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Cannabis Musings - September 11, 2023
My "hourglass" prediction for the cannabis marketplace - countering the counterpoint.
Friends – one of the luxuries of trying to pretend to be a cannabis public intellectual with a newsletter is that you get to speculate about the future of the industry and it doesn’t really matter whether your prediction turns out to be right or wrong. It’s kind of like being a macroeconomist. Or a political pundit.
It warmed the cockles of my heart to see Bengal Capital’s The Bengal Bite respond to our July 25, 2023 discussion considering the future structure of the national cannabis marketplace, which, in an Inception-like layering, originally ran as an op-ed in Jeremy Berke’s Cultivated. Both newsletters are absolutely worth your time and your subscription.
The Bengal piece, written by friend of Cannabis Musings and fellow ex-lawyer, Jerry Derevyanny, takes issue with my prediction that, in the long run, the national industry will be hourglass-shaped, with a handful of large operators with the vast majority of volume, lots of small local/hyperlocal operators, and not much in the middle. Sort of like the beer industry.
I don’t disagree with Bengal’s counterargument, and I strongly encourage you to read it and consider it for yourself. My only slight point of contention is that I think it downplays the risk that alcohol and alcohol distribution companies will try to shape the industry like their own. The possibility that Congress would impose an alcohol-like three-tier system (in short, requiring that interstate sales be made through a federally-licensed distributor) onto cannabis as part of legalization is something I’ve been yelling about for years, most recently in March, a lobbying battle that is only just beginning. I mean, it’s not like the cannabis industry has figured out how to profitably distribute its own products, and alcohol distribution companies have a low cost of capital, plenty of infrastructure, and a century of know-how (although see today’s MJBiz Daily for a counterpoint).
It's vital that the industry engage in these kinds of discussions and debates in order to develop a sustainable, national marketplace for all participants, while retaining its core culture and values. At the same time, we can’t forget the pesky political, business, and policy realities that will serve to patshke those plans.
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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.