It's the most wonderful time of the year
With the kids jingle belling
And everyone telling you
"Be of good cheer!"
It's the most wonderful time of the year
That's right! It's time for the Cannabis Business Times editors to share their favorite stories from the past year!
We can't say with any confidence that this was the brightest year in the cannabis industry, but has anyone ever said that? Ever? The past 12 months were riddled with incredible challenges and oppressive regulatory burdens and dire economic headwinds. Nothing fell in operators' favor, generally speaking, so we spent much of the year compiling thoughtful perspectives and tips for weathering the ongoing storm and finding a version of success that fit each of your individual business goals (see the Stone Road Farms profile below). We hope we provided a bit of a balm along the way.
With that said, we certainly had our favorites among the 945 (and counting) stories we published this year.
Check it out!
Editors' Picks
Dispatches From the Failing Cannabis Economy
It was unavoidable. Throughout 2023 (and certainly for weeks and months and years leading up to 2023), the talk of the town in cannabis revolved steadily around the word “collapse.” Prices were falling. Companies were downsizing. Employees were hitting LinkedIn in search of work. Despite a wave of new states coming online with medical and adult-use legalization, despair reigned in most corners of the cannabis industry.
We tried not to sugarcoat the news around here at Cannabis Business Times; each week we published sober reports from the front lines of corporate budgets and cultivation facility management teams. It was a trying year, and 2024 doesn’t look to be all that sunnier, at least on a macro level.
With a day-in, day-out churn of stories hitting our website and newsletter, we turned to our stalwart print magazine in April to compile the most critical market trends and perspectives in one package for our audience. The result was a compendium of our team's findings, framed with what I consider one of our strongest covers of the year: a portrait of a concerned economist, a wallpaper pattern of alarming pull-quotes, and the damning headline: “Dispatches From the Failing Cannabis Economy.”
Like I said, that was in April. The market’s overall health grew worse over the summer. Let’s raise a reluctant glass to this hectic year and move on with our heads high to the next.
- Eric Sandy
US Health and Human Services Department Recommends Cannabis Reclassified to Schedule III
There’s nothing quite like living in a nation that calls itself a representative democracy yet having elected leaders who govern that very nation in a manner that ignores a broad consensus from their voters: cannabis should be legal.
Furthermore, millions of Americans depend on the medicinal benefits of cannabis every day for dozens of qualifying conditions outlined in 41 state medical programs (yes, I’m counting Georgia, Iowa and Texas in that bunch). Yet, cannabis has no federally accepted medical use as Schedule I drug on the Controlled Substances Act.
So, when news broke in late August that the U.S. Health and Human Services Department recommended to the DEA that the plant be reclassified—in what many presume to be a Schedule III substance, although the exact recommendation has yet to find the public eye behind HHS secrecy—it provided a much-needed bright spot in an otherwise dreary year for the industry.
A Schedule III classification would recognize cannabis as having medical value; it would provide much-needed tax relief for cannabis businesses to deduct ordinary expenses under 280E; and it would further dismantle a drug war that has unjustly criminalized or otherwise impacted vulnerable Americans for more than 50 years.
Yes, cannabis stakeholders and advocates have been burned on the false hope on federal reform countless times before, notably with the SAFE Banking Act passing the U.S. House seven times and the MORE Act passing the House twice, only to fall on deaf ears in Senate. Not to mention, there have been at least five unsuccessful cannabis rescheduling petitions since 1972.
But this rescheduling effort feels different. Our nation’s sitting president gave the directive for the recommendation. And our nation’s top health department conducted a yearlong investigation that concluded by not only recognizing cannabis’s medical value but its lower potential for abuse—a federal agency first.
Notably, the medical and scientific analysis conducted by HHS and FDA officials, paired with a formal recommendation, resembles a key ingredient missing from previous rescheduling attempts. Specifically in 1975, the DEA found rescheduling cannabis would not violate the United Nation’s 1961 Single Convention treaty on narcotic drugs, but rather the DEA maintained its hands were tied in the absence of cannabis having an accepted medical use recognized at the federal level in the U.S.
But the “no medical value” claim is now off the table for the DEA.
In a particularly difficult year for the cannabis industry, and perhaps especially for businesses operating in California—a market that Lex Corwin, founder of Nevada City, Calif.-based sungrown flower brand Stone Road Farms, describes as “inherently broken”—it was refreshing to share Corwin’s take on how his company is steadily growing and expanding to new markets.
