#024 - EOY Cannabis Business News Round-up | December 28, 2023

Speaker 1: 0:02

Hey everybody, welcome to episode 24 of High Spirits. I'm Ben Larson and with me, as always, is my co-host in crime, anna Rae Grabstein. It's Thursday, december 28th 2023. Hope you all had a nice, happy holidays. Anna Rae, how was yours?

Speaker 2: 0:21

It was exciting and you know I survived. So I'm good, I'm happy to have arrived at the end of the holidays.

Speaker 1: 0:28

Survival. Yeah, I know I'm begging for my routine to be back, my team to be back, not to be like. Yeah, I don't know, I have a hard time with this. Between the Christmas and the New Year's and the Monday positioning of the two, it's a mental challenge for me as a CEO.

Speaker 2: 0:51

Absolutely, it's like. It's almost like you need to know who is not working and who is. If everyone could just post it on the internet or something so you could understand who's pushing stuff forward, and who's not?

Speaker 1: 1:04

Yeah, and don't make me ask, because I don't want to seem like an asshole.

Speaker 2: 1:09

Yeah, I took Christmas and the day after Christmas off. I worked yesterday and now I'm back to work for this Wednesday to Friday week and then we have New Year's, so I'm planning on taking New Year's Day off, but then I'll be back to work.

Speaker 1: 1:26

Yeah, Very good, yeah, yeah, any, any, any travel for you this week.

Speaker 2: 1:33

Not this week, but I did just buy tickets to go to LCD Sound System in San Francisco on Saturday night, which will be fun. I know it's going to be fun. My husband and I have been really enjoying live music and getting our dance on, so yeah, it's good it's back.

Speaker 1: 1:56

I mean it's I, my wife and I went to Lauryn Hill's 25th anniversary the Miseducation of Lauryn Hill, the 25th anniversary of that record. It's definitely seems like it's been about 25 years. It wasn't the best show, but it was a lot of fun to get out and when I was sitting in the crowd I was like realizing. I was like looking around and like man, it's been a long time since I've been around as many people and I think my last show before that was at Bill Graham in San Francisco January 2020, right before the pandemic hit, and so I would say so.

Speaker 2: 2:37

I loved that album, by the way, so that's really cool that you went to the show and Justin's this is a cannabis podcast. I will say that music, and live music in particular, is actually one of the ways that I first clued into a cannabis community early on, when I was super young, and a lot of the people that I knew in college that loved live music going to fish shows and grateful dead shows like those were the early people that started as kind of the cannabis folks in the early 2000s, and that's that's how I ended up on my first cannabis farm is sort of like by way of people that I met through live music. So it feels good now that I'm I'm a grown up and a parent, but my kid is old enough that now he can, he can be home with a babysitter or with someone else and I can get back out there and maybe I can even write these tickets off my taxes, because, you know, music and cannabis they go together right.

Speaker 1: 3:38

Yeah, that's amazing. And then I can confirm at the at the Lorne Hill show that there was or Lorne Hill and the Foogees, I think there was two Foogees, multiple. Yeah, there was certainly a cannabis community in the crowd. You know, we were in Oakland and as soon as the music started you saw puffs of clouds coming up. It was yeah, it was. It was a good time on a Tuesday night, which is very challenging for this almost 43 year old.

Speaker 2: 4:08

Well, so today we are doing an end of year business news roundup for all of you out there. And then what are we going to be talking about today, Ben?

Speaker 1: 4:21

Oh man, you know, as I started thinking about the year and the various news that that's out there, I just I kept going to the macro. It was, like you know, I'd start thinking about news around safer banking or rescheduling and I just think about how messed up our federal government is independent of cannabis. Like cannabis is here, hemp is here, but like just the dysfunction at our federal government level is out of control. I don't know if we're going to see it get better in 24. So we'll talk a little bit about that.

Speaker 1: 4:58

We got finances you know the ups and downs in the market, but generally remaining pretty flat and then we just have the movements at the local level, which I think has historically been what has excited us most in the cannabis industry. Looking at new states New York, ohio, others but yeah, I mean, that's kind of that's what it started boiling down to. Oh, and this little thing called hemp. I think there's been a lot of movement there and you know, being in beverage through Vertosa and seeing just a lot of kind of fluid movement of brands in between the hemp and the cannabis space. I'm excited to see what 2024 holds for that. So that's a little preview, but yeah, would you want to kick us off on one of the particular topics?

