u.s. Cannabis Sales Trends
We currently have roughly 70% of the states that have reported April cannabis sales. In April, we estimate that cannabis sales in the U.S. will be down 1.6% sequentially and down 1.9% YoY. This is only the second time in history that cannabis sales have been down sequentially in April. When we look at the seasonality trends, March is usually a very strong month compared to January and February, with April coming ahead of March. The last time April sales were down sequentially was in 2020, when dispensaries were closed due to COVID-19. The low inventory numbers paired with pricing pressures caused the industry to not benefit from its 420 holiday. Units for the month grew 1.6% sequentially and are growing in the mid-teens on a YoY basis. This indicates that we saw roughly 3% price declines across the industry for the month of April.
SAFE BANKING
Yesterday, the Senate Banking Committee kicked off the push to get a cannabis banking bill passed this Congress. Most Republicans skipped the conversation entirely and Democrats largely provided opportunities for panelists to reinforce the need for the legislation. One Republican, Tim Scott, did use the platform to express his concerns about potential loopholes created in the money laundering laws that might make it harder to catch people trafficking weapons or fentanyl. He also complained that some banks in the U.S. have chosen to cut off companies in the firearms and oil and gas industries due to pressure from progressive groups. “I think anytime the issue of cannabis comes up, it's always a wild card,” said Senator Dan Sullivan, a Republican from Alaska who co-sponsored the veteran's cannabis bill. “Safe banking — you know, we're still working on it, but it'll be a wild card,” he added. The Senate needs to gather the support of 60 voters in order to pass this bill, but nothing will get passed unless Minority Leader Mitch McConnell gives the go-ahead, which he has not indicated that he will and his history on the topic does not give us much hope.
Interstate Commerce Panel Replay
For the webcast replay and materials: CLICK HERE |
We are at a pivotal point in the history of the cannabis market, with thousands of small farms and businesses that have failed or are on the verge of failure. In addition, millions of legal patients and consumers remain stuck in illicit markets due to high prices and poor selection/quality in many state markets. The largest Cannabis ETF is down 90% from its peak in February 2021 as the industry has collapsed on an inefficient system of failed state-siloed markets leading to significant excess legal cultivation capacity.
The status quo is not a path forward for current cannabis investors or industry participants willing to acknowledge that the industry is broken. Not to mention that the current structure of state-soiled markets will disappear with the inevitable federal legalization. Why are we continuing to misalign incentives in cultivation that will soon be non-competitive? The cannabis industry has raised over $20 billion in debt and equity since 2018; the 15 largest publicly traded only have a market value of $11 billion. The industry has lost billions of dollars, and more will be lost if there is no significant reshaping of the industry fundamentals.
From a legal perspective, we are on the cusp of the single most important and least recognized shift in the economics of legal cannabis since WA and CO were first legalized in 2012. Our conversation about the potential for Interstate Commerce will be the first-ever public forum in which state officials from producer and consumer markets discuss interstate commerce (in advance of fed legalization) in real, informed terms, including its pathway, likelihood, and its desirability.
