Top 10 Predictions for the Cannabis Industry
In 2019, I made my first list of predictions. I remember, we just announced our merger with MTech to list as a public company on Nasdaq. I was beaming with pride and optimism about the year ahead and the future of our industry. Today, as I reflect on the year, I am pleased with my results, eight out of ten isn’t bad. Before I get into what I see on the horizon for 2020, let’s do a recap of 2019.
10. Globalization Becomes More than Pins in a Map
I predicted 2019 would be a year for continued globalization. To date, 37 countries have legalized cannabis in some form, an increase over the previous year. At Akerna, we grew our global customer base to support those countries.
9. Consulting Becomes Data-Driven
We create 2.5 quintillion bytes of data every day. More than 90 percent of that data was generated over the last two years. Amid the fourth industrial revolution, I predicted a shift in consulting models to rely more heavily on data. For more than five years, we have been helping our clients overcome business challenges using data. In 2019, we saw significant growth in our data-driven consulting practice stemming from our ability to provide reliable data. Now everything we talk about, from forecasting patient counts and sales for new markets to analyzing trends in mature markets, we are using our data to support our clients and help them achieve their business goals.
8. CBD Standards Emerge
With the 2018 passage of the Farm Bill, the big news was hemp growers, and CBD-product manufacturers are no longer aligned with drug laws that regulate its psychotropic cousin. With this new distinction, I predicted the emergence of uniform standards.
7. Brands Become Real
The fact that articles on this topic appeared in publications like Forbes and AdWeek demonstrate the accuracy of this prediction. In 2019, we saw consumer growth in brand loyalty. Our data shows, consumers are becoming devoted to certain brands and products, so much so, they are requesting specific brands at the point of sale. However, there are still barriers for brands when it comes to media, partnership and publishing opportunities due to legal concerns about being associated with cannabis.
6. Spain Passes Federal Legislation, becoming the Colorado of Europe
What happened in Spain? Based on the fact Spain has some of the world’s most active research teams looking into cannabis, I was sure the current government would pass legislation. According to feedback from the region, Prime Minister Pedro Sánchez has not shown the slightest inclination to regulate cannabis. There is no pressure on politicians to do so, either from within parliament or without. A parliamentary commission for cannabis’s legal status supported by the anti-austerity party Podemos and center-right Cuidadanos never got off the ground in Congress. While this didn’t happen in 2019, I remain optimistic. The medicinal properties of cannabis are being recognized internationally and there is an undeniable change in how it is being perceived.
5. Latin American Production and Export Change the Direction of the Industry
The accuracy of this prediction can be seen in the Northern Swan and Clever Leaves announcement to integrate their operations to strengthen global reach. The combined company’s global footprint will now encompass brands, extraction facilities, cultivation operations, and other investments with subsidiaries in Colombia, Portugal, Canada, the United Kingdom, Germany, and the United States with more than 625 employees worldwide.
4. Canada Has a Reckoning
I hate having been right about this one. Over the last 10 months, cannabis stocks have been on a downtrend with double-digit percentage declines. At issue, in Canada, ongoing supply problems. Health Canada has been tasked with reviewing and approving cultivation and sales licenses for the legal industry. The regulatory agency came into 2019 with more than 800 applications to review. Health Canada will need time to work through the backlog. This means delays that will continue to affect the market.
3. The Public/Private Funding Gap Widens
I predicted businesses with access to the public markets have had and will continue to have a window in time where public capital is easier to obtain than private capital once the hurdle of securing a public listing is cleared. Businesses with that public currency will acquire their competitors and consolidate a wider competitive advantage in scale and brand recognition. I was right about this one. The lucky few who were able to secure funding were able to leverage public currency to buy licenses and acquire companies. Going forward, this won’t continue the same way. They’ll have to focus now on fundamentals. Private funding is drying up as investors look at public markets and wonder what is the exit.
2. Consolidation Accelerates
I hit this nail on the head. Some monumental consolidations have marked the year. Cresco Labs announced the largest acquisition of a public company operating in the American cannabis industry to date, agreeing to buy CannaRoyalty. This followed the announcement by Harvest Health & Recreation to acquire Verano Holdings.
1. Trump Publicly Helps Cannabis through Executive Action
I’m kicking this one to 2020. I think it still has a strong possibility.
I’ve never shied away from sharing an opinion. Now that we’ve closed out 2019, here are my predictions for 2020 (who doesn’t love a list and someone else laying it out there?).
10. Cannabis becomes cool beyond THC and CBD
Do you think science has already discovered all the possible uses for legal cannabis? Think again. As cannabis legalization rolls out across the U.S., consumers have gotten familiar with the two compounds currently in widespread use. There’s tetrahydrocannabinol – commonly known as THC (or ‘the one that gets you high’). And there’s cannabidiol, or CBD, which isn’t psychoactive and is used by many for anxiety, depression, pain relief, and more. My outlook is we’re in the early stages of commercialization—educating the public, introducing new products, and marketing legal cannabis to consumers. Why’s that? Well, consider this: There are well over 400 different identified compounds that can be extracted from these plants. They’re known as cannabinoids – and so far, only two are widely available. There are a handful of discovered cannabinoids already showing promising research that are primed to become the next CBD, such CBG, CBC, CBV, and CBN. CBN is the compound showing the most promise for sleep, and with my hectic schedule, I personally hope to see more products with this compound! In 2020, with greater access and more education, we are going to see new breakthroughs and expanded cannabinoid use.