Speaker 2: 5:52

Sure, let's get started talking about dollars and cents. Finance, land Finance, yeah. So MSOS, the ETF that is really the bellwether of all the cannabis industry for the public companies ended the year basically flat. It's kind of been up 2%, down 2% for the past few days, but you know it's had a wild and volatile year. It really tanked mid-year and it hit its lowest point I think it might have even been under $4 at some point, but it was in the fours. And then it spiked crazy and went above $10 for a while due to federal policy change that was being teased by all of us. But ultimately it fizzled and it's ending the year kind of right back where we started, right around like the high sixes.

Speaker 2: 6:51

And all of this to say that. How do we compare MSOS's flat performance to the Nasdaq 100. Well, I looked yesterday and the Nasdaq 100 is up 54% for the same period. So doesn't look like cannabis public stocks have had a very good year. That's the truth. There have been some movements by some of the larger public companies to uplist to some better exchanges, so both Terrisoned first and then, most recently, cura Leaf moved from the Canadian stock exchange, the CSE, to the TSX, the Toronto Stock Exchange, and that was done in hopes of escaping the doldrums of the CSE, where institutional money does not play at all. It remains to be seen if that really does push the needle.

Speaker 1: 7:50

It's hard to imagine that it will not to be negative about it, but it's what institutional capital is looking at the cannabis industry right now and be like, oh yeah, that's a growth opportunity. Besides the fact that maybe all this correction that's happened over the last 12 months is putting the prices more into the realm of reasonable, I wouldn't say that the stocks are overpriced at the moment. So if there is an opportunity for them to see lift through some federal movement which we'll talk about in a little bit then maybe it would be a good buy. But I don't see institutions jumping in until there's a sure thing that we're going to get some help from the feds.

Speaker 2: 8:36

Yeah, and what I like about watching the public stocks, and I know that there are only so many public companies, and if you're a cannabis entrepreneur out there or a leader, it's likely that you maybe have a private company.

Speaker 2: 8:49

Why does this matter?

Speaker 2: 8:50

I think that one of the things that is really useful for me is that the public companies have to share all of their financial information, so we get to see how they're doing and we get to understand how, what their debt loads are like, how much liquidity they have and what their market valuation is like compared to their performance, and we don't get to see what all of our competitors look like in the private markets in the same way. And one thing that most of the public companies are struggling with is liquidity. There's only so much cash on the books of these companies, and most of them don't have enough cash to fully make it through the next year, so there is going to need to be continued financing activities in order to keep standing up these companies, and when the stock is so underperforming, it becomes a lot more challenging, and so we're seeing debt instead of equity, we're seeing really more expensive debt, but then a number of these companies do have good real estate assets, and so they have been able to secure some more reasonable debt recently.

Speaker 1: 9:58

And some of them have been offloading certain underperforming states. Have you been seeing them unloading real estate in some of these states to kind of free up cash flow, or is it really just to kind of cut off an arm that's not putting in the work?

Speaker 2: 10:20

I think that when they're exiting, they're exiting a state like we've seen people exit Arizona and California and Oregon, colorado. There's a number of more challenging markets that the public companies have exited. They're getting rid of the assets. So if there's real estate attached, that has been going to although I'm trying to think of which of those companies had real estate in those markets and it's not coming to me quick but on the overall side of the whole market, not just the public companies, what has proved to be true this year is that profitability and cash flow is king in cannabis and the question is who is making money these days?

Speaker 1: 11:07

Well, it's hard to make money when people aren't paying their bills, so your P&L could look pretty solid, but how's the balance sheet looking? And, to your point, with a lot of the private companies, we see the headlines and we see the traction and they look like they're performing well, and then big companies all of a sudden kind of evaporating overnight. We saw it certainly here in California. Started with Herbal, a major distribution company in California. I think they had raised something like over $100 million in funding Just to see that go to have not that many options when it comes to distribution. And then later in the year, grassdoor, southern California well, maybe they're all over California providing that kind of direct to consumer linkage for dispensaries and whatnot. This makes it very challenging, right, and that has a huge ripple effect. You're writing off debts in AR and when you're just trying to count your pennies and do all that, it makes it incredibly challenging, even if you're running at an EBIT of positive, to be cash flow positives incredibly hard in this industry.

Speaker 2: 12:31

Totally. I'd say that any leader that is watching fundamentals right now and overseeing their cannabis company should learn the difference between accrual and cash so that they can be running those P&Ls and cash and see what's actually happening, as opposed to what might be happening if everyone paid their bills.

Speaker 1: 12:54

Yeah, shout out to my VP of Finance, dustin, on our team. He's built me this 13-week cash flow model that he's updating every week and getting down to the granular questions like how many checks are you holding and are you going to go deposit them, just so he can update the model and inform myself and the board, like what does cash flow look like over the next several months, which is very different to how we used to run the company when we're taking on venture capital and whatnot.

