SPEAKER_01: 0:09

Welcome to this week in Cannabis Live. I am Jay Rosenthal. That is Jeremy Burke. We are both from Cultivated. Nope. That is Mark Hauser from Cannabis Musings. And that is Ben Larson from High Spirits, a cannabis business podcast. Welcome, Mark, Ben, and Jeremy.

SPEAKER_02: 0:25

Hey guys. Good to see you. Happy Friday.

SPEAKER_01: 0:28

Happy Friday. It is uh almost a little bit more than halfway through the Olympic men's semifinal where Canada is losing to Finland 2-1. But as we were getting ready to go live, uh Canada scored a goal. So we are breathing a sigh, uh a slight sigh of relief here north of the border. Uh it was a, I would say, a moderately busy week in cannabis news. Um uh Ben, we welcome you back from uh a couple weeks off of this show. Um uh but I want to start with Jeremy. Jeremy, uh, and then we'll go around the horn for a bunch of other things. But Jeremy, um we had a piece uh in our newsletter and the real news, uh not just our newsletter, that uh a draft version of the new farm bill got introduced. And we know draft versions of new bills don't necessarily equal what comes out the other end of the sausage making. Yeah. But what did it say? What didn't it say? What are we paying attention to that uh everybody should know?

SPEAKER_02: 1:23

Yeah, I mean, I mean, for me myself, and I think for our readers, we're mostly paying attention to if lawmakers are saying anything about hemp derived THC. Uh, we did not see that addressed in the draft bill. Um, but you know, there was some interesting details about supporting industrial hemp, supporting farmers. And so, you know, maybe we'll see some, you know, tweaking of the THC allowance numbers. The bill does go to markup next week on February 23rd. And so, look, this is very preliminary. I personally expected to see a little bit more um, you know, addressing the hemp THC ban. Uh, we didn't see much of that. Uh, you know, this this draft came from a Republican member, and so, you know, it's sort of focused on farmers and and all the things that the farm bill traditionally focused on. Um, you know, I think hemp and THC policy is probably a pretty small part of that purview. Um, but we'll see. I mean, the bill's gonna change and markup. I'm sure that uh, you know, there will be some more advocacy and voices heard around the issue. Um, and I saw, you know, Ben nodding along a little bit because he knows that, you know, a lot of these conversations are are not happening in press releases, but uh behind closed doors.

SPEAKER_01: 2:33

Yeah, Ben, behind closed doors, you don't have to spill any beans if there are beans to spill. But on the general word that's no use. But sausage making is done behind closed doors. This bill is far from done. This is a very early version. And my sense, having worked on the Hill, is that things as um not low level because they're important to us, but things as specific as this happen sometimes last minute, sometimes um before the bill gets done. Like, what is your sense? Are your emails blowing up about this or just not yet?

Ben Larson: 3:06

Uh no, my my emails aren't blowing up about this. I I you you're right. We might see something inserted in the 11th hour, and all of a sudden, you know, all hell breaks loose that would actually be on par with what's happening in Hemp and Cannabis. However, I I I am I am excited to see that there wasn't actually any THC mentioned in the Farm Bill because I've always felt that the Farm Bill was the wrong place to have uh consumer products be I you know regulated. That that belongs with the FDA, the TTB, you know, the the farm bill is supposed to define what is best for farmers, right? And so like let's leave it there. Let's also get it out of the appropriations bill. It shouldn't be in there as well. Like in what we're seeing this year is specific language being brought to brought to the industry, whether it's through Wyden or the Griffith bill, and and so there is momentum in trying to kind of frame up a true regulatory framework, right? And so what we do know from the Hill is that what is being uh lobbied for is what should those frameworks look like and what should be allowed and what shouldn't be. And what I think this is laying the groundwork for is an opportunity for those conversations to start seeing um some daylight. And so, you know, um I guess what I can say from behind the scenes is that there isn't a huge appetite uh for a broad hemp THC marketplace, uh, but there is some appetite for therapeutic products or very low-dose products in certain form factors, and I bet you will probably start seeing language around that in the coming months.

