Top 10 predictions for the cannabis industry in 2019
It’s that time when we dust off the year that was and look forward to what may be in the year ahead. At MJ Freeway, we are looking forward to the definitive merger agreement with MTech to be finalized. This will create an exciting new chapter for us and the industry, but we’ll talk more about that later. For right now, let’s do some speculating. Here are my top 10 predictions for the cannabis industry in 2019 (because ‘tis the season for lists, and who doesn’t love them).
10. Globalization Becomes More than Pins in a Map
Last year, the U.S. comprised 90% of all retail cannabis sales. I predict that share will be closer to 70% in 2019. For the nine years that I have been in the industry, I have watched U.S. states pass legislation, get press coverage, and then sometimes take years to establish the framework for a legally regulated marijuana program. The other pattern I’ve seen is that a couple very risk friendly and forward-looking entrepreneurs become the first to legally operate in a new market. They establish their presence and gain that important virgin market share, beating others by many months because they risked investing in build out and business expenses well in advance of receiving a license to operate in cannabis. Currently in many countries around the world, we are now seeing those first intrepid cannabis entrepreneurs begin to operate. Next year, many, many more global operators will open for business who don’t invest in their start-up until after they receive their licenses.
9. Consulting Becomes Data Driven
A legal background or prior experience in cannabis will no longer be enough for savvy business owners looking for consultants with whom to partner in new markets. As more experienced business owners look to engage consultants, they will expect the kind of data-backed advice they would receive in 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. CBD Standards Emerge
The current state of hemp-derived CBD reminds me of the early days of cannabis in most states. No one really knows what they are really getting most of the time. Consumers will begin to insist on knowing for what they are paying and what they are getting. Regulation must happen, perhaps via a self-regulated organization or through federal regulatory bodies in various countries (FDA in the U.S., Health Canada in Canada).
7. Brands 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 tightly control, regulate, and report on their repeatable processes, enabling product consistency in geographically disperse 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.
6. Spain Passes Federal Legislation, becoming the Colorado of Europe
Spain currently operates in a grey environment. The cannabis clubs exist in Spain because Spain has very serious private property laws. It is still technically illegal to have cannabis on the streets in Spain, but in the clubs, it is legal. Our channel partner in Spain is closely involved in the country’s push to legalize cannabis in a licensed, regulated, compliant and taxable model, which is expected to pass in legislative session in 2019. As the Netherlands model is still grey in some respects (it is legal to sell it at the retail level, but it is not technically legal to grow it), Spain will become the first European country to truly implement a fully-licensed, regulated, compliant and taxed cannabis program of more than experimental size, paving the way for the rest of Europe to follow.
5. Latin American Production and Export Change the Direction of the Industry
We’re at number five; is it safe to talk about the elephant in the room now? Low cost production and export laws will forever change the direction of the industry. Colombia and Mexico are poised to establish their global dominance in short order. Which leads to my next prediction… Cannabis will soon become a very valuable, sizeable addition to Colombia’s legal agricultural exports and local economy. 2016 legislation opened up Columbia to regulate the import, export, and cultivation of medical cannabis, and there are just a few companies like Clever Leaves and PharmaCielo that have dual licenses to cultivate and process cannabis containing THC and CBD. The Washington Post predicted in May that the Colombia cannabis market could be worth $31.6 billion in just three years. That escalation starts in 2019.
4. Canada Has a Reckoning
It’s going to be hard for many Canadian producers to compete with low cost, large-scale greenhouse producers and imported cannabis from Latin America. The euphoria of being the first developed, world nation to legalize will subside in 2019. Plus, the Canadian public markets will experience a correction next year when businesses begin to report their financials. That’s when winners will emerge and other businesses will be consolidated or fold.
3. The Public/Private Funding Gap Widens
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 capitalonce 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.
2. Consolidation Accelerates
With access to public capital, the dominant players will accelerate consolidation globally. Those businesses will need to invest in their IT and infrastructure, as well as products, which as a category has experienced underspend in our industry. MJ Platform, which offers a true ERP for cannabis, meets compliance in every legal jurisdiction and provides the critical business intelligence needed to run a global business. These businesses will not only NEED to ensure they are compliant in every jurisdiction in which they operate; they will also need to track their ROI and report on fundamental business metrics to ensure they remain competitive in a market moving toward lower cost production.
1. Trump Publicly Helps Cannabis through Executive Action
The midterms showed 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 only 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, so the Democrats will not be able to take credit for enabling the booming industry of cannabis and all the available tax dollars by passing something in Congress next year.