10 Cannabis Industry Trends to Watch in 2022

Curated, translated, and edited by Sechat, with information from MJBizDaily (Bart Schaneman)

Now that 2022 has arrived, cannabis industry executives expect to face a series of trends. Some will be positive for the industry; others, negative. Some will be new; others, a continuation from 2021.

To name just a few:

- Other U.S. states will legalize marijuana in some form;

- Calls for greater minority participation in the cannabis industry will grow;

- The consequences of climate change will continue to wreak havoc for cannabis companies.

Below are the top 10 trends from MJBizDaily to be watched in 2022:

1. Mergers and acquisitions will continue.

Smaller M&A deals are likely to continue at a rapid pace and may even accelerate across the United States as multi-state operators with capital flow build their footprints in high-growth cannabis markets.

In Florida, for example, MSOs made a flurry of acquisitions in 2021, totaling over $500 million. The goal: to invade Trulieve Cannabis's dominance in a medical marijuana market where annual sales reach $1 billion.

Pennsylvania has also been a focus for MSO trading.

In mature markets like Colorado, the trend of vertically integrated companies acquiring smaller, niche companies will persist.

The acquisition of Denver-based Medicine Man by Columbia Care - completed on November 1 - highlights the accelerated consolidation of Colorado's cannabis market.

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2. Brands will grow across sectors, including cultivation, retail, and product infusion.

We have already seen some selected brands of flowers and edibles expand across the United States and internationally - think Cookies and Wana Brands.

As more brands learn to work with partners in other states and also establish their own operations, expect to see this trend boom.

3. More California municipalities will opt for cannabis.

Additional towns and cities in California will adopt the licensed marijuana industry, but licensing is likely to slow to a crawl in 2022 due to the expiration of provisional licenses.

This will increase the value of all licensed businesses in relation to M&A deals.

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4. Cannabis companies will increasingly demand lower state taxes.

Alaska and California are two important examples of markets where taxes are an issue:

- A fixed cultivation tax of $800 has put financial strain on producers in Alaska;

- Cannabis companies in California are warning that taxes are leading to market collapse in that state.

“Without significant change, many, if not most licensed cannabis businesses will face a desperate choice: pay exorbitant taxes in a system designed for failure or pay employees so they can feed their families,” warned California cannabis industry leaders in a December letter to Governor Gavin Newsom and legislative leaders.

5. Market share loss will lead to M&A actions in the north.

Many large Canadian producers will continue to lose market share to smaller, more disciplined competitors. In an attempt to reverse this trend, those losing market share will aggressively dive into the M&A pool.

The closing of the Tilray and Aphria merger was one of the highlights in Canadian trading last year. Other significant M&A transactions in 2021 included the acquisition of Supreme Cannabis by Canopy Growth Corp. for CA$435 million ($344 million) and Hexo Corp.'s agreement to buy Redecan for nearly CA$1 billion.

6. Incorrect assumptions about growth and profitability will persist in Canada.

Some CEOs of large publicly traded Canadian companies will make inaccurate assumptions about expected growth and profitability of their businesses.

Importantly, they will continue to be wrong about the pace of growth and development of the international legal cannabis market.

Expect this to lead to some poor decision-making, both internally and when looking at the import and export market.

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7. The pandemic will further solidify the cannabis industry's reputation as 'recession-proof.'

As more coronavirus variants come into play and U.S. and global markets continue to suffer from pandemic volatility, expect retail marijuana sales to remain relatively robust, as they have throughout the crisis.

While the ongoing pandemic presents challenges - both expected and unexpected - for cannabis companies on the operational side, including inflation and supply chain issues, consumers will continue to visit retailers as the market expands further.

8. The unpredictability of climate change will continue.

Cannabis producers must remain flexible and adaptable, as climate change means that normal weather patterns are no longer reliable.

Wildfires. Early frost. Drought. Severe flooding, hurricanes, and tornadoes. All of these items are likely to be included in the story of 2022 for marijuana growers.

9. Push for social equity.

As states roll out new marijuana markets, it is increasingly common to see the licensing process require a social equity element aimed at giving minorities and those harmed by the war on drugs an opportunity to participate in the cannabis industry.

So far, this has not worked as well as advocates hoped.

States like Illinois continue to be mired in lawsuits over social equity provisions. But this will not stop the effort to make the industry more equitable and fair for people of color and others. The calls for this are only getting louder.

10. More U.S. states will legalize marijuana, but the federal government likely will not.

The momentum for marijuana legalization in each state likely means more progress on that front. Look for possible changes in the following states:

Adult:

- Rhode Island

- Maryland

- Delaware

Medical:

- Mississippi

- Kansas

- South Carolina

- North Carolina

Federal legalization of cannabis in the United States would be a shock. What is more likely to happen: the comprehensive marijuana reform bill from Senate Majority Leader Chuck Schumer getting stalled in the Senate.

Cannabis banking reform could then be considered a standalone measure in the upper chamber, but no vote is likely to take place before the fall 2022 elections.