SPEAKER_01: 4:50

Well, we're gonna use that as one of your predictions. Um, I want to talk about uh well, also uh just a note, it is almost March, and nothing more has happened on rescheduling, other than some deadlines being missed by the DOJ. So just a note on that, that really nothing has happened since the Oval Office um on that front, uh, much to the consternation of uh I'll call it cannabis Twitter. Um but we want to move uh to a different part of Capitol Hill and the Supreme Court, because as we were getting ready for this this morning, uh new ruling from the Supreme Court around tariffs, um, which obviously we're not importing and or exporting cannabis from the US at least. Um talk about sort of that ruling and what it might mean for sort of ancillary parts of the industry, especially things that do get imported, especially from China.

SPEAKER_00: 5:42

Yeah, no, I mean it was um, you know, depending on your uh your your your perspective, it was I the you know, the the ruling was either um uh uh you know a re restored faith in in the rule of law or or complete tragedy. Um, you know, so uh you know I don't I I'm not gonna state a position on it. Uh you know, I want to see neutral, but I don't want to piss anybody off. But um, but look, I you know, I it is um, you know, Trump and Lutnik have made it clear that they are gonna find other ways to impose tariffs, um, and you know, whether those will um you know, whether those will stick. But uh, but you know, it will I I would imagine that this, you know, this will help with um, you know, on the margins on in terms of you know the cost of paper and packaging that's imported, the cost of um of of vape devices and cartridges and all the other sort of paraphernalia uh that you know that gets imported has been subject to taxes. So, you know, hopefully, you know, we have to see how it plays out, but hopefully over time we will start to see, you know, some of that margin restored.

SPEAKER_01: 7:03

Yeah. And and the rule of law, not you know, something like that. Nothing something minor like that.

SPEAKER_02: 7:08

Yeah, I'm I'm interested to see if companies start suing the Trump administration or the federal government for all the costs that they've borne from these tariffs. Like, you know, I imagine that this is gonna be a fight, like not just in cannabis, but in every single industry that has a global supply chain, which is every single industry. Um, so you know, I I imagine that's gonna be a fight and gonna be pretty interesting to watch.

SPEAKER_01: 7:31

Yeah, fun to watch. Fun to watch, interesting to watch.

SPEAKER_00: 7:35

What is the yeah, it'll be interesting to see if Congress uh, you know, if he tries to impose some of these through Congress, uh, you know, is Congress gonna play ball? And you know, and some of the and the the tools are more limited with through other sort of routes. Um, and so it's it's gonna be a lot more piecemeal. Uh it will depend a lot more on where the goods are coming from. Um who knows? But it's it definitely continues to make us interesting. And yeah, hopefully any margin we can help restore the better.

SPEAKER_01: 8:10

Yeah, for sure. I want to keep it um, well, we're talking about international trade. Uh, Jeremy, we want to talk to you. Um, this is, I think, the third or fourth week in a row. We've had a conversation around major Canadian companies, major investments or uh moves in international markets, often in Germany or partly in Germany. And this week was no different with um organogram known as OGI on stock markets, um, about a major move in Germany as well. This uh is a trend we've talked about for some time, but it seems like major moves are being made and and and how as the beginning of the year kicks off.

SPEAKER_02: 8:46

Yeah, no, I I look, I I thought it was a uh I thought it was a fascinating deal. I mean, again, like we've talked about this on the show for the last few weeks, there's there is a lot of MA happening, which is interesting. This organogram deal I thought was interesting for two reasons. One is it's you know full acquisition of a German medical cannabis producer that has a footprint both in the Germany medical market um as well as pilot projects in neighboring EU states, um, but also just for the the purchase price. It's the deal is up to 250 million euros, which is a pretty significant cannabis deal. Half that is up front, and then half that is tied to an earnout based on you know different financial performance metrics. Um, but look, I think, you know, from my armchair strategic analysis, it's a pretty good deal for a Ganagram, right? I mean, they want to put as many dots on the map as they can before uh, you know, their American counterparts are able to do so in the same way with the same stacking of you know major liquid exchange like the Nasdaq and uh you know with federal coherent policy in Canada. So they're able to do deals like this. Um, you know, we have seen some US companies try similar deals. I mean, CuraLeaf has a European operation, but it's uh, you know, much more tortured in how it's set up and it's difficult to do, whereas this is just you know Canadian company outright acquiring uh a German medical cannabis producer and using it as a platform to dominate Europe. So I think it's pretty fascinating. Um, and it's a trend we've seen pretty recently. I mean, we we spoke with the Aurora cannabis CEO, Miguel Martin, just last week, and he talked about how you know the growth story is really Europe and global. Uh, you know, we saw High Tide, another major Canadian company, uh uh, you know, pursue an acquisition of Romitzi and Pharma. It's a smaller deal, but it still gives them a major footprint in Europe. And so look, like I'm watching pretty closely how every single Canadian company probably is now gonna look to Europe and and the Americans are gonna be jealous.