Speaker 2: 13:29

Yeah, I love a 13-week cash flow. I think that it's really key for businesses to understand what's coming and to make realistic predictions, and that's what this year has been about as companies buckling down and understanding what is the absolute necessity and what is not, and focusing on what they can control. Yeah, let's move on to our next topic market dynamics.

Speaker 1: 13:58

Well, yeah, I mean speaking of right.

Speaker 1: 14:00

So one of the market dynamics that we've talked about over the last, certainly half of the year, has been the influence of hemp and even with some of these large companies, the MSOs, them starting to consider getting into hemp.

Speaker 1: 14:15

And that would be a big sea change, right, like these are companies that have benefited off of limited license markets and kind of really kind of protecting that, not throwing shade at any of them, just saying it's a strategy that they've employed. But hearing from some of the leaders of the biggest MSOs, like now considering getting into the more less regulated, unregulated hemp side of the business, is really telling. And we quoted Bo Whitney, whitney Economics earlier this year where hemp and cannabis are now depending who you ask, one might be greater than the other, but generally bringing in the same amount of, on the same scale of revenue in 2023. And so if this persists through 2024, we could very much see the hemp industry surpass the legal cannabis industry. So I think that's causing just a lot of complexity, especially at the organizational level, the trade organizations and even companies, just like companies like ours, where we're having to make a decision about like what is legal, what is ethical, like how do you serve the consumer and your customer base when everything is so fluid?

Speaker 2: 15:44

Yeah, when I do strategy workshops, a lot of the time we have conversations about how do we grow our total addressable market, where are new consumers, and is it about going deeper in our existing markets or is it about going wider? And hemp, if you are a regulated cannabis company, really presents the largest untouched if you're not in that space to go wide in product categories that you already understand. So it certainly presents opportunities, while also a lot of challenges and uncertainty and kind of strategic complexities. So I think that that will continue to be a big part of 2024, but it was a massive part of 2023. It was a huge change from the previous year, in 2022, where I think that it was still something that was happening a little bit more quietly. It wasn't that it wasn't.

Speaker 1: 16:42

It just wasn't as obvious to you as well and, as we mentioned a couple of weeks ago, like MJ, biz is a great barometer for just kind of the status of everything.

Speaker 1: 16:54

And you know, years past I don't remember hearing much of anything about the hemp industry at MJ Biz and this year it was about every other conversation where it was coming up and there were parties being hosted by hemp companies and it just accelerated very quickly, which has me looking to 2024 and then thinking it was like all right, this is going to be a big determining year to see kind of what direction is this trends.

Speaker 1: 17:25

But going back to what I was saying about the role of trade organizations in the space, you know one in particular and I am a member of Attach and on the Beverage Council there. But there was some activity in one of the states where I think it was Arkansas, where there was someone. So the state tried to ban intoxicating hemp cannabinoids from coming into the state, being sold in the state, and essentially there was an injunction that was filed and upheld based on the Dormant Commerce Clause, and all of a sudden hemp-drive cannabinoids were on sale again in Arkansas. Well, there was an appeal filed and Dwayne Morris and Attach was listed on that appeal, and it's just really interesting to see a trade organization that represents both cannabis and hemp very clearly drawing a line about where they think responsible hemp lies, and I think that opinion probably has shifted quite significantly for companies that might consider themselves hemp companies and or cannabis companies.

Speaker 2: 18:54

So this has been unfolding in real time and I think that it's it doesn't. I want to just say that I hate the word intoxicating. I think psychoactive to me feels a lot better. I don't think that cannabinoids are toxic in general, and so intoxicating.

Speaker 1: 19:12

What about inebriating? I've heard inebriating used as well.

Speaker 2: 19:15

Yeah, maybe, but I think it was a real surprise. Attach really went out on on its own in this way. When I when I read the the brief that they submitted to Sarah Huckabee Sanders, the governor of Arkansas, I was very surprised and I thought I wonder if, if, if, if, if, if, if, if, if, if this truly represents the constituents, the businesses that support Attach, because Attach is unique in that it the name it stands for, the American Trade Association for Cannabis and Hemp, and they're most of the trade associations at the federal level are either cannabis or hemp, but this is one has has, from the beginning, tried to represent both sides of the aisle and and I'm sure that there is some, some complicated dynamics going on with some of the companies who are part of Attach that that create hemp-derived Delta nine and Delta eight and and bring those products to the market. So we'll see how that continues to unfold.

Speaker 1: 20:18

Yeah, yeah, the one thing that really stood out to me in that particular brief was the new term that seemingly was developed, the hemp synthesized intoxicants.

