Political WINDS SHIFTING
The chances of passing a comprehensive reform bill look slim in this Congress, but 2022 is another story. As we said in our weekend note the GOP-sponsored bill, from Rep. Nancy Mace (R-S.C.), sets the stage for negotiations between the two parties, which now at least seem to agree on removing cannabis from the Controlled Substances Act and expunging nonviolent cannabis convictions. The biggest differences are over social equity and tax rates. Another small shift is Sen. Dianne Feinstein (D-Calif.) has signed on as a co-sponsor of the SAFE Banking Act, a bill she didn’t sign on to last Congress. The bill now has a total of 41 cosponsors.
Florida Tracker
Sales in Florida have had a slight downtrend in the last few weeks. This past week, sales were down about 7%. All three of the top companies by market share have been losing share to smaller players. Surterra, Ayr, and iAnthus have been gaining share in the state. Curaleaf added on dispensary location in the state this past week.
Illicit Dispensaries NY
Unlicensed dispensaries are popping up all over Manhattan, including cannabis trucks and modern brick-and-mortar locations. These dispensaries are operating under self-proclaimed loopholes in the law. Their websites describe the sale as an "acquisition and transfer" of the cannabis they're being given as part of the membership. Wording it in this manner is an attempt to get around the ban on sales of cannabis by unlicensed (and even licensed) sellers. However, it is unclear if this "loophole" would hold up in the court of law. One dispensary, named "Street Lawyer Services," has locations all over the country in areas where there is such a gray market. They have locations in Miami, Washington DC, and NYC. In Miami, however, they can only sell Delta 8 and CBD products. Manhattan also has several green-colored cannabis trucks scattered throughout the city selling various THC products. When New York finally begins licensed cannabis sales, these unlicensed companies will pose a significant threat to companies entering the market.
DC Legal Market
The DC City Council is set to lay the groundwork for a long-awaited legal marijuana market this week. Since 2014, dispensaries have been "gifting" cannabis to patrons. The full launch of the licensed market could come as early as August of 2022. Questions still linger on what would happen with the current gray market in the District. It is estimated that over 1000 smaller operators provide delivery or pickup services. New operators are wary of entering the market now: "For people like me, we're not really excited about someone getting an 18-month head start when they've already had a six-year head start," said a prospective dispensary owner. These dispensaries in the gray market will likely have a path to licensure, but not all will be accommodated.
CGC Management CHANGES
As evidenced by this management shake-up, CGC is struggling.
Effective immediately, Mike Lee, EVP and CFO, and Rade Kovacevic, President and Chief Product Officer will be stepping down from their respective roles on the Executive Management Committee and will depart from the company on 31-Dec-21. In the interim, they will serve in an advisory capacity to support the transition. The company has initiated an external search for both roles and to support a seamless transition has named Judy Hong as interim CFO and Tara Rozalowsky as interim Chief Product Officer. In addition to serving as members of the company's Executive Management Committee, both will report directly to CEO David Klein effective immediately.