SPEAKER_01: 10:47

Yeah, it strikes me, Jeremy, because you were writing about this way back in the day at when you were a business insider, about the Canadian advantage. And it didn't seem like it was gonna be uh I think the thought was like, we'll create these, we as a Canadian, uh, we'll create these brands that will have international impact, you know, the next Coca-Cola, the next Pepsi, the next big brands. It turns out that some of that might have been true. It wasn't necessarily about brands, but about footprint and about a platform. And uh the companies that we were talking about them, some of them are still around and still doing this, uh, Aurora and Organogram being two of the early ones here in Canada. Not so much with massive um, you know, you know, million square foot greenhouses all over the country exporting around the world. It's a much smaller footprint from a cultivation perspective, but also the international part has become real and it is uh built upon federal legalization here in Canada and the regulatory environment that demands GMP uh you know manufacturing and processing. And it is this sort of other market that is not your not the US, but is still big and growing. And as Miguel Martin said, you know, there's still much more road ahead than there is behind. And that's why they see the growth uh that they've seen where organogram's following the same path and high tide on a different sort of a different sort of track, but but similar, similar idea and similar ethos. Um good for Canada, I think.

SPEAKER_02: 12:07

Yeah, I mean, I mean, look, like the I think one thing we've learned, um, you know, my my years reporting on this space, Jay, here you're being in the space, is that the Canadian consumer market is just not that attractive to create, you know, multi-billion dollar companies, right? It's it's useful and it's certainly a big market. Um, but the most useful thing is the federal coherence. However, the policy is written, um, whether it can be more favorable to business or public health and you know, managing those trade-offs, like I'm not taking a position on that. I'm just saying that um, you know, with federal coherency, I don't know if that's a word, coherent regulations, um comes the ability to list some deeply liquid exchanges and comes the ability to actually pursue deals in jurisdictions where cannabis is legal, like Canada and in Germany where cannabis is legal. And so um we're seeing just the more you know regular corporate MA emanating from paid in companies in a way that uh, you know, uh I think a lot of American companies certainly hope to be able to do so under Schedule Three, but the jury is still a little bit out.

SPEAKER_03: 13:10

Yeah, I yeah.

Ben Larson: 13:11

I think it's also yeah, I was just gonna say, I think it's also worth highlighting that you know, organogram did get a hundred and twenty-five million dollar investment from BAT. So they're about 30 per 30 percent of their common shares, I think, are are owned by BAT. And their CEO as well.

SPEAKER_03: 13:26

Right, yes, they're that. So, so yeah, good for Canada, good for global uh tobacco, I guess.

SPEAKER_01: 13:34

Well uh I would I would I would just I yes, everything you just said, and major investments like that from tobacco or otherwise are only available to cannabis companies that have federal legalization because they, while they are tobacco, they are still fairly conservative companies in how they allocate their resources and people and cash. Um, you know, and and and and the next big ones in, I mean, may not be tobacco, but maybe big big alcohol and beverage, right? With similar, similar portfolio, similar sort of reach, similar cash.

Ben Larson: 14:05

Yeah, yeah. As a as an operator in the space, I'm excited for this because it means organagram and maybe their friends at BAT will be there investing in opening up those markets because you know, bur Germany famously is is pretty limited on on the form factors they they offer. Uh, but Organagram has a a pretty large suite of of IP that they would probably want to bring over. So, you know, if they can pay the pioneer tax, wonderful.

