LAS VEGAS – As the regulated marijuana industry wraps up the 2022 business year, companies are fine-turning their strategies for whatever new challenges 2023 might bring.
Cannabis business leaders attending MJBizCon described a variety of expected headwinds in the year to come – and a range of plans to adapt and succeed.
“The market has a lot of marijuana in it right now,” said Beth Kotarba, chief operating officer of vertically integrated Colorado company Native Roots Cannabis Co.
Kotarba sees challenges in “getting the right balance of supply and demand,” especially given the long lifecycle of cannabis plants.
“We’ve been addressing it by implementing a lot of planning, sales and operational planning, where we work really (closely) with retail on forecasting the demand, so that then it gives us time to adjust our supply chain to that demand.”
George Allen, board chair of California-based marijuana grower and retailer Lowell Farms, cited heavy taxation, “market fragmentation and a rampant illicit market” as key difficulties going into 2023.
“Most operators are relying on a strategy built on economies of scale and vertical integration with captive retail,” Allen told MJBizDaily.
“We see our path elsewhere, in true product innovation and branding. … We are planning for a world where cannabis sales will occur across platforms on a federally deregulated basis.
“In that environment, differentiation within branding is critical.”
Finances are a key concern
Capital challenges and banking reform are also top of mind for U.S. marijuana operators in the year to come.
Ali Jamalian, CEO of California manufacturing and extraction business Sunset Connect, said that one bank recently shut down his business accounts and another “would not open an account for me nor admit that they actually have cannabis banking.”
“Access to capital is only reserved for (multistate operators), it seems.”
“The passing of the SAFE Banking Act would be an instrumental win that significantly impacts cannabis businesses of all sizes,” said Mike Weinberger, chief franchise officer of Arizona-based marijuana cultivator and retail franchisor Item 9 Labs Corp.
“To help push it forward in the new year, we are increasing our advocacy and lobbying efforts to include our local shop owners across the country.”
Others are concerned about so-called THC inflation and how a heavy focus on THC content affects the marijuana market.
“We’ve seen how lab shopping has frequently led the worst-actor cannabis brands and labs to perform better, while high-efficacy brands and science-first labs suffer,” said Jeff Journey, CEO of California marijuana testing company SC Labs.
“In the year ahead, we’re focused on combating this issue head-on and ensuring that, as an industry, labs be held accountable for the results that they deliver.”
Going into 2023, marijuana-product safety is top of mind for Tyler Williams, chief technical officer with industry standards certifier Cannabis Safety & Quality.
“No one is making smaller operators get certified for safety, and most head cultivators come from the legacy market and are stuck in old ways, thinking, ‘I’ve been doing things a certain way for a while now and haven’t harmed anyone, why pursue certification now?'” Williams explained.
“(Multistate operators), on the other hand, are smart enough to see the benefits and know that this is the direction the industry is headed. The challenge is getting the small operators in the same headspace, looking to the future with federal legalization around the corner.”
Emerging markets = new opportunities
On a positive note, developing adult-use marijuana markets should also bring new opportunities for small cannabis businesses to find their niche in 2023.
Kevon Carter, co-founder and CEO of Plant Base in New Jersey, is working to open both a store and a consumption lounge upon licensing.
Carter said he’s building a team of people with experience in more mature adult-use markets such as Colorado and California “because they can actually tell us what roadblocks are going to approach – because I feel like it repeats in every market that opens, coming from west to east.”
New state markets also offer new opportunities for ancillary cannabis businesses, such as Missouri-based information technology consulting firm IT-This Consulting.
“I’ll be scaling up, trying to automate some aspects of the business so that we can get new customers and new dispensaries up and running within a week,” IT-This founder Nathan Kaminsky said.
“We’ll also compete on price – a lot of the other IT companies in our area hear ‘cannabis’ and think they can charge anything.”
Companies are branching out
Some ancillary cannabis industry firms such as point-of-sale software company Cova Software in Colorado are taking their businesses in new directions in 2023.
“The biggest challenge we see in supporting the retail piece of the supply chain is the challenges retailers have in mature markets where there’s a saturation of dispensaries,” Cova CEO Gary Cohen said.
“The way that we’re going to deal with that is, we’re going beyond supplying the point of sale, and all the technology around it, to putting more training and coaching into successful business strategies to our customer base.”
Consulting with retailers to improve their businesses strategy is “a win-win,” Cohen added.
“If they go broke, it hurts us, and we don’t want them to go out of business.”
Cannabis software company Dutchie is also moving in new directions, co-founder and CEO Ross Lipson said.
Global economic conditions have changed, average order sizes have shrunk and some cannabis retailers have gone out of business, Lipson said.
Oregon-based Dutchie has launched a point-of-sale system, an insurance business and a payment system to address what it sees as the needs of marijuana retailers.
“We need to focus on what matters most – and for us, that’s the customer, which is the retailer,” he said.
“So 2023 is all about focusing on solving the merchants’ needs.”
Solomon Israel, Kate Lavin, Chris Roberts and Bart Schaneman contributed to this report.