Speaker 1: 20:30

And hemp synthesized can be kind of a misleading term, right, people have, like the word synthesized has is very loaded. There are synthetic drugs that emulate certain compounds but are indeed different and, and have generally been found to be, can, can be dangerous, and these particular, in this particular case, they are referring to those compounds that are converted from from CBD through a chemical synthesis, and chemical synthesis should not in itself be demonized, because there's many ingredients that we consume that are synthesized ingredients, because generally there are ways to, at scale and when regulated, can do so, you know, do so cleanly and and repeatedly. It also has your other favorite word in toxicants in there, so it's like really like, kind of like I'm not going to say reefer madness, I guess I just did, but I was going to say reefer madness. Yeah, it is. It's like hemp synthesized in toxicants. When you're talking about simply talking about tetra tetrahydro cannabinoids being converted from CBD, right, and it's a separate.

Speaker 2: 21:49

That's the thing is that I'm just going to say that reefer, reefer madness is not going to get us anywhere, and and that public safety is something that's really critically important and that if, if that is what we're asking for, then let's ask for that let's. Let's not pay, make people live in fear and give new fuel for the prohibitionists to try to shut down something that's making people's lives better and creating lots of economic opportunity.

Speaker 1: 22:19

Yeah, yeah. Well, I think we can use this as a segue because a critique, shaw and the audience asked about our thoughts on the farm bill in 2024. You know, we probably wouldn't even be having this conversation if the federal government would keep up with the pace of the evolution of the industry and actually, you know, create some movement and regulations. There was a lot that that kind of hit the floor this year in a number of different ways. We had we had safe that then became safer, passed through the Senate banking committee and passed through the Senate banking committee, and then we we had the States Act, the more act, mention of rescheduling, and obviously nothing again has happened. And it feels like a groundhog day with the with 2022, where we thought we were going to get safe at the end of the year. So 2024, what do we? What are we thinking regarding all these different opportunities for, for reform?

Speaker 2: 23:28

Yeah, I can make an argument for some massive federal policy change to happen in 2024 because of the upcoming election and the excitement around what what that could do to get voters to the polls and to become more beloved, maybe to the Democrats and get get voters out for the Democrats if Biden was to be able to get something done.

Speaker 2: 23:52

But I also can make a really strong argument for nothing happening, because nothing ever seems to happen. I do believe that a new farm bill will most likely move forward by the end of 2024. And that is because it is not cannabis specific and there's too many other groups across the economy in the in the U S that depend on the farm bill and those are those are folks like like food stamp programs, local local farm assistance programs for for dairy and meat and vegetables and grains and all of of these inputs that are so important to meeting our basic kind of nutritional needs in this country. So I do think that there will be a farm bill that moves forward. We are going to have a show fully dedicated to talking about this next week for our first show of the year we're going to have.

Speaker 2: 24:57

we're going to have Bob Hoban and Xavier Gillay come on and talk to us about about hemp policy in 2024. So I'd say, stay tuned for that. But yeah, I think the farm bill will move forward. I I believe that what's happened with hemp derived cannabinoids is hard to put back the toothpaste, back into the tube, as they say. I think that there are a lot of people that really love these products and that we will likely see some, some safety regulations, but I would be very surprised if the legal option to create hemp derived cannabinoids that include Delta eight and Delta nine become illegal. I don't see that happening. So that's my prediction for what it's worth.

Speaker 1: 25:47

Yeah, I'm. I've been thinking about this a lot lately and I've been in a number of conversations on both sides of the fence right, and there's a lot of interesting components here that I I think could play into it. But I'm also just the pessimistic side of me is just things like we get a lot of the status quo with the 2024 farm bill and they're like this is not our jurisdiction. Go talk to the FDA, like they've been saying for the last five years, and the FDA has been doing nothing for the last five years. They could get explicit about that. They could say, like you know, they could reference the FDA and say it's like this is, you know, this all needs to go through a regulated structure that the FDA weighs in on, and I guess that would just be more of the status quo.

Speaker 1: 26:38

But the interesting thing here is like thinking about having this next nine months or whatever timeframe it is, before it comes out. It's like lobbying dollars you know, right now cannabis doesn't have a ton of money, like I know these speaking of, like you know P&Ls and balance sheets, like I generally know, like where these professional organizations lie with kind of their funds, and we just don't have the lobbying dollars that some of the even just the independent hemp companies have that are spending out massive profits because they have economies of scale and aren't burdened with insane structures and taxes. So it's, you know, I think that element will make them have a louder voice up on the hill. But then you also have the consideration of who's involved with drafting the farm bill, and I do know that there's, I think, two senators on the from Minnesota helping that drafting and it's like Minnesota is the beacon of light when it comes to the integrating of the hemp and cannabis space, if you ask me personally.

