MJBizCon 2022 Unpacked

As PLG returns from MJBizCon 2022, we reflect on some of the key thoughts and sentiments coming from the industry. 

From depressed prices, long runways to generating revenue, to minority and social equity inclusion fits and starts, and the real impact of 280e, the industry overall feels a bit beat up. 

To be sure, there is less of a sense of optimism than in years’ past.  More of a feeling that 280e, lack of safe banking, the swift decline in wholesale prices and long runways to profitability make “success” harder to achieve than many had hoped or expected.  And, more and more the industry is feeling that those who risked their freedom to establish the industry along with those who have clawed and scraped by for the last 10 years of adult use may be unable to survive long enough to really benefit from the progress that has been made.  And that means, new industry participants and those looking to acquire legacy assets, will be the ones to reap the big rewards.  Specifically, with 280e crafted to make it impossible for marijuana enterprises to be profitable, and the growing tax liabilities existing operators are facing, make it more likely that these early operators will be forced to sell their businesses in order to satisfy the escalating tax bills. This, of course, presents numerous opportunities for new investors or entrepreneurs looking to get into the industry.  However, one cannot feel sympathetic to the people and companies that have paved the way thus far.

While the industry is firmly against delta-8 THC and its derived products, it was concerning to see so many packaging and labeling companies on the expo floor designed specifically for delta- 8 and other synthetic cannabinoid products.  And, not just any packaging, but packaging clearly designed to appeal to minors bearing images such as Cookie Monster, Bart Simpson, and a plethora of known brand knockoffs, including Sour Patch Kids, Skittles and the like.  It is deeply concerning to see these companies plying their wares alongside highly regulated, licensed marijuana operators and ancillary service providers. 

Indeed, states are experiencing the tension between regulated marijuana operators and Delta 8-focused companies.  Just this week, Utah regulators began the push to further regulate delta-8 THC and other synthetic cannabinoids after researchers, patient advocates and product manufacturers raised safety concerns. Currently, Utah allows for “THC analogs” to be incorporated into a variety of products including edibles, vape cartridges and other products sold in state-licensed medical marijuana pharmacies. Analogs are defined as “a substance that is structurally or pharmacologically similar to, or is represented as being similar to, delta-9-THC.” This expansive definition has made it legal for medical marijuana pharmacies to sell products that contain delta-8 THC as well as other synthetic derivatives including delta-6 and delta-10 THC, both of which have had little testing on their safety. 

Other takeaways, operators need more money than they think to get started.  Let’s face it, when dealing with state and local licensing authorities, constantly evolving rules and regulations and licensing fits and starts, the pathway to opening for business is much longer than many expect.  Indeed, may operators face the prospect of paying almost a year’s rent before actually generating revenue.  On top of that, realistic revenue expectations must be established.  Sure, when a new market gets underway, $3000 pounds may be commonplace, but as virtually all established markets have shown, prices will fall and in many cases fall hard.  Operators need to be conservative with their initial estimates and factor in price stabilization. 

But all is not lost, it is precisely these types of market conditions that present opportunities for existing operators and those looking to break into the industry.  And, it reaffirms the need for operators to establish good, compliant business practices, to set realistic budgets and revenue projections, and forces companies to invest in brands and other company assets that will drive value.