SPEAKER_01: 14:32

I like that. That's that's uh the opening the wave for second second mover advantages.

SPEAKER_03: 14:37

I'm I'm happy uh fast follow. Mark?

SPEAKER_00: 14:42

On a more macro level, I mean, I think Jay, you're making a good point uh and and well and germly about the the sort of how stable, you know, coherent-ish policy uh helps foster this. And you know, it just more highlights how you know uh atypically the US is sort of behind um the you know, behind other countries on this. Um and uh, you know, and so it's you know, is that gonna be is that kind of argument gonna be persuasive with you know convincing Congress at this point? You know, probably not, but you know, I think that it it you know it, I think this kind of thing has an effect on the you know on the margins, and it's it's it's a constant sort of building up of that pressure, that eventually, you know, the the the the policy um you know economic arguments will eventually outweigh the scariness of drugs um and you know and drug policy. Uh I still think we're ways away from that, but you know, but this this only helps that argument.

SPEAKER_01: 15:54

Yeah. I I think, I mean, if you were an operator in the US with a big footprint, I think you could also argue almost the reverse of that. I I don't think you would do it publicly, but the chaos that's happening at the federal level is helping me entrench my position in Florida or Ohio or Massachusetts, New York. And that's that's yeah, that there is the fact that there is no predictability and I am comfortable operating without that predictability and maybe even doing pretty well or expanding my footprint nonetheless. Um, you know, it's clearing the playing field of more patient money that's conservative money that's not getting in yet, right?

SPEAKER_00: 16:27

Yeah, and that's been an argument. I've heard that argument a lot for about seven or eight years now from from a lot of the big MSOs, not all of them, but you know, but and and I've never bought it because you know it, I mean I think it's true to a point. I think, you know, to be fair, I don't want to be totally dismissive of it. It's true to a point, but it but that it only gets you so far, and I think it's also shown, you know, I think that the past, you know, the how that's played out is shown that it hasn't worked for most of them, right? You know, so it's you know, the lack of interstate commerce, the lack of you know, everything is just you know, it you can't survive in the long run under that. Yeah.

SPEAKER_01: 17:11

So but yeah Ben, can I backtrack a bit uh to something we actually talked about with Anna Ray uh and was newsworthy when you weren't here? Uh, but I do want to get your thoughts on, and that is uh THC beverages being served at United Center in Chicago, not necessarily during polls or Blackhawks game, but sort of what does that signal anything to you or to the sector overall, or is it just a good news story with the press release?

Ben Larson: 17:37

I mean, absolutely. It's uh I mean it's it's it's very notable, namely because it was uh it's it's a commitment from the owners of the stadium, uh, which are famously tied to the beverage category through breakthrough beverage. And it's not only that, you know, the if if things go well with the music events, then it can naturally transition over to the sporting events, which would be huge. But uh there's two things that are huge about this. One, it's the access point, it's the discovery mechanism that we have largely been missing in cannabis, right? You can't stumble into, or you can, but most people don't stumble into a dispensary and then try something just because they happen to be there. You know, that is what happens at at these big social events like music festivals. The other thing is like beverage backing, right? Right now, there's a huge, huge momentum to get all the beverage voices kind of rowing in the same direction, be it distributors or suppliers, retailers, or the hemp beverage uh brands and operators. And so it just further signal that people have a large amount of uh confidence that this product category is here to stay. And what was really cool about it is like amid all the uh deliberation about what should and shouldn't be, um, they did a three-year contract on this. Right, right. And so this is kind of hilarious. It's like we're all staring at this existential threat at the end end of November or September or whenever they decide to do another appropriations bill. Um and yet, you know, they're they're signing this long-term contract. So I'm here for it.

SPEAKER_01: 19:17

Um, Jeremy, can I almost take a quote? And I think it was in the details of maybe what we're reading or or something similar in our newsletter. And that is a bill in New York that will that may would allow, I think, low dose THC beverages to be sold in liquor stores. Correct me when I get that story wrong.

SPEAKER_03: 19:33

No, it's right.

SPEAKER_01: 19:34

That's that would seem to pit, I mean, in this case, liquor stores against, I don't want to, I don't want to, I guess that's how I frame it, against the dispensary model, which um some of the dispensary owners we know in New York will not be happy about this possible development.