Speaker 2: 27:53

Well, they haven't lost their cannabis market in Minnesota yet. They're a little slow and behind and there is intention of the groundwork is really late.

Speaker 1: 28:02

Well, you could say the same about New York. Sure, yeah, it's like you know, being slow and intentful as you develop the structure, versus hustling at the market and having it fall apart with a bunch of lawsuits. You know, I don't know which one is worse, yeah, so yeah, I don't know that. The farm bill, a big, big question mark. But as far as all the others go, I don't think we're going to get any much of any help, and not because it doesn't make sense to give us help, but I just see a completely dysfunctional federal government and I don't imagine it getting much better in 2024.

Speaker 2: 28:45

Yeah, I guess if there's one takeaway of how to metabolize the uncertainty if you're thinking about doing business on the hemp side, or if you're on the cannabis side and you're trying to figure out how to think about hemp and its impact on your business, it's just that hemp companies should be unafraid of regulation and of safety standards and to be building businesses that, if and when more regulations come, be it from the FDA or from their local state regulators, like in Minnesota, that they are ready to implement the types of safety requirements that are likely going to come. You got testing dosage requirements, you know, whatever it is, whatever it looks like, packaging, things like that.

Speaker 1: 29:38

Yeah, the interesting thing is I do see this movement towards self-regulation and development of standards right. I saw Patrick Ray from Poseidon Post on LinkedIn the other day, just like who's working on this. We need to keep pushing this forward. I know that in the beverage category, distributors have a tendency to really kind of set that quality standard. They ask for chain of custody of ingredients, they ask for stability, all that kind of stuff. So the bigger that the market gets, the more sophisticated it'll come. It doesn't mean that there aren't people working behind the scenes and creating the stereotypical unregulated product, but the more available and more mainstream it feels like, that's what the consumers will certainly gravitate towards. Yeah, sure, yeah.

Speaker 2: 30:36

Well. I want to put this into a new topic, if you're okay with that.

Speaker 1: 30:40

Absolutely. Let's do it.

Speaker 2: 30:41

All right. Well, let's talk about something that has kept people optimistic, and that is new markets.

Speaker 1: 30:48

New markets.

Speaker 2: 30:49

And they're something that have turned on in 2023, and there's some that are just like really starting to get their feet, and so I think of them still as new markets, and so those look like Missouri, maryland, ohio, new Jersey, new York. Those are some of the big ones and these are sort of the bright lights. There's still challenges in these places in particular, new York I did lump into this category, but Missouri and Maryland are off to a great start. The companies that are in those markets tend to be trending better than the companies that aren't, so they're keeping us excited and I think people are kind of waiting on the sidelines to wonder if they mature in the same ways that we've seen other markets, but it's been good. Just this year, we crossed a threshold where now over 50% of Americans live in states with legal cannabis, and that's huge for the movement. It's huge for progress.

Speaker 1: 31:52

Yeah, I admire the fact that some of these smaller states are able to create healthy ecosystems that support the entire value chain of cannabis. Being grounded in California and seeing how challenging it's been to create economies of scale and viable businesses even though we have nearly 40 million people here to imagine trying to do so in some of these smaller states, I was kind of like breaking my brain. But they're seemingly managing to get it done and there's a lot that goes into cannabis, like starting with the grow to the retail and everything in between. It's pretty impressive. So I'm hopeful that New York another large state, like really kind of gets it figured out in 2024 and kind of creates that healthy ecosystem. But yeah, missouri, maryland, michigan's been around for a little while but I still feel like it's on the ramp up. I don't know. There's some very exciting markets out there.

Speaker 2: 33:07

Yeah, and then I think it is newsworthy as we talk about New York. Just 10 days ago they closed their application period for new businesses and the estimate is around 7,000 applications for new cannabis businesses to enter the state, which is wild. That is a big number, and I've read that it's likely that they're going to issue around 1,400 to 1,500 licenses from this first batch of applicants.

Speaker 1: 33:43

Holy smokes.

Speaker 2: 33:44

It's a little bit unclear of what they're looking for in terms of the total number of licenses to issue. It's up to their discretion at the Office of Cannabis Management, new York, but people are clearly optimistic about the opportunity there. 7,000 businesses threw their hat in to participate in the market, so if there's anything that's optimistic, it's that.

Speaker 1: 34:09

I am curious as to how long it's going to take them to get through those 7,000 applications, because if I know anything about these management groups in the various states, they're understaffed and the question is, do they have to get through all 7,000 before they start issuing you know license to them, or are they just kind of like, approve them as they find viable ones?

Speaker 2: 34:38

Yeah.

