Our outlook for 2024
Navigating the cannabis industry is far from the glamorous and leisurely experience often perceived by outsiders. Those who have spent significant time in the industry understand that it requires consistent hard work and dedication. In good times, it’s a demanding day-to-day commitment, and in challenging times, it can feel like facing insurmountable obstacles.
The year 2023 exemplified this dynamic, being an incredibly turbulent period for the cannabis sector. The industry experienced rapid changes, particularly due to a wave of legislative reforms across various regions. This period also marked a significant moment for global expansion, as numerous countries began to recognize and embrace cannabis as a viable market. Additionally, there were notable developments at the federal level, including movements towards the potential rescheduling of cannabis and promises of federal expungement.
As we look towards 2024, the cannabis industry is filled with a sense of hope and anticipation. This outlook is shaped by a combination of factors: ongoing regulatory changes, technological innovations, and evolving perceptions both from the public and within legislative circles. These elements together are defining the future landscape and the expectations for the cannabis industry as it enters the new year.
Global Legalization Efforts
Unlike in the past, 2024 is expected to see continued efforts towards legalization in numerous regions. Unfortunately, while we see the rise of many markets with pushes towards a more progressive approach to cannabis such as Thailand, we have seen places that were natural bastions of cannabis freedom such as Amsterdam go through forms of regulatory regression. International partnerships will be a big part of the discussions in 2024 as new markets open up and already cannabis companies from pre-established markets move in, expediting the SOP process for that newly emerging region. We expect new countries to legalize adult-use in 2024 and the discussion turning from being around legalization to international intellectual property rights for cannabis businesses.
In areas where cannabis is legal, there is an expectation for regulatory improvements, including changes in taxation, product labeling, and quality control. Although hopes were high for legislative relaxation in 2023, the situation largely remained unchanged. However, as more markets emerge, there’s continued optimism for positive regulatory shifts. Notably, Nevada has set a precedent by significantly increasing its cannabis possession limits starting January 1st, a move that could inspire similar changes in other markets. Cody Sadler, Co-Founder and CMO of Gelato Co. thinks the regulated market in CA will continue to suffer if those in charge don’t make dramatic changes to current policies. Over taxation is crippling legal cannabis allowing the illicit market to thrive. Cody feels this will continue into 2024 unless lawmakers leave the bureaucracy behind and start listening to industry experts. Lauren Fontein, co-founder of The Artist Tree agrees stating the California market in particular will see some big changes with “…many retailers and brands going out of state or closing their doors entirely citing the cost of doing business and the black market”.
Could there be a rescheduling move on the federal level in 2024? Douglas Fischeri, General Council of AVD says “I expect marijuana will be shifted to Schedule III in 2024. The most obvious benefit of rescheduling is the removal of 280E for plant-touching businesses, which should free up capital and fuel growth. Beyond that, it’s hard to know how policy will play out. While Schedule III substances SHOULD fall within a traditional prescription drug paradigm, it’s hard to see the will or ability for all marijuana sales to be forced down that route. More likely, there will be a bifurcation of adult use and medical, with adult use continuing largely as it has (perhaps subject to some lighter touch federal regulation) and medical going down a more traditional FDA-regulated route. I don’t expect SAFE(R) banking to pass in 2024. Congress has too many other priorities and the new House leadership will likely not be inclined to take up cannabis-related issues.”
Market Expansion and Consumer Trends
Broadening Consumer Base
The cannabis industry is experiencing a significant shift in consumer behavior and purchasing patterns across key markets, reflecting a change in usage context. Products like dog walkers and edibles are gaining popularity, indicating a move towards more specific use cases for cannabis. As legalization spreads across more states and the stigma surrounding cannabis use diminishes, a wider range of consumers, including older demographics and those focused on wellness, are showing increased interest in exploring cannabis products.
Interestingly, the demographic aged 55 and older remains the fastest-growing segment in the cannabis market. This trend is expected to continue as more individuals in this age group become open to trying cannabis products, possibly due to their therapeutic benefits and the growing body of research supporting cannabis use.
Concurrently, there’s a notable decrease in alcohol consumption among younger demographics, who are increasingly turning to cannabis as a preferred alternative. This shift is partly driven by a desire to avoid the after-effects of alcohol consumption, such as hangovers. The trend of choosing cannabis over alcohol is expected to persist, fueled both by expanding access to cannabis and a growing inclination to prefer its effects over those of alcohol.
Consumer attitudes towards cannabis products are also evolving as understanding of the plant deepens.
Alex Maniatis, Chief Brand Officer of THC Design agrees saying that “In the past, consumers have purchased cannabis based on the highest percentage levels of THC. People are gaining a deeper understanding of terpenes, and that knowledge will play a role in empowering consumers to make more informed choices when selecting strains based on their preferences and desired outcomes.”
