Cannabis Musings - July 25, 2023

Today's Cultivated Op-Ed

Friends - if you’re savvy and already subscribe to Cultivated, written by my friend and cannabis industry reporter, Jeremy Berke, you’ve by now read my op-ed in today’s edition, so you can skip the below (you’re of course welcome to read it again).

If not, you should immediately subscribe to Cultivated here to receive his excellent, journalistic take on cannabis industry news, and then read the op-ed I wrote below (in Cultivated layout) speculating about the shape of the national cannabis market to come.

Be seeing you!

---

Last week, news hit that international tobacco company, Philip Morris, is acquiring Israel-based Syqe Medical, producer of a metered-dose inhaler used for pain reduction treatment using medical cannabis (such a blessing!). 

This represents yet another multinational company planting yet another a stake along the perimeter of US cannabis.

Previous examples include:

• Constellation Brand’s ill-fated investment into Canadian cannabis company, Canopy Growth.

• Altria’s 2018 investment into cannabis company, Cronos Group.

• Alcohol distributor Johnson Brothers’ circuitous investments into US cannabis distributor, Humble & Fume.

• The launch of cannabis-infused beverages in Canada by US-based Boston Beer Company.

• And Wine & Spirits Wholesalers of America, issuing a white paper and launching a lobbying blitz to shape the future of cannabis distribution in the US.

The US cannabis marketplace will become ‘hourglass shaped’

I’ve been predicting for years that, post-legalization, the US cannabis marketplace will eventually become hourglass-shaped, akin to the beer industry — a handful of producers owned by multinational alcohol, tobacco, and consumer packaged goods companies will make up the vast majority of national distribution and sales volume, offering highly-branded, relatively commoditized product (likely grown outside of the US) for the masses, while countless regional, local, and hyperlocal offer create craft, specialized cannabis products to connoisseurs. 

There’s a reasonable debate to be had about whether this is “good” for the cannabis industry, but I think it’s nonetheless inevitable — these companies have infrastructure, know-how, and, most importantly, access to cheap capital.

Of course, no one of this will really happen until the US legalizes cannabis — the terms “money laundering” and “aiding-and-abetting” still strike fear in the hearts of in-house lawyers, particularly at highly-regulated companies. 

It’s the reason why most of these companies haven’t yet directly invested in, or engaged with, US cannabis, and it’s also the reason why they’re methodically working along the perimeter.

I suspect this will accelerate as the industry continues to struggle, and maybe it picks up if the SAFE Banking Act ever passes (that’s a big if), because of its protections for ancillary businesses.

It’s all about building relationships within the industry, developing know-how, and getting ready for the day when the risk of federal illegality is removed, when all of these multinationals can have fun storming the castle.

---

Hauser Advisory provides advice and strategy on business lifecycle events and cannabis industry navigation, tapping into a deep, national network and twenty-five years of dealmaking and capital markets experience.

© 2023 Marc Hauser and Hauser Advisory.  None of the foregoing is legal, investment, or any other sort of advice, and it may not be relied upon in any manner, shape, or form.