Speaker 1: 34:38

Yeah, I don't know. I was talking to some of our partners in New York and they're skeptical about how quickly New York can begin onboarding new retailers and outlets. So they are projecting a bit of growth, but not 20X or whatever. You know, the new license numbers compared to the existing would signal.

Speaker 2: 35:06

Well, I've got my popcorn, so we'll see what happens there. And then in some of this, the overall kind of market dynamic stuff I pulled some numbers yesterday about the total dispensaries nationwide and then where they're most concentrated. And one of the things that popped out of that data and there's around 12,000 dispensaries legal cannabis dispensaries across the nation, and of those the state with the most dispensaries is Oklahoma, and this was data that was put out in September, so the numbers might be a little bit different, but there's 2,683 dispensaries in Oklahoma and that is far and away by 2X the most dispensaries of any state, and so I thought, holy crap, that's a lot of dispensaries. What about the percent of the US population? So those 2,600 dispensaries in Oklahoma account for 22% of all of the dispensaries nationwide exist.

Speaker 2: 36:12

So how does that? That's amazing, right? So how does that compare to the amount of population that resides in Oklahoma? Well, drumroll. The Oklahoma population is 1.2% of the total US population and yet they have 22% of all of the dispensaries in the state. So either they've figured out something that the rest of the states haven't or, likely, we might be seeing some struggling in Oklahoma this year 2024. Which would be my prediction.

Speaker 1: 36:44

I mean, oklahoma's been open though I remember calling Oklahoma the Wild West for at least two or three years now, and so I think, if anything, it's a signal of what happens. If you create kind of an open and free market, right, there's not a lot of restrictions on packaging and dosing and all that, and if they are, people just don't listen to the rules, and what you do see, though, is like highly compressed prices on product, and I think people are just really yeah, there's just not a lot of restrictions. Like you know, we generally know that you know, people grow in very large scale in Oklahoma, and a lot of that cannabis that maybe is not consumed in Oklahoma might end up elsewhere. You know, and I do think, though, that, on a per capita basis, because of the access that is created in Oklahoma, that you have a lot, much larger percentage of just regular, you know, casual consumers in the space.

Speaker 1: 38:02

It's not so hard to find a dispensary or for the product. Look for the products that you're finding. Like you know, like I've been in this industry a long time, and occasionally I want a product and I'm like, oh shoot, where do I go to get that? And like that kind of really sucks Like it's. It's like if, if we're as easy as a liquor store which it sounds like it is in Oklahoma, I think you know consumption patterns would be be a lot different.

Speaker 2: 38:26

Yeah, that makes me think about what a lot of people are gearing up to do, which is to have a dry January, which when people say that they mean they're not going to drink any alcohol in January.

Speaker 1: 38:38

Call it Callie sober.

Speaker 2: 38:39

Callie sober, yeah, and that there's, there's a. There's just, in general, a slow decline of less and less young people are getting as deep into alcohol as generations before us and they're experimenting with cannabis, and and so you might. The difference between alcohol and cannabis is so stark in terms of what happens if you do too much. You know it's like you drink too much alcohol and you might be barfing for hours and you consume too much cannabis and maybe you eat more pizza than you feel good about, but like you're going to be okay.

Speaker 1: 39:17

I mean, I I got high the other night and I had a gross amount of ice cream but it was really good. It was like I just I remember thinking to myself in the middle of it. I'm like I'm just going to chalk this up to like a therapy session and I'm like I'm, this is good for me, I'm just going to eat this ice cream and I'm going to enjoy the heck out of it and I'll do a few, a few extra crunches in the morning.

Speaker 2: 39:40

Yeah, and you know, ben, there was a time I think it was in 2022, you and I were in New York late at night significant cannabis and there was a lot of pizza. That was. We both bought a lot of pizza. I tapped out fast, but you really went for it. I couldn't believe it.

Speaker 1: 39:58

Yeah, I did. I remember that.

Speaker 2: 40:01

I remember that you got to have the late night slices.

Speaker 2: 40:06

Oh man, New York pizza, I love it Well so, yeah, and then moving on, I think there's been some other things that have really risen to the surface this year, which is kind of about new categories becoming more and more popular and, in particular, convenience products and the way that I think of those are things that you don't got to, you don't got to light, you don't got to, you don't got to roll, you don't got to grind, and so those are things like beverages, gummies and disposable vapes, and they've just, they're all categories that are becoming more and more beloved and chosen. So that's been an interesting, interesting dynamic to notice, although it's been predictable, I have to say yeah, yeah, yeah, it was bound to happen.