Overall, these trends reflect a broader evolution in the cannabis industry, where consumer preferences are increasingly informed by research, personal wellness goals, and a desire for specific effects from cannabis use.
The year 2024 is anticipated to bring a wave of innovative cannabis products, encompassing a diverse range including edibles, beverages, topicals, and wellness-focused items. This surge in product variety is being driven by companies dedicating substantial resources to research and development. Their aim is to tailor products to meet an expanding range of consumer demands and preferences.
Moreover, the emergence of social use lounges, particularly in prominent markets like Los Angeles and the burgeoning Las Vegas social lounge scene, is significantly influencing product innovation. These venues are becoming catalysts for shaping consumer expectations and preferences, pushing the boundaries of what is offered in the cannabis market.
In the realm of hardware, companies such as Puffco and Ispire are notable for their contributions to the evolution of products for dabbing, a method of consuming cannabis concentrates. This segment of the market has undergone a dramatic transformation from the traditional use of torches to more advanced methods. The focus now is increasingly on vaporization technologies and products designed for on-the-go consumption. These innovations are expected to be at the forefront of hardware development in the cannabis industry for the foreseeable future, reflecting a broader shift towards convenience and discretion in cannabis product use.
Cultivation and Production
As the cannabis market expands and diversifies its consumer base, the industry is simultaneously experiencing a surge in technological advancements, particularly in the realm of cultivation and production. This evolution is driven by the need to meet the growing demand and the varying preferences of a broader consumer spectrum. Ali Garawi, the founder and CEO of Muha Meds, anticipates that “the hemp market will continue to impact the cannabis industry especially with the ease of access on the consumer.”
The role of technology in transforming cannabis cultivation is becoming increasingly crucial. Elmar Mair, Founder and CEO of Neatleaf, highlights the importance of technological advancements in cultivation. He predicts that “2024 will be the year that data-driven cultivation and automation will take center stage,” emphasizing the role of AI in revolutionizing cultivation practices. “There will be a massive leap in the adoption and efficacy of crop-steering using AI that will redefine best practices in cultivation for the future.”
This technological revolution in cannabis cultivation is not just about automation but also about the intelligent analysis and use of data to optimize growing conditions and crop yields. Advanced AI systems can analyze vast amounts of data from various sources, such as climate control systems, soil nutrient levels, and plant growth patterns, to make informed decisions that enhance the quality and quantity of the cannabis produced.
Moreover, these advancements extend beyond mere production efficiency. They have the potential to significantly reduce the environmental footprint of cannabis cultivation by optimizing resource use, such as water and energy. This is particularly crucial as the industry faces increasing scrutiny over its environmental impact.
The integration of advanced technologies in cannabis cultivation is also expected to drive innovations in product development. With more precise control over the growing process, cultivators can produce cannabis with specific characteristics, catering to the nuanced preferences of a diverse consumer base. This could lead to the emergence of new strains and products, further expanding the market.
In summary, the intersection of technological advancements and the broadening consumer base is setting the stage for a transformative era in the cannabis industry. As we move into 2024 and beyond, the integration of AI and automation in cannabis cultivation is poised to redefine the industry, leading to more efficient production, innovative products, and sustainable practices.
Economic Impact and Investment
Job Creation and Economic Growth
The cannabis industry is poised to be a major economic driver, creating jobs in cultivation, production, retail, and ancillary services. Traditionally, cannabis has held explosive jobs growth and for the longest time was considered one of the fastest growing employment sectors in the country. Vangst, one of the largest talent agencies for the cannabis industry, released their 2023 report back in April and found that as of the report there was a 2% drop in full-time cannabis jobs.
Investment and Mergers
The potential rescheduling of cannabis at the federal level is poised to create a significant impact on the economic and investment landscape of the cannabis industry. This shift is expected to open up new avenues for capital investment and liquidity in a market that has, until now, been constrained by federal legal status and regulatory uncertainties.
Morgan Paxhia, co-founder of Poseidon Asset Management, told Forbes that “Rescheduling alone or the rescheduling/memo combo will result in a new wave of liquidity, a surge in M&A activities, equity issuance and refinanced debts that will bail out many who may not survive otherwise…” This perspective underscores the idea that the rescheduling of cannabis could be a watershed moment for the industry, unlocking the potential for large-scale legacy capital investment that has been largely withheld due to the federal prohibition of adult-use cannabis.
The current landscape, where cannabis is classified as a Schedule I drug under the Controlled Substances Act, places significant limitations on banking, financing, and investment opportunities for cannabis businesses. Rescheduling cannabis would potentially alleviate many of these challenges, allowing for more traditional forms of financing and investment to flow into the sector. This could lead to a more robust and stable financial environment for cannabis businesses, encouraging mergers and acquisitions, equity investments, and debt refinancing.