SPEAKER_02: 19:50

No, uh, but the brands will, right. And so, and so, you know, again, like all these types of policies are are managing those trade-offs. Um, you know, I I've had, and Jay, we've talked about this my a little bit contrarian view of of the longevity of the dispensary model in New York City. I do think it's um, you know, a little bit a function of how the regulations are designed rather than meeting consumers where they're at. And I just want to be careful. I love all my dispensary friends, we love all our dispensary partners. Um, at the same time, uh, you know, I think, you know, these companies buying big pieces of real estate in expensive neighborhoods, like, you know, let's say downtown Brooklyn, um, for people to come in for two seconds and pick up their preferred product is not a model that's long for the world. I imagine that, you know, the liquor stores are very happy about being able to sell low-dose THC. And it's sort of the tip of the spear to allowing, you know, let's call them non-combustible products everywhere in the city, right? Like there is no reason why they can't be available in bars, restaurants, the Barclays Center, Madison Square Gardens, City Fields, what have you. And I think uh there is a tacit acknowledgement among lawmakers, uh, you know, State Senator Jeremy Cooney uh uh, you know, has been sort of leading this to say, like, let's sort of meet consumers where they're at, let's design regulations that make sense. Um, but you know, again, this is a draft bill. There's a lot to get from here to there. But, you know, my insight is that the liquor stores are very happy about this, the brands are gonna be very happy about the distribution, and all of a sudden a lot of the bodega sellers, which have pretty strong unions, are gonna say, you know, we want in on this too. And all, and that's uh a big paradigm shift for how cannabis is distributed to customers in the city.

SPEAKER_01: 21:34

I will still never be a Mets fan, whether they serve THC at City Field or not. That's like that would that would even make the games even a little bit more fun, although they will have Bo Bouchette start well starting.

SPEAKER_02: 21:44

Fortunately, they'll have Bo Bouchette, yeah.

SPEAKER_01: 21:45

Fortunately, fortunately for Bo, bad for I don't know, the Mets because uh, or good for the Mets, I guess. I don't know, terrible to follow them. Um, but it that does it it like there are I I'm not gonna say a through line, but like the United Center, this Bill and New York. Yeah. Notwithstanding the sort of cliff, I guess, for November on this. But like there is movement on this that that seems to be slightly different than the conversation even a month or a month and a half ago. And it's not necessarily around hemp derive, but but really around, you know, is there a category is there a second category of cannabis products that will have a different distribution model? The bill does.

SPEAKER_02: 22:24

I mean, I think it is the cliff is absolutely relevant to the bill just for the amount of products that that can be in the stores, but there's but there's no, you know, there's no reason why traditional New York City, the traditional side of the industry, regular cannabis industry in New York, um, can take advantage of this too, right? Um, and so um it's it's sort of a pretty interesting, I don't know, it's a pretty interesting dichotomy.

SPEAKER_00: 22:47

Wait, so I you know, I apologize, I don't know the detail in enough detail to yet, but is so a tradition could a traditional licensed producer then then shit you take it, take that product out of the system?

SPEAKER_02: 23:04

No, it's the the the liquor stores themselves will will have a license to sell. Oh, I see.

SPEAKER_00: 23:09

I see what you're saying. Okay, yeah. You see, yeah, I mean, I that okay, thank you. That makes sense. I mean, I you know, I I though we'll say I mean it's an interesting approach, but uh, you know, it is um it sort of solves a little bit for the problem, but I still remain a little skeptical. I was going back and forth with somebody on LinkedIn about this earlier this week. You know, I I'm less skepti less I'm more skeptical about the the viability of sort of intrastate non you know hemp products in you know outside of the system, you know, basically drinks sort of being um continuing when you you know if the cliff goes over or you know and and the loophole is closed, because you you're gonna lose a lot of the distribution um from the big distributors. And that to me is what you know, there's a lot of reliance for better and for worse on that system in order for this, you know, for this to really sort of break out, and you're gonna lose that.