Speaker 1: 40:55

Yeah, yeah, bound to happen, I am. It is interesting to hear about the kind of the gradual and continual rebound of the vape category. I mean I also happening this year. The Netflix docu series on the big vape jewel, that was an interesting like. If you haven't watched it, definitely watch it, because it's like kind of especially if you've been in the industry since I think that was like 2015. It was, yeah, it was just very reminiscent of what was happening and like vape gate and all that kind of stuff, many acetate, all that. So, yeah, it kind of took me back and to now be here with kind of a recovered industry when it comes to vapes, yeah, and still see new hardware coming out, like I remember running the incubator and seeing ideas for new vapes, friends with Sebo Shen who had some really cool products that he's worked on over the years to see that there's still innovation to be done and new form factors to be created. It's exciting. I like product, so keep evolving is cool.

Speaker 2: 42:17

Yeah, and a lot of innovation on the hardware side as opposed to the actual input side, and not seeing as many new form factors but more new types of consumption devices. I think that will continue, as brands realize that they can differentiate themselves both by the product quality, but also by the hardware that the product comes in and the packaging.

Speaker 1: 42:43

Yeah, and on the beverage front, having gotten out through the or almost the holidays I guess we have new years still on the horizon to see the beverage category be able to shine a little bit, at least in my circles, where you can be having a holiday dinner and not have to excuse yourself for a vape or smoke and to just be able to drink it right there at the table while everyone else is consuming alcohol or Martinelli cider, if that's your flavor. Yeah, I don't know. It's interesting, but as it translates over to the retail sector, seeing the difference between this more open hemp market versus the regulated cannabis market, regulated cannabis certainly gravitating towards the heavier dosing the 100 milligram, 200 milligram in some states that's a lot of beverage, especially for someone like me but seeing these lower dose, higher scale products being able to proliferate in kind of a more open market. We'll get to this a little bit later, but I think there's certainly an opportunity there for the industry to adopt this bifurcated strategy of getting products into the main street marketplace.

Speaker 2: 44:09

Yeah, I think it's a really good way to look at it. Well, should we move on to our last news roundup topic.

Speaker 1: 44:17

Yeah, yeah. What's the last new roundup? What's the last topic?

Speaker 2: 44:22

Legal battles.

Speaker 1: 44:24

Oh, legal battles yeah.

Speaker 2: 44:27

I would say that there has been a very public movement towards more civil types of legal battles, whereas we've officially moved from the era of prohibition, where the legal battles were about criminalization of people and companies and actions, and now, instead, it's time for people to chase money, opportunity and power using the court system, and it's happened both in the areas of the legal licensing space, of states getting sued based on the way that they're trying to license, and then there's also a bunch of more prominent companies that are having very public infractions, both with ex executives or with competitors and things like that.

Speaker 2: 45:23

So, starting with some of those bigger companies, we've seen cookies, stizzy and Glass House all be subject to lawsuits, either from former execs or from competitors in the space and investors, and so that has been one of those moments where you realize, well, people only decide to invest in a lawsuit because it's expensive, if they think there's really something valuable on the other end, and so I think that that will continue to happen this next year, where the companies and the brands that are perceived to have power and an emote around them in some way have folks come after them and try to grab onto it.

Speaker 1: 46:08

And the Glass House one that was related to. Was that related to hemp or was that related to kind of shipping?

Speaker 2: 46:15

Well, that's related to diversion. So, that is a competitor. Catalyst, which is a California based dispensary chain, accused Glass House of being the largest black market diverter in California, and so there's some anti-competitive kind of accusations in there. Not exactly sure of all of the details of the lawsuit, but y'all can go find it real easy.

Speaker 1: 46:45

Yeah, yeah. And then cookies had a number of them. It was kind of hard to keep track Hard to keep track.

Speaker 2: 46:52

Yep, former investors have sued them folks that they did genetic deals with, suing over IP, and then STISI is the most recent one and that is it's just come to light. I guess the lawsuits have been on the books since August and September, but the LA Times just dropped them to the public in the last couple weeks. And that is around accusations of unlicensed activities by some of the owners and execs in the company renting apparently multiple I think they say 18 unlicensed dispensaries in the state, and then also stuff about funneling profits around. There's a former board member of STISI that is suing them and a former CEO of STISI that's suing the company as well. So that's some exciting inside baseball kind of stuff.

Speaker 1: 47:51

That's good times, yeah, and the other category of lawsuits that we've seen a lot of is just between the states and a lot of the hemp operators. We talked about this on a previous episode, but it doesn't seem to be slowing down and we spoke about attached just kind of this volling back and forth. I remember when I first got into business, one of the first things that a lawyer told me is ambiguity leads to lawsuits, and the hemp industry is very ambiguous, and so I think until that is fixed, we are going to have lawsuits abound in every state, and it's created a really interesting market for me where I'm, and I think all of our listeners should really think about this, as they're thinking about multi-market expansion and all that. And when you look at a market, you're going to have to look at it in another dimension. Now it's like what are the rules and laws and case law around hemp and cannabis in this given market, in any given market?

