Now that the new year is here, cannabis industry executives can expect to face a crosscurrent of trends in 2022.
Some will be positive for the industry; others, negative. Some will be new; others, a continuation from 2021.
To name just a handful:
- Additional states will legalize marijuana in some form.
- Calls will grow for greater participation among minorities in the cannabis industry.
- Climate change fallout will continue to wreak havoc for marijuana companies.
Below are MJBizDaily‘s top 10 trends to watch for in 2022:
1. M&A will march on.
Smaller M&A deals will likely continue at a rapid pace and even accelerate across the United States as capital-flush multistate operators build out their footprints in high-growth marijuana markets.
In Florida, for example, MSOs made a flurry of acquisitions in 2021 totaling more than $500 million. The goal: Make inroads into Trulieve Cannabis’ domination of a medical marijuana market where annual sales top $1 billion.
Pennsylvania also was a hotbed for MSO dealmaking.
In mature markets such as Colorado, the trend of vertically integrated companies snatching up smaller, one-off companies will persist.
Columbia Care’s acquisition of Denver-based Medicine Man – completed on Nov. 1 – highlights the accelerating consolidation of the Colorado cannabis market.
2. Brands will grow across all sectors, including cultivation, retail and infused products.
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As more brands learn how to work with partners in other states and also set up their own operations, expect to see this trend boom.
3. More California municipalities will opt in to cannabis.
Additional towns and cities in California will embrace the licensed marijuana industry, but licensing likely will slow to a crawl in 2022 because of the expiration of provisional licenses altogether.
That will drive up the value of every licensed business with respect to M&A deals.
4. Cannabis companies will increasingly call for lower state taxes.
Alaska and California are two prime examples of markets where taxes are an issue:
- A flat $800 cultivation tax has placed financial strains on Alaska growers.
- California cannabis companies are warning that taxes are leading to the market’s collapse in that state.
“Without meaningful change, many, if not most licensed cannabis companies, will face a desperate choice: pay exorbitant taxes into a system designed for failure or pay employees so they can feed their families,” California cannabis industry leaders warned in a December letter to Gov. Gavin Newsom and legislative leaders.
5. Market share loss will lead to M&A action up north.
Many large Canadian producers will continue to bleed market share to smaller, more-disciplined competitors.
In an attempt to reverse this trend, those losing market share will aggressively dip into the M&A pool.
The closure of Tilray and Aphria’s merger was among the highlights in last year’s Canadian deal-making.
Other major M&A transactions in 2021 included Canopy Growth Corp.’s 435 million Canadian dollar ($344 million) acquisition of Supreme Cannabis and Hexo Corp.’s deal to buy Redecan for almost CA$1 billion.
6. Incorrect growth and profitability assumptions will persist in Canada.
Some CEOs of large Canadian publicly traded companies will make inaccurate assumptions about the expected growth and profitability of their businesses.
Importantly, they will continue to be wrong about the pace of international legal cannabis market growth and development.
Expect that to cause some bad decision-making both internally and when looking at the import-export market.
7. The pandemic will further solidify the cannabis industry’s reputation as ‘recession-proof.’
As more coronavirus variants come into play and the U.S. and global markets continue to suffer from the volatility of the pandemic, expect marijuana sales at the retail level to remain relatively robust, as they have throughout the crisis.
Although the ongoing pandemic will present challenges – expected and unexpected – for cannabis companies on the operational side, including inflation and supply-chain issues, consumers will continue to visit retailers as the market expands further.
8. Climate change unpredictability will continue.
Cannabis growers must remain flexible and adaptable, as climate change means normal weather patterns can no longer be trusted.
All of the above will likely factor into the story of 2022 for marijuana cultivators.
9. Momentum builds for social equity.
As states roll out new cannabis markets, it’s increasingly common to see the licensing process require a social equity element aimed at giving minorities and those harmed by the war on drugs an opportunity to participate in the marijuana industry.
So far, that’s not worked as well as advocates had hoped.
States such as Illinois remain bogged down in lawsuits over social equity provisions.
But that won’t stop the push to make the industry more equitable and fairer for people of color and others.
Calls for that are only getting louder.
10. More states will legalize marijuana, but the federal government probably won’t.
The momentum for state-by-state marijuana legalization likely means more progress on that front.
Look for possible shifts in the following states, as well as a dark horse or two.
- Rhode Island
- South Carolina
- North Carolina
Federal U.S. cannabis legalization would be a shocker.
What’s more likely to happen: Senate Majority Leader Chuck Schumer’s comprehensive marijuana reform bill will stall in the Senate.
Cannabis banking reform could then be considered as a stand-alone measure in the upper chamber, but no vote will likely be taken before the 2022 fall elections.
Bart Schaneman can be reached at email@example.com.
Other MJBizDaily reporters contributed to this story.