9. Consultants help more mainstream brands enter the industry
As the supply and demand experiment in states such as Oregon and Washington have resulted in oversupply issues and licensed operators duking it out for market share, more states are considering a limited license approach with stringent license qualifications. As these valuable licenses become available, more mainstream traditional CPG brands will look to establish a cannabis brand and will start by working with a qualified consultant to help them leverage their mainstream business experience while learning cannabis. As more experienced business owners look to engage consultants, they will expect the kind of data-backed advice they would receive in the traditional industry. Anecdotal advice will be less relevant. The backbone upon which MJ Freeway’s consulting practice is built, including track records, hard data, and how it converts into ROI for the client, will become increasingly important.
8. Asia enters the market and gives Latin America and Africa a run for their money
Low-cost production and export laws are forever changing the direction of the industry. Colombian operators are already exporting products, and other Latin American countries are looking to follow suit. South African operators are scaling quickly as well. However, Thailand has recently legalized medical cannabis and begun establishing a regulatory framework, becoming the first Asian Pacific country to do so. Although we are likely some years away from seeing true regional varietals available for purchase locally, much like your South American, African, or Asian coffee, I predict we will see the foundational regulations and export paths be established for that future.
7. Data is the new cannabis currency
Real data has been hard to obtain for cannabis businesses, investors, and governments. Surveys are only so valuable. As the industry both expands in size and consolidates in terms of the number of businesses, more and more smart professionals will demand rich data that is used to make business decisions in most other industries. Being able to supply rich data for the full supply chain through to and including the consumer becomes critical for stakeholders looking to make the right decisions. MJ Market Data has launched to meet this need for rich, meaningful data to inform business, investment, and regulation decisions.
6. Hemp businesses expand beyond CBD extraction
Hemp is an incredibly valuable and versatile product. To date, hemp businesses have been focusing on growing hemp for CBD extraction. However, it is likely we’ll see saturation in the hemp CBD extraction space. If all operators with all available space were extracting the maximum amount of hemp for CBD extraction today, we would have a serious oversupply issue. The savvy hemp business owners will look to monetize other parts of the plant and potentially their extractions beyond CBD to some of the other valuable cannabinoids. Strong data analytics and tracking through software such as MJ Platform or in working with a data-driven consulting team such as Akerna’s will be key for those leaders in evaluating the ROI of their decisions as well as predicting market trends through a predictive analytics reporting engine such as MJ Platform’s.
5. Canada’s scaled market continues to set the standard. U.S. businesses will partner or merge to operate globally.
Canadian businesses have been able to capitalize on their head start and have established what is now a maturing and robust market domestically. They’ve also, due to their federally legal status and help from U.S. capital markets, planted flags across the globe, quite literally exporting their compliance, regulation, and tracking standards. I expect to see Canadian cannabis businesses continue to lead in meaningful ways in the years to come, which brings me to my next prediction. U.S. businesses do not want to be excluded from global expansion opportunities. In this area I expect we’ll see two things, one, more U.S. brands establishing intellectual property holding companies and licensing their technologies oversees, and two more U.S. companies partnering or merging with Canadian companies who have already established a global license presence. Speaking of brands…
4. Brands must prove they are real
Last year I predicted brands would become real. A brand is more than a name and a logo with some marketing spend to promote it. True brands start with product consistency, and it has been tremendously difficult for existing cannabis brands to ensure consistency across locked borders. As business intelligence information, like that available with MJ Platform’s detailed reporting and analytics, becomes more widely adopted, brands will be able to control, regulate, and report on their repeatable processes, enabling product consistency in geographically dispersed regions. Consistency also builds credibility, which contributes to the evolution from a product to a brand that lives up to its positioning and drives loyalty, demonstrated in repeat sales. Counterfeit products can swiftly undercut all of this hard work to establish a brand similar to identical packaging flooding the market. Brands must now prove they are real to consumers through trusted marks such as solo*CODE. In 2020, we’re going to see brands implement anti-counterfeit measures. This brings me to my next prediction.
3. Consumers become savvier
Just as consumers will begin to pay attention beyond THC and CBD, with the advent of products like solo*CODE, which allow the consumer to interact with a package and its contents directly, verifying its traceability information, more and more consumers will vote with their dollars by demanding product authenticity and only purchasing trusted products, especially in the wake of the vaping crisis when not paying attention to the source can mean serious illness or even death.
2. Cannabis businesses focus on fundamentals
As public valuations for operators have fallen, setting comps in the private sphere as well, cannabis businesses are focusing on fundamentals. Consolidation among operators that are also rapidly scaling is accelerating the adoption of technology and the utilization of data-driven decisions.
1. Trump Publicly Helps Cannabis through Executive Action
I predicted this last year, and it didn’t happen, but I still think this has a strong likelihood before the election. The midterms won a sweeping victory for Democrats, and cannabis has become a mainstream issue, vital to converting voters. One only must look at Florida’s election results in 2016, where Trump was elected with 49% of the vote, and cannabis passed by 71%, to see the bipartisan nature of the cannabis issue. I speculate Trump will do something meaningful for cannabis by Executive Order, and he’ll wait until the most opportune time when it has the greatest potential to convert voters in the election.
Those are my top 10 predictions for 2020. Overall, the future of the industry is bright. As a business leader, I am looking forward to the new year and the ongoing maturation of the market. For more news, insights, and information, follow us on Twitter @AkernaCorp.