Scott Jennings’ Post

The biggest mistake that many have made, as it relates to predicting the trajectory of the Canadian recreational cannabis industry, is to ignore history and instead, rely on hope. To ignore the fact that recreational cannabis is a regulated consumer packaged good and as such, was likely to follow the same evolution as any other regulated consumer packaged good. Slow, slow, slow. I mean, you could start with the consumer, as you always should in CPG - and the fact the consumer beliefs had to change, in order for the consumer behaviour to change - and that takes time. You could add in the fact that consumer trial is always higher than consumer repeat and consumer adoption - the math says it has to be - and that means you can't get seduced by around-the-block lines on Day One or Day Seven - that was not going to last. You also needed to look at the products and understand that there is no first mover advantage in CPG - that better beats first and the first were not good (enough) - that consumers would switch to products that better delivered on their needs and within their value equation. You needed to look at government - to understand that there was political risk in federally legalizing recreational cannabis and there was zero chance that government were going to through the barn doors wide open - it was always going to be strictly regulated and would stay that way until there was enough information and (this is important) enough voter acceptance, to change it. And finally, you needed to look at the companies, meaning, the leadership - what was their history - their pedigree? What was there in what they had done before, that said they possessed the skills and experiences to successfully lead a regulated CPG business in a new industry? Yeah, I'll wait. Too many people just wanted it too badly - they wanted recreational cannabis to be massively successful. It may have been because they had a deep personal connection to it. Maybe they had a deep financial investment in it - but wanting something to happen and the likelihood of it happening, can be very, very different. I have been predicting the Canadian rec cannabis market and the companies therein, for the past 5 years - I have been pretty much bang-on. And, it's because I don't rely on hope - I don't really care - I only look at it through the lens of objectivity and facts and history, combined with my experience. It's something a lot of other people could also do, but for some reason, don't - it may be because that renders a picture that doesn't help them in terms of selling consulting services, selling company stock or getting speaking gigs. To me, it's a consumer packaged goods industry that is intellectually interesting to evaluate and predict - and so, that's what I do. More people need to do the same - I could use the competition.

Licensing takes control over the growing and trade of a natural plant from the hands of the many and places it in the hands of the few. It is true that in many US states, where recreational cannabis has been legalized, home growing is allowed enabling households to grow a few plants for personal use. But anybody who wishes to grow plants at a larger scale, or who wishes to trade in the plant, must secure a license from the government. This is downright absurd. Do any farmers growing rice, wheat, corn, tea or coffee, or other such crops need to get a license for it? No. Then why should cannabis growing and trade be licensed? When one considers that the majority of the world's cannabis growers are primarily small farmers and traders, and the precise reason why they choose cannabis as a crop is because they need the money badly, then we see licensing for what it really is. The ones who secure licenses are the well off and politically connected persons. The vast majority of small to medium scale cannabis growers and traders, who would benefit the most from a legal environment to grow and sell their cannabis, are forced to operate out of the black market due to these unfair restrictions. It is true that governments earn tax revenue from licensing cannabis growth and trade. But what they fail to see is that if cannabis growing and trade were made license free, it would result in all the sales revenues that are lost to the black market, and therefore also the sales taxes and income taxes, flowing into the legal market and the government treasuries. It would also encourage more numbers of farmers to take up cannabis farming as an additional crop. Considering that the black market is still about 50% of the market even in Canada that has legalized recreational cannabis, and that it is 100% nearly everywhere else, one hopes that better sense will prevail on the governments. https://lnkd.in/fmfZ4Nn