Moreover, the impact of such a change would extend beyond the immediate financial benefits for existing cannabis businesses. It could also create a more attractive and less risky landscape for new investors, who have been hesitant to engage with the cannabis industry due to its complicated legal status. This influx of new investment could drive innovation, expansion, and growth, helping to solidify the cannabis industry’s position as a major economic contributor.
Furthermore, the rescheduling of cannabis could have broader economic implications. It could stimulate job creation, enhance tax revenue generation, and contribute to the development of related sectors such as technology, healthcare, and retail.
In summary, the potential rescheduling of cannabis represents not just a shift in legal status but also a pivotal economic opportunity for the cannabis industry. It holds the promise of unleashing a new era of growth, stability, and innovation, reshaping the landscape for investors, businesses, and consumers alike.
Social Equity and Justice
Social Equity Programs
The topic of social equity in the cannabis industry has long been a complex and contentious issue, particularly among activists who are calling for more inclusive and fair practices. This challenge is especially prominent in markets such as Los Angeles, where the slow pace of application processing has imposed financial burdens on numerous social equity applicants. These delays and hurdles have raised concerns about whether the industry is genuinely accessible and equitable for all, especially those who have been disproportionately impacted by historical cannabis laws.
Despite a growing focus on reform, particularly in states with newly emerging cannabis markets, no state has yet established itself as a definitive leader in implementing effective social equity measures. This lack of a clear frontrunner in social equity initiatives underscores the ongoing struggle to address and rectify past injustices within the cannabis industry.
The potential for federal reform offers a glimmer of hope for a more concerted and systematic approach to social equity. There’s an increasing expectation that federal policies, especially in the event of cannabis rescheduling, might prioritize and better address the needs of those who have been most adversely affected by stringent drug laws, commonly referred to as the war on cannabis. The rescheduling of cannabis at the federal level could significantly alter the legal landscape, potentially leading to more uniform standards and practices across different markets.
However, whether these changes will mandate specific social equity standards across various markets remains a subject of political debate. Despite this uncertainty, there is a growing consensus among stakeholders on the urgent need for further reform. This consensus reflects a widespread recognition of the importance of social equity in ensuring a more just and fair cannabis industry.
A notable issue for many social equity applicants who have managed to obtain licensure is the challenge of navigating partnerships, often marred by bad faith practices. As we look towards 2024, there is a sense of optimism that the industry, bolstered by potential regulatory changes, will offer better support to social equity applicants. These changes are anticipated to provide safeguards against exploitation and ensure that social equity applicants are given fair and equitable opportunities to succeed within the industry.
Criminal Justice Reforms
The ongoing efforts towards criminal justice reform across the United States are expected to gain further momentum. A significant step in this direction is President Biden’s initiative to address federal marijuana possession offenses. In October 2022, Biden issued a proclamation granting a full, unconditional pardon for certain prior federal and Washington, D.C., offenses of simple possession of marijuana. This act, though largely symbolic, marks a notable shift in the federal stance on cannabis-related offenses. It represents a move towards alleviating the long-term impacts of these offenses on individuals’ lives, particularly in terms of employment, housing, and educational opportunities.
Biden further expanded that proclamation through the issuance of another proclamation earlier this month. The proclamation’s impact is limited to federal offenses, including violations of the U.S. Code, the D.C. Code, and the Code of Federal Regulations. It specifically pardons offenses for simple possession of marijuana in violation of federal law prior to December 22, 2023, and does not cover state or local convictions. However, it does not signify innocence or expunge the conviction but can remove certain civil or legal disabilities imposed because of the pardoned conviction, such as restrictions on voting rights or holding office.
At the state and local levels, where much of the movement is occurring, new and emerging markets face the significant task of expunging records and implementing social equity reforms. These efforts are vital in addressing the repercussions of past drug policies, especially in communities disproportionately affected by these laws.
Furthermore, the process of expunging criminal records for cannabis possession is expected to positively impact economic growth in several sectors. By reintegrating previously ineligible individuals into the workforce, these reforms can open up new opportunities for employment and participation in various industries. This, in turn, could lead to a more inclusive and equitable economy, benefiting both individuals and communities that have historically been marginalized by stringent drug laws.
Overall, the continuation of criminal justice reforms and the implementation of initiatives like President Biden’s proclamation are essential steps in rectifying past injustices and fostering a more progressive and fair approach to cannabis-related offenses. The implications of these reforms extend beyond the individuals directly affected, potentially leading to broader social and economic benefits.