Speaker 1: 49:02

Massachusetts was a market that was having a good run up a couple of years back and I would say in the last six months it's become very apparent to us that there's over a thousand retail doors that are now selling low-dose hemp products and that can very much become competitive with the regulated cannabis market, especially when you start talking about certain form factors that might be sold in both venues. So as we look into 2024, I don't imagine that we're going to see any fewer lawsuits be created, either to ban or to injunt those bans or whatever it be. But regardless, as an operator, it's really important to keep an eye on it because it can certainly impact sales and dispensaries.

Speaker 2: 49:56

Yeah, we said at the top of the hour, we talked about the size of the hemp market and the size of the cannabis market, both of them being somewhere in that $25 to $30 billion a year range.

Speaker 2: 50:06

So we're talking about a $50 to $60 billion market combined and we're just bound to be having more legal fights.

Speaker 2: 50:15

And some of those fights have been against the states too, and I think it's worth it to talk about how that has created some interesting market dynamics. Very publicly, the lawsuits in New York against the OCM and their licensing process. They shut down the over 400 card retail license awardees for many, many months of 2023 due to a lawsuit that challenged the priorities that New York was using to choose who'd license first to become a retailer and that finally became settled, and then I think it was the final day of the licensing. Just 10 days ago, a group the Verisite group that people have heard of because they have been suing regulators in many states over local residency requirements, decided to issue a new lawsuit against the state on the day that the applications were due, asking to basically shut down all future licensing. There hasn't been any forward movement on that lawsuit. It's just a week old. At this point New York has really. Not only have they struggled to get the market open, but they've been highly distracted having to deal with all these lawsuits about their law and about their rollout.

Speaker 1: 51:46

It's been pretty wild, it's hard to imagine there might be a state more litigious than California. This is exciting.

Speaker 2: 51:55

Well, and then you've got Alabama, which has just done their third round of licensing because they have had to redo their licensing two times before, and now they just released their third round of redoing their licensing, all because of appeals and lawsuits against the licensing process. And there already is lawsuits that have been filed appealing the way that the third round of licensing came down, asking for them to redo it all over again. So that's another one to have some popcorn and watch. If Alabama actually gets open Hopefully it does the people of Alabama deserve to have legal cannabis, but that isn't even adult use, it's just medical. But yeah, more legal battles. It seems that in cannabis sometimes the only people that winner the lawyers and I hope to see in 2024 some winners on the.

Speaker 1: 52:50

Shout out to the accountants too. I think they're doing all right, absolutely yeah, but lawyers do get a good leverage to get you to pay. So yeah, their cash flow probably looks stronger.

Speaker 2: 53:08

Yeah Well, that takes us to the end of our cannabis news roundup for the year. There certainly has been a ton of other news in cannabis, so if you were hoping to hear a story that you didn't, we're sorry and we hope to cover it in future episodes. Certainly, let us know what are the topics that are most important to you and we'll make sure that we keep diving in as we roll out our 2024 schedule.

Speaker 1: 53:36

Yeah, and then, I think, top of my list as far as news is, we made it through 24 episodes, heading into 2024, I think that's a good omen, and only thing is that it's encouraged us to do this more. The audience continues to grow. The engagement is growing. We're incredibly grateful just for the opportunity to be in your ears and have you engaging with us and having these conversations, because if you have any ideas for guests you would like to see on the show or would like to refer someone, we're very easy to get in touch with. Just comment in the comment section on LinkedIn, as always, subscribe, share this podcast wherever you listen to your podcast. It's immensely helpful for us to kind of just keep growing and getting the voice out there. In turn, we'll just make sure that we keep making this show get better and better. It's been a great 2023. In the NRA, I'm incredibly grateful to have made this decision to kick this off with you. It's been an absolute joy. It's something I look forward to every week. So, thank you. This is great, yeah.

Speaker 2: 54:54

Likewise, I think that we all should be thinking about the things that we want to stretch into in the new year and challenge ourselves to do. One of the things that I wanted to challenge myself to do in 2023 was to make more content. Thank you so much, Ben, for being my accountability partner and friend in this journey. I'm excited to see what happens next year and what we can turn this thing into. Yeah, thanks to everyone out there.

Speaker 1: 55:25

Incredible, really, really grateful. All right folks, happy New Year. Keep your spirits high. Talk to you soon.