Here’s the story of how the cannabis industry will die in Michigan, and how thousands of jobs will be lost in the process: 2022: The state names an ex-cop to run the Cannabis Regulatory Agency. 2024: Regulators codify a slew of new rules aimed to enhance their ability to enforce. These rules pause price compression, raising retail prices in some cases, but operator profit gets even thinner due to the cost of the regulations. They continue to fail in their efforts to stop illicit product from entering the system, and their continued overregulation only makes it harder for licensed operators to compete with the black market. The CRA faces its first lawsuit due to blatant overreach. Cannabis is rescheduled federally. 2025: Hemp Derived products continue to thrive and online sales begin to eat away at dispensary revenue. Many processors opt out of the Rec market altogether and sell strictly via Ecommerce and Smoke Shops. Cultivator and processor license counts drop for the first time. With the higher cost of dispensary goods, many consumers flock back to the black market and online/hemp market. 2026: Ohio and IL’s recreational markets compress and begin to significantly eat away at Michigan’s top line. Retailer license counts drop for the first time. The CRA opens its state run lab. Their lab staff is just as capable as the staff they have reviewing contracts. They attempt to use lab data to back enforcement efforts but the data is so thin, they are unable to prove any wrongdoing in court, and lose lawsuit after lawsuit against licensees they attempted to strip licenses from. 2027: The CRA refuses to enact change that allows operators to compete on the national market, or against black/hemp market products. They still have not replaced AFS or package level tracking. CRA revenue shrinks so they increase fines to pay for the financial black hole that is the State Run Lab. They leverage this new lab to terrorize license holders for variance in cannabis product that occurs naturally. 2028: Cannabis rescheduling finally leads to interstate commerce. Operators now choose which state they should base their single manufacturing operation in. Cannabis is legal in Indianan and Wisconsin, and retailers in Michigan continue to close. Few manufacturers choose to stay in Michigan due to its geographic location, gross overregulation, poorly staffed regulatory body, and quickly shrinking market. All the largest employers exit the state. Outdoor and mixed light cultivation in the southwest kills off the vast majority of cultivators selling on METRC in Michigan. 2029: The greatest cannabis market in the world is reduced to nothing more than a cautionary tale about overregulation.

The story of who wins in cannabis is not even close to written. Some have made very nice exits while the getting was good. Those are really admirable given how much loss has taken place. But, from a brand perspective it isn’t clear that anyone is a clear long term favorite. Giant MSOs will fail. Small profitable businesses will inch along. But it is still anyone’s game. A big reason? There is still a huge uncertain evolution that is going to take place on what the actual market looks like even in 12 months. The farm bill could decimate regulated cannabis just as easily as It could decimate hemp cannabinoids. Imagine if a cannabis brand could invest in one facility and sell nationwide instead of having to invest in each state where it wants to sell. Interstate commerce alone would crush growers across the country trying to compete with California climate and growing cycles. Cannabis is so many things for so many people but at the end of the day it is a plant. The licensing scheme was a big mess aimed at solving an imaginary problem that has always persisted in the minds of the sheep politicians. Cannabis is evil and we need to think of the children. In the meantime seed oils, sugar and alcohol wreak havoc on our society with no limitations while cannabis wastes time tracking seeds and flowers that end up in the traditional market anyway. Brands will prevail at some point. And the ones that do might not have even been created yet. Lowest cost. highest value. Differentiation. Those are the long term keys to success. There will be so much bad debt and equipment etc. when the big house of cards falls as rules change. Interesting times. Stay Smokey.

If you found out that a wine producer was inflating their alcohol by volume % on their bottles, you would feel lied to and would likely buy from a different producer next time. That is exactly what is happening across the legal cannabis industry, both in Canada and around the world. With too many licensed cannabis producers in Canada, there is too much pot in the market for the available number of consumers, and it's causing producers to inflate their THC % on their labels in order to win customers. This practice is generally resorted to by producers that are losing business and don't have the resources or creativity to create new brands that capture consumer attention. The fact that labelling regulations make it very difficult for producers to distinguish their products notwithstanding. But that practice affects the entire industry, including producers that are acting in good faith and honestly reporting their THC content, even though we know that doing so means our products will be perceived as inferior to some consumers that are looking for the most THC and are misled by bad actors, causing losses to our business. There is speculation that the federal government is taking a somewhat laissez-faire approach and is waiting for distressed producers to go out of business on their own, causing a natural realignment of supply and demand, after which they will introduce new regulation on a smaller industry. But practices like THC inflation will keep producers around that would otherwise leave the market, and who knows for how long. I'm happy that the Globe & Mail has made a story out of this ongoing problem and that Organigram can be a part of the story. I hope that it spurs Health Canada to take these claims seriously and take action. Colorado, Washington and Michigan have all taken decisive action to stop labs that inflate THC numbers. Until similar action is taken by the Feds here in Canada, consumers will not have the confidence in products they buy at cannabis stores they take for granted at grocery or liquor stores.