Ben Larson: 24:16

Yeah, yes and yes and no, but the a lot of big distributors, so to speak, have kind of local regional reps that kind of own those markets, right? And so it's like if you have, you know, there there was a deal where Southern Crown just bought up some some New York uh or not Southern Crown, sorry, uh Southern Glazer brought bought some New York distributors that through the ABM Bev neck network. And so those are kind of like hype hyper-regional, right? Same with you know, South Carolina, you know, it has a large market share distributed through Southern Crown, and it's you you kind of have this state-to-state kind of distributor market, and so I think that could very much work. I I I love the kind of this this concept of a layered layered licensing and co-location. Like, this is a trend that I think will continue to lead to what Jeremy was saying is like this belongs in all these different marketplaces, and you'll just have different styles of licenses with different potencies. It's like dispensers can have this, and and you know, liquor stores can have that. And I think if we start looking at what's happening across all these different states, is that this is how like regulatory convergence happens. This is how you know, like if we take what Oregon is doing, they're having uh hemp licensing kind of like clearinghouses, right? It's like you can import hemp, uh, it has to go through a hemp handler's license and then get distributed into the state network, right? And so at that point, it would be really easy to kind of bring together hemp and cannabis under one framework and then have those licenses kind of apply to both both.

SPEAKER_01: 25:51

I would also I would also welcome everybody here to Eastern Canada where uh many of the liquor stores, because it's provincially run liquor stores and provincially run cannabis sales, you can actually buy both in the same uh location. Like you go to like a separate sort of window, if you will, like a building within a building to actually explode or or anything.

Ben Larson: 26:12

It doesn't explode and people don't die.

SPEAKER_00: 26:18

But I just be I just be I want to go back, Ben, to one thing you said is I don't fully agree with with the re with the issue about the regional uh and local sort of distributors because remember, this still rolls up to a parent company that has a federal license to a certain extent, and is um, you know, and a lot of those big companies are also under pressure through a lot of um you know federal antitrust suits right now. And so the question is, are they gonna still be willing to take that risk, you know, if the product is once again a controlled substance? And uh, you know, I I that's that's to me the difference is yes, it's physically there. It's just are they will, you know, is it does it if it's a controlled substance again, are they willing to still do it? And I'm not, you know, I don't know the answer to that. Maybe now, you know, maybe this was, you know, the past year has been a test case, and they're seeing that the federal government's not doing anything, so they're willing, they'd still be willing to take the risks, but I think that the risk will be different, and that's something that we're gonna need to think about.

Ben Larson: 27:25

What the what the last couple years has taught me is that if it sells, people are willing to take more risks, and so yeah, and people are willing to fight for it, and that's that's why we see the the beverage momentum right now.

SPEAKER_00: 27:39

I don't disagree with that, but you know, but at the same time, currently it is mostly legal, and that's different, you know, again, but versus versus you said, you know, you know, yeah, no, no, I've said that in my musings that it's mostly I agree, but it's different, you know, because then you get into the problems of money laundering, you get into all these sort of ancillary problems that again are a lot scarier. So I, you know, I think it's one of those things where it's it's an interesting problem for us to keep an eye on. And I think, you know, I think we've we've both identified here, you know, that sort of where, you know, that you know, it's it's who knows at this point. But it's really this is this is so it's so interesting. That's what I love about this stuff.

SPEAKER_01: 28:23

That's what I love about this stuff too. And it's also we're coming up on time, and I want to thank you, Mark, Ben, Jeremy, for this Friday touch point. But also, I think we're having very good um conversation. We're getting some good feedback uh in the chat as well. So I want to appreciate uh all of you for the work that you put in every week to do this. And uh welcome back, Ben. Jeremy and Mark, we will see you again next week, as long with Ben and maybe Anna Ray as well. Uh maybe we'll get some guests as well, some special guests uh for some insight on this and other topics as well. But Jeremy, Mark, Ben, thanks so much. And uh all of you for watching and staying tuned. Uh, find us at cultivated.news. You can find Ben uh wherever you get your podcast at high spirits, but especially on YouTube, I would recommend you do that. And go to Cannabis Music and subscribe to Mark's Substack because it's a great read. And for that, everybody, have a good weekend.

Ben Larson: 29:14

Go Canada.

SPEAKER_01: 29:15

Go Canada.