Cannabis Musings - May 14, 2024

Some thoughts on another internal divide within cannabis.

Friends, on Thursday, I’m going to be enjoying the first Dead & Company show at The Sphere in Las Vegas.  I’ve been a Deadhead since my teenage years, having lost track of how many shows I’ve seen in my lifetime.  My first show (and first concert!) was Jerry Garcia Band on Broadway during their run at the Lunt-Fontanne Theater in New York City, October 17, 1987 (I still have the Playbill and ticket stub).  I sport a Steal Your Face sticker on my car so I can find it in parking lots (paying homage to the design’s original purpose).  I’m not as steeped in encyclopedic knowledge as some of my friends, but I can hold my own.

It goes without saying that the Dead and cannabis kind of go together (see, e.g., Rob Hunt’s entertaining Deadhead Cannabis Show).  The Dead were my entry point into cannabis culture, though that path is little traveled these days (Phish was the final wave of neo-hippies), having been replaced by other cannabis-embracing countercultures.  However, that kind of plays against the messaging of legalized cannabis that it should no longer be considered a “counterculture.”

Therein lies a tension that the industry doesn’t really want to talk about – it wants to be accepted within the US as any other adult recreational and/or medicinal product, but it wants to remain true to itself and its roots.  We’ve talked about this dialectic before, but not in the context of “selling out.”  Cultivated recently published a nice piece about the mainstreaming of 4/20.  Is it selling out for a cannabis brand to partner with a major CPG company?  Does America even care at this point?  (I’d argue that irony died when, in 1995, Mercedes-Benz used Janis Joplin’s song about consumerism, Mercedes Benz, in an ad for its cars.)

You see the pushback mainly on social media, but also in conversation, particularly at operator-focused conferences like Hall of Flowers.  I think that it was born primarily from the split that developed when states like California, Oregon, and Washington, traditionally bastions of unlicensed cannabis grows, legalized adult use and implemented cultivation regulations and taxes.  Many traditional growers got pushed further underground, while those that made the transition got burned by taxes, the high cost of compliance, plummeting prices (after an initial spike), and continued competition from (and lack of enforcement against) those very same traditional growers (see, also, what’s playing out in New York City).  The industry overpromised and underdelivered.  As a result, there’s a real resentment of the continued failure of legalized cannabis.

It’s not like the big MSOs (so-called “corporate weed,” as they’re derisively referred to by some smaller operators) aren’t facing the same problems.  Nearly all of them continue to lose piles of money and take massive write downs, even though they’re better capitalized.  They’re subject to the same taxes, the same competition from the unlicensed market (as well as licensed products making their way into unlicensed dispensaries), the same overly-burdensome regulations, at a larger scale.

There’s a lot of blame to go around.  First and foremost in my mind was the belief that a highly-fragmented, state-legal, federally-illegal system was sustainable and even, in the eyes of some, preferable.  Second was the speculative frenzy of the 2017-2019 period, when too much money was thrown at an industry that didn’t understand it and wasn’t equipped to handle it.  Third was the overly-naïve expectation by industry champions that everything was sunshine and lollipops and would work out swimmingly, that demand was unlimited, and that politics wasn’t a thing.  There’s a zillion other reasons this experiment isn’t working, to be sure.

Blaming each other, however, is pointless.  There is enough of a market for cannabis to appeal to everyone both within the “culture” (however that gets defined) and without.  Other industries seem to get along just fine appealing to both the mass market and the niche consumer.  You can have a Top 40 pop music station in the same market as a low-powered college radio that only plays bands even Pitchfork hasn’t heard of. 

In this time of continued financial distress within the industry, dogged by declining sales and persistent lack of capital, the industry cannot afford a further split over what constitutes, and who is true to, “cannabis culture.”  It must find a balance where it’s inviting to both the cannabis “subculture” and, well, everyone else.  We can’t have a full-blown, national CPG industry that only appeals aesthetically to a small subset of consumers, and that narrow focus will never convince Congress to accept the necessity of legalization.  We can stay true to cannabis’s roots, and the plant, while also expanding its reach. 

Wait a minute, watch what you're doing with your time/All the endless ruins of the past must stay behind.

Be seeing you!

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© 2024 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.  The foregoing represents my own views and not those of Jardín.