🌿💨 Cannabis Prevails Over Booze: TD Cowen Report Unveils Shift in Consumer Habits 💨🌿 Legal cannabis is reshaping preferences, with two-thirds cutting back on alcohol, per TD Cowen analyst Vivien Azer. Alcohol sales in cannabis states have underperformed by 100-150 basis points in the past five years. With projected U.S. cannabis sales of $29 billion in 2023 and a 7% CAGR, cannabis gains momentum, while alcohol may lose 2 million users. 📉 Impact on Alcohol: Beer takes a hit with a 6-point decline in preference among past-month cannabis users. Alcohol's retention rates, especially among 18-25 year-olds, decline as two-thirds of cannabis users cut back on drinking. 💰 Stock Implications: Short-term impact expected for alcohol stocks; tequila and bourbon may fare better. Opportunities arise as soda consumption declines, and energy drinks face scrutiny. 🔮 Future Projections: Cannabis sales to grow 11% in 2023, outpacing alcohol at 3%. Total U.S. legal cannabis retail sales estimated at $29 billion in 2023 and $37 billion in 2027. 🔄 Consumer Habits: Cannabis users report increased consumption frequency as they cut back on alcohol. 🌱 Positive Outlook: Azer remains optimistic about cannabis, emphasizing the need for industry evolution. Share your thoughts on this evolving landscape! 🌿🔍 #CannabisTrends #AlcoholIndustry #TDcowenReport Article: https://bit.ly/3TqJ08A

The Cultural Shift: Why More Cannabis Consumers are Growing Their Own ~~~ At 24, I gained the legal right to grow. But it took me 4 years before I tried. Like many who move from an illegal state, the legal market’s selection was more than enough to satisfy my smoking needs for a while. But, eventually, the legal market started declining — safety, quality, and selection weren’t what they once were back at the peak of Colorado’s medical market. ~~~ So, I started supporting friends and home growers who offered products and varieties that the dispensaries didn’t. The more you're around other growers, the more you consider doing it yourself. And I’m not the only one. ~~~ As more places gain the legal right to grow, more consumers will decide to try their hand at growing. Here’s why: ~~~ ›› Safety  ‹‹  Legal markets require testing. As a result, products that fail are recalled. This is a good thing done to protect consumers. But it’s the fear of the unknown — what happens in the grow and post-harvest to get a product to pass testing—that worries consumers. As recalls become more frequent, along with concerns about remediation, safety will drive many to consider growing their own. ~~~ ›› Legal Right ‹‹  With no legal risk, the risks and barrier to entry are less. As that balance between risk and reward keeps tilting, more will feel comfortable trying. ~~~ ›› Selection ‹‹  Eventually, you’ll tire of the market's selection. Shops stop carrying your favorites because others are better yielders or better sellers. Legal grows only pump out what sells, leaving you empty-handed, looking for options that match your needs. What the market cannot supply, you can grow yourself. ~~~ ›› Quality ‹‹ Recreational has brought a variety of benefits, but is also responsible for a decline in quality, especially in medical markets. Quality exists, but is less common and often priced at a higher point, making growing a more affordable way to get better weed. ~~~ ›› Cost ‹‹  Even with crashing averages, quality continues to carry a premium price. Disappointed with $99 ounces but can’t afford a $300+ alternative? Growing can give you access to better cannabis at lower costs than buying top shelf. ~~~ ›› Boredom ‹‹  I started growing out of boredom. Bored with the same routine. Bored with the market. Bored with the buying experience. If you’re bored with something, find new ways to enjoy it; if you’re bored in life, learn something new. ~~~ ›› Curiosity ‹‹ Ever you wondered what it actually takes—What goes into growing? How hard is it? How expensive could it be? Why can’t I do this myself? Eventually, you’ll decide, “Screw it, let’s try it.” ~~~ Even with the legal right, most people won’t try growing their own. But the ones that do will experience an entirely new level of legal weed. ~~~ That’s a wrap! Ready? Learn why and how to get started growing your own: Use the link in my bio to join 2500+ others in The Hobby Grow.