Stone Road rounded out 2022 with 50% year-over-year growth from 2021 by maintaining a lean team, effectively telling the brand story, scaling back the number of SKUs and offering consistently high-quality products.
That’s not to say the company is immune to the industry’s harrowing economic conditions; Corwin shared in February that only 8% of Stone Road’s customers pay immediately upon receiving products—down from roughly 35% at the start of 2021—and said the market is a “rob-Peter-to-pay-Paul scenario,” where retailers don’t pay brands, so brands can’t pay manufacturers, and then manufacturers can’t pay the farmers at the start of the supply chain.
Still, Corwin—who started growing cannabis back in 2009 at the age of 16—has learned plenty of lessons that have helped him build a successful business. He said it all comes down to working with the right vendors and constantly pivoting to meet the market where it is.
This strategy has paid off for Stone Road, which has expanded to Massachusetts, Michigan, Oklahoma and, most recently, New Mexico.
“I don’t exaggerate when I say we’ve made millions of dollars’ worth of mistakes in California,” Corwin told CBT in November, upon Stone Road launching products in New Mexico. “Taking those lessons and applying them to these new markets is just going to ensure we’re going to have a higher probability of success than a lot of brands who are getting into cannabis maybe with a more naive mentality. … When I started the brand, I felt we were going to be printing money after the first three years. How wrong I was. It’s a really tough business, not only when you look at the taxation and regulatory scheme, but ultimately, it’s a very finicky consumer. … [We’re] basically taking our learnings from California and applying them into every market we can."
- Melissa Schiller
Who is Mel Frank?
Anyone working in the cannabis industry, especally at a plant-touching cultivation company or dispensary, understands that there’s an element of risk involved and a whole lot of uncertainty. In 2023, we’ve seen this play out perhaps more than ever before, as prices in many markets dropped, access to consistent banking and capital was limited, and key legislation that would bring relief remains stalled. Taxes and the inability to write off many business expenses create more barriers to profitability. Cannabis is still being criminalized and remains illegal at the federal level.
However, August brought back-to-back weeks of more sunny cannabis news, with the U.S. Department of Health & Human Services confirming it would recommend rescheduling, the SAFE (now SAFER) Banking Act getting revived in Congress, and citizens in Ohio’s Republican-leaning state approving an adult-use cannabis initiative by a wide margin. There are at least eight states on their way to being billion-dollar markets in 2023. There’s a demand for regulated cannabis, and access is improving in many places.
During challenging moments, it’s important, almost essential, to remember this incremental progress. It’s also helpful to reflect on how far the cannabis industry has come.
One of the pioneers of indoor cannabis cultivation, Mel Frank, knows all about risk and uncertainty, and has watched as the industry has transformed into something "mostly unrecognizable” from when he first started growing and writing about cannabis in the late 1960s and early 1970s. Born James Goodwin, he changed his name to Mel Frank so that he could share seeds, plants and vital growing information safely when cannabis was not legal in any state nor for any use.
Frank detailed his story to Cannabis Business Times as part of the August 2023 cover feature, which also includes several images from Frank’s extensive photo collection, showing detailed close-ups of early cultivars, some that were lost to a fire, outdoor grows in New York, indoor gardens in L.A. and friends sharing a joint in San Francisco. Reading about his experiences and seeing images of sun dappled cannabis plants grown from smuggled seed is a unique window into what has changed—and what hasn’t--since states started legalizing the plant for medical and adult use.
Dave Holmes, owner of Clade9, says that Frank “educated an entire generation of growers. Without [Frank] and a couple of others that wrote early treatises on indoor cultivation, it would’ve taken a lot longer for the industry to get where it is.”
Despite the challenges, Frank kept writing books, sharing seeds and cultivating plants, helping create a foundation for the industry as we know it today.
- Michelle Simakis
If states in the U.S. that have legalized cannabis are, as they are often called, experiments in cannabis legalization or laboratories of democracy, our neighbor to the north then is a laboratory of democracy on a significantly grander scale. Canada stepped to the center of the world’s cannabis stage when it passed the Cannabis Act, the federal adult-use legalization law that took effect in October 2018. It did so despite the vast majority of the rest of the world holding fast to antiquated and harmful prohibition laws and in conflict with the Single Convention on Narcotic Drugs, 1961, the international treaty that the U.S. Drug Enforcement Administration (DEA) has cited in previous rejections of requests to reschedule cannabis in the U.S. and noted as a possible concern as we wait on the DEA’s response to the HHS’s recommendation to reclassify cannabis.
Four years after Canada’s momentous step to legalize cannabis, CBT Senior Editