Its December and time to prognosticate on where the cannabis industry is headed in 2022.
1. Consolidation – The fragmented US and Canadian sectors will continue to consolidate, driven by 1) companies disappearing and 2) M&A right across the value chain;
2. Sluggish US reform – the Congress will move forward on narrow issues like banking (triggering MSO uplistings) while punting contentious questions such as decriminalization and full-scale legalization;
3. Lively capital markets - Undervalued MSOs will finally receive (some of) the respect they deserve. Expect some pubco LPs to be delisted because they don’t meet minimum listing criteria. Debt financing will take off driven by innovative instruments (e.g., venture debt), the rise of new funds and improved sector operating results;
4. Ongoing margin compression – retail prices will continue to fall as growers and retailers have incentives to sell their way out of their inventory and fixed cost morass. Meanwhile, inflation is taking off, driven by labour shortages, rising capital costs and supply chain hiccups;
5. Global liberalization – New jurisdictions in South America, EU and Africa will announce their intent to legalize. However, expect a long wait to market openings due to regulatory lags and C19;
6. Dynamic product categories - new product launches (e.g., fast acting edibles, pre-rolls, concentrates) will proliferate reflecting evolving consumer tastes and innovation. Yet, underperforming SKUs will hastily exit the shelves.
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