Industry Predictions by Insiders for the Newly Emerging York Adult-Use Market
- Operating Hurdles: “I think the overall rollout of the equitable CAURD (Conditional Adult-Use Recreational Dispensary) program in the state of New York will be one of the biggest hurdles to overcome in 2024. So many folks have been patiently waiting for their opportunity to open, and lawsuits and injunctions got in their way. Many folks have been affected by the small number of open licensed dispensaries, and even more by product that has gone to waste. I hope this can be resolved in 2024. Another hurdle New York has to overcome is the oversaturation of illicit dispensaries, which make it hard for legal dispensaries to operate to their full potential.” – Sasha Nutgent, Retail Manager of Housing Works Cannabis Co
- Regulatory Opportunity: “Cannabis cultivation—especially home grow—will be a big topic in 2024. This is thanks to evolving state laws, such as New York likely allowing home grow starting in 2024 and newly legal Ohio debating its regulations. Home grow should always be a mandatory component of state regulatory frameworks. Allowing individuals to grow cannabis just like they grow their tomatoes is a critical step toward ending the stigma of prohibition. It can also promote sustainable growing practices, while empowering consumers to become smarter shoppers. Just like the craft beer industry created new generations of informed beer drinkers and allowed brands to develop and market new niche brews, home grow can do the same for the cannabis industry.” – Shai Ramsahai, President of Royal Queen Seeds
Top End of Year Questions for Blunt Strategies
Question: Where do you see the cannabis market in the next five years?
- “As more states adopt progressive policies, I foresee the cannabis market diversifying, leading to innovations in product offerings, technology integration, and even how we perceive and integrate cannabis into our daily lives. Additionally, I anticipate more cross-industry collaborations, making the cannabis sector even more multifaceted and robust. Moreover, as the industry evolves, I hope to see a stronger emphasis on sustainability, community engagement, and equitable business practices that ensure everyone has a fair chance to benefit from this promising market.” – Leili Fatehi, Partner and Principal, Blunt Strategies
- “I see the consumer options skyrocketing. As more people test the waters, there is going to be incredible innovation of products, mechanisms, etc.” – Laura Monn Ginsburg, Partner and Principal, Blunt Strategies
Question: The US will head into a presidential election in 2024—do you think this will impact the state of the legacy and legal cannabis markets?
- “Election years always bring a degree of uncertainty to industries like cannabis. The presidential election could influence federal policy stances on cannabis, affecting both the legacy and legal markets. While the trajectory seems to be towards broader acceptance and legalization, industry stakeholders should be prepared for any shifts in political climate and be ready to advocate for fair and progressive cannabis policies.” – Leili Fatehi, Partner and Principal, Blunt Strategies
Question: As we close out 2023, what learnings can the legal cannabis industry apply in 2024?
- “A paramount lesson from 2023 is the necessity of integrating multidisciplinary and multidimensional thinking into our strategies for shaping the law and the industry. While navigating the complexity of the regulatory landscape and diverse stakeholder interests, it’s clear that seeing the big picture is vital. This means understanding both the business side and the wider social context. Moreover, we’ve learned that building relationships with local communities and everyday people isn’t just a nicety or political tactic–it’s imperative for the industry’s growth and evolution.” – Leili Fatehi, Partner and Principal, Blunt Strategies
- “Legalization in Minnesota was achieved through collaboration, partnership, and a desire to build the best legal cannabis industry in the nation. We need to build on what we learned about getting further ahead together.” – Laura Monn Ginsburg, Partner and Principal, Blunt Strategies
As the cannabis industry moves forward into the new year, it’s important to acknowledge and celebrate the resilience and perseverance it has demonstrated. The industry has navigated through some of the most challenging times, marked by regulatory shifts, market fluctuations, and evolving consumer behaviors. This journey has not been an easy one, and the ability of businesses, entrepreneurs, and workers within the cannabis sector to adapt and thrive is commendable.
In extending a heartfelt congratulations to everyone in the cannabis industry, it’s also crucial to express gratitude for the support and solidarity that have been pivotal in overcoming these challenges. The collaborative spirit, innovative approaches, and relentless pursuit of growth have played a significant role in shaping the industry’s current success.
Looking ahead to 2024, there is a sense of optimism and excitement. The industry is poised for further growth and innovation, with new opportunities on the horizon. Whether it’s advancements in cultivation technology, expansion of consumer products, or progress in social equity and legal reform, the coming year holds the promise of continued prosperity for the cannabis industry.
This is a time for reflection on past achievements and for looking forward with anticipation to the future. As the industry continues to evolve and make strides, the hope is to see every member of the cannabis community— from growers and entrepreneurs to consumers and advocates—flourish and succeed in 2024.