I mean, it makes common sense, if you think about, solely across 4 components. 1. Both recreational cannabis and beverage-alcohol deliver on a number of shared need states, be it relaxation or energy/party or socialization or even status/sophistication/badging. 2. Consumers have a fixed amount of disposable income and usually make trade-offs if they add a new consumption category. 3. Cannabis is being legalized across more jurisdictions and is (slowly) increasing in acceptance, on its way (slowly) to normalization. 4. Cannabis is seen by many as a safer alternative to beverage-alcohol. So, one could expect beverage-alcohol consumption and resultant sales, to see a decline, if consumers add recreational cannabis to their consumption set. What is interesting is that cannabis-infused beverages seem to represent a very small piece of total recreational cannabis consumption and are unlikely to be the format-driver of any switching away from beverage-alcohol. Rest assured that the bev-alc industry is unlikely to stand idly by and watch consumption leave their category - they will develop strategies to defend, from the easy ones, like reducing their pricing, to product innovation, to public relations and education messaging. Adding recreational cannabis to their business (a la Constellation/Canopy) is not a way to retain beverage-alcohol consumption - it can be an offset, but to own a cannabis company does nothing to retain bev-alc sales. https://lnkd.in/gvg3BvaZ

🌿Holland Geared Up: From Coffeeshops to Controlled Sales, the Dutch Cannabis Experiment Starts Rolling🌿 MediCannaGPT.com It's official! After years of navigating a hazy policy landscape, two Dutch cities, Tilburg and Breda, have flipped the switch on the much-anticipated experiment: legal cannabis sales. This isn't just a green thumb waving to tourists; it's a major milestone in the Netherlands' long relationship with this controversial plant. Why is this such a big deal? For decades, Dutch coffee shops have existed in a legal limbo, tolerated but not fully regulated. This experiment changes the game: cannabis grown under the watchful eye of the law is hitting the shelves, marking a shift towards controlled access and responsible commerce. What's under the microscope? Researchers are gearing up to dissect the experiment like a botanist with a prized bloom. From crime rates to public health, from consumer satisfaction to economic ripples, every aspect will be analyzed to see if this new leaf turns into a flourishing tree. Beyond Dutch borders: The world is watching. If this experiment sprouts success, it could be the fertilizer for similar moves in other countries, potentially shaping the future of global cannabis policy. Challenges in the bud: While the green shoots of progress are exciting, concerns linger. Can the black market be kept at bay? Can responsible advertising and consumption be nurtured? How can we ensure society doesn't feel the sting of potential downsides? Winning public trust: Ultimately, the experiment's success hinges on public opinion. Transparent communication, addressing concerns head-on, and showcasing the benefits of a regulated market will be crucial for earning public trust and support. This isn't just about buying a legal bag of buds; it's about opening up a critical conversation about responsible cannabis policy, regulation, and the potential benefits it can offer. So, let's keep the dialogue flowing! Share your thoughts on the Dutch experiment, the future of cannabis legalization, and how we can cultivate a responsible future for this complex plant. Will this experiment blossom into a model for the world? Or will it wither under the weight of challenges? Time will tell, but one thing's for sure: the Netherlands has just planted a seed that could change the global cannabis landscape forever. So, let's watch it grow together! Share your thoughts, questions, and hopes for the future of cannabis in the comments below. The conversation is just getting started!