. As a result, many license holders will want to exit the market, creating opportunities for acquisitions that give single-state operators (SSOs) the ability to expand their footprint and multi-state operators (MSOs) the ability to enter new markets.

Cannabiz Media has tracked and researched the details of over 500 M&A transactions in the cannabis, hemp and accessories space through Cannabiz Intelligence™ (available in the Cannabiz Media License Database) and this number is sure to increase in 2023.

3. The Delta 8 threat

Brightfield Group recently released a report on the Delta 8 threat to the cannabis industry, and the data shows that Delta 8 products are already stealing market share from the CBD market, with 35% of users reporting CBD as a type of psychoactive having purchased a hemp product in the past six months.

While the report noted that it is too early to quantify the increased accessibility of Delta 8 products when selling legal cannabis products, 23% of cannabis users in legal cannabis states who responded to the Brightfield Group survey said they likely to buy Delta-8. 8 products into the future. Therefore, increasing sales of Delta 8 products can be expected to steal revenue from legal cannabis sales. Suffice it to say that Delta-8 is something everyone in the cannabis industry should watch closely.

4. Evolving consumer preferences

Flower still dominated legal cannabis product sales in 2022, and this trend is expected to continue in 2023. However, market shares are changing across the nine categories of cannabis products that Headset tracks. Flower has lost a small portion of its market share to other product categories since 2019, including pre-rolls, beverages, edibles, vape pens, and capsules.

According to Headset’s November 2022 Cannabis Beverages Report, the breakdown of market shares for the US cannabis product category is as follows:

  • flower: 40.8%
  • vapor pens: 23.5%
  • leader: 12.2%
  • Edible: 11.8%
  • concentrates: 8.0%
  • drink: 1.1%
  • Tincture and Sublingual: 1.0%
  • capsules: 0.9%
  • Currently: 0.7%

As younger consumers enter the legal cannabis market and more states open up sales of adult-use products, market shares will continue to shift. For example, as Headset researchers explain in category trend reports released in 2022, younger consumers are spending more on Vapor Pens than Flower. Men are more likely to buy flowers than women, and women are much more likely to buy topical products than men. Evolving consumer preferences will determine the future sale of cannabis products, and brands need to pay close attention to these trends in 2023 and beyond.

5. Growth in micro-enterprises and consumption licenses

The expected increase in micro-businesses and consumption licenses in the United States was one of the trends included in Cannabiz Media’s 2022 cannabis industry trend forecasts, and is also included in the 2023 list – albeit with an expanded focus.

In Episode #44 of Cannabiz Media’s Cannacurio Podcast, Jason Kikel, Director of Regulatory Research at Cannabiz Media, provided some insights into the future of micro business licensing in the United States:

“I think looking six months to a year, maybe beyond that, New York is going to be a state [to watch]. The microbusiness license is already on the books. In the short term, their cannabis commission works through the early-start adult-use growers, but beyond those early adult-use licenses, there’s a pretty decent opportunity for many smaller mom-and-pop operators in New York. “Additionally, I think there’s a good opportunity for micro-enterprise licensing to act as a counterbalance to some of the larger MSO-dominated states, but through the lens of bringing in smaller operators guide that.” “[Regulators] could have the ability to allow either 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 on episode #46 of the Cannacurio podcast, Jason shared what he expects for consumption licenses in the future:

Nevada will likely emerge as National [consumption license] Leader. They will quickly eclipse some of the other markets and some of the other states. Las Vegas will likely take center stage. There will be interactive shows and other activities, not just a room with a dirty bong on a table. It will be much, much more. You will have a “Vegas experience” in some of these lounges.

“Beyond Nevada, Illinois is laying the foundation for a great regulatory environment. Chicago could become a national leader. California, for all of its challenges and struggles over the past five years, is also allowing local governments to lounge and innovate. So while Los Angeles isn’t yet allowing lounges and consumption rooms, their smaller neighbor, West Hollywood, has already popped up with individual dining, on-site dining with restaurants, and fairly advanced menus of edible and infused food. “Looking on the East Coast, New York is likely to emulate Las Vegas and will increase quite quickly. And maybe there are a few other surprises. Denver could always catch up here and become a major player. “I think consumers are going to start speaking out and saying, ‘Hey, we’d like to see this in our city or in our state.’ And patient advocates still have a lot of value in the conversation. This is still a matter of social justice. “So I think 10 years from now, probably at least 25 to 30 states will be present in some form. Some states might say, “You know what? We don’t want to deal with that, but counties, cities, if you want to take that on, that’s for you.’ And leaving that decision up to cities is likely to be the route that the majority of states will take. And there will always be some states that probably won’t allow lounges.”

While it will take time for micro-enterprise and consumption licenses to reach the points Jason predicts for the future, we will definitely see these types of licenses becoming more common and popular in 2023.

Key takeaways on cannabis industry trends in 2023

Heading into 2023, the cannabis industry is about to experience its version of the 2000 dot-com bubble burst. After years of rapid growth, the industry is about to start over. A global pandemic wasn’t the pinprick that would burst the bubble, but the ailing economy could be. The good news is that the industry will survive. We just have to navigate our way through 2023 first.

Cannabiz Media will track all licensing and business intelligence data in the Cannabiz Media license database. Schedule a demo to see how you can use it to grow your business in 2023 and beyond.

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