We talked last newsletter about the state-level success we witnessed in the U.S. election. So what’s to come? Well, most imminently, prohibitionists, miffed at the resounding success of cannabis at the ballot boxes, are challenging the reforms via litigation. While it’s unlikely any will succeed, it’s just one of many hurdles to come for legalized states. Recall that it took Maine FOUR years to finally start selling cannabis after it legalized. It’s unlikely more recent states will drag that long, but expect the consistently seen issues of supply, accessibility, economics, and equality (already sprouting in NJ) to recur across legalizing jurisdictions.
Looking ahead, the storm of legalization isn’t likely to slow, as a real “grass is greener” mentality (along with COVID-inflicted budget deficits) will help nearby states opt in. New York, Connecticut, Maryland, and New Mexico lead as clubhouse favorites, while Pennsylvania, Virginia and a few others have varying degrees of opportunity to progress legislation. In many ways, this wave represents pent-up demand, as COVID stalled signature initiatives in 2020 and almost derailed our prediction.
What's Next, International Edition:
The advance of cannabis isn’t just inspiring folks domestically. Looking beyond our borders, Mexico is charging ahead in (finally) progressing legalization. As a refresher: The Mexican Supreme Court judgement set up a deadline last year, which has been repeatedly extended due to disagreements on implementation and (of course) COVID-19. The government is now pushing to legalize by December 15th, and recently passed a bill through the Senate.
They’re not the only country that’s contemplating change. While Germany and New Zealand both rejected measures to legalize, Israel announced plans to create a regulated adult-use market similar to Canada’s. Overall, this makes a lot of sense - Israel is already a leader in cannabis research and has already partially decriminalized (usage indeed seemed decently... accepted when I went). Heck, they’ve been blazing since Biblical times.
It’s promising, and hopefully an impetus to our own government to think on this more deeply - we’re already behind on cannabis research, and have presented our own businesses one hurdle after another. Our ‘lead’ is real, but quite slight… and we’re letting others catch up.
Looking For The Little Guys:
In April, we talked about the potential for the craft cannabis movement out of California’s Emerald Triangle. Unfortunately, that movement has largely been challenged, primarily by the difficulties presented in standing up and managing small, independent brands.
Within California, distributors sit at a critical juncture in the supply chain, as growers are precluded by regulations from building direct regulations (as vineyards do). As it stands, there’s little incentive for distributors to push small craft brands through to retail - especially when they can support their own brands, or better financed, higher-volume players. Appellation and co-op models may alleviate the challenges, but it’ll be a long road with far more changes to come for craft to be a truly viable play.
Wholesale transfer pricing is an interest concept in this situation (as well as more broadly within the world of cannabis). Here, distributors are exhibiting their wholesale transfer pricing by essentially forcing small growers into selling bulk / white label. In other geographies, that isn’t the case - growers or retailers hold far more sway. What succeeds in one market may not apply to others...
SPACs have long been a topic of interest here at Cannablurbs, first as a curiosity, and then recognizing the substantial capital they were raising. With deals largely dead in 2019 and 2020, those pools of capital largely have sat on the sidelines (with 2020’s most notable deSPAC actually coming from a non-cannabis SPAC). The question loomed - would any of these blank canna-checks actually get cashed, or expire at their deadlines?
Well, at least one SPAC has found a deal. Subversive Capital kicked Thanksgiving off with a bang as they announced the acquisition of California vertically integrated operator Caliva and Left Coast Ventures (a somewhat funky holding company best known for its celebrity partnerships). On that note, the SPAC also enlisted Jay-Z as “Chief Visionary Officer” to push marketing, branding, and Vision (I guess).
A lot to unpack on this one, so will likely change the format and explore a deeper dive on the new entity next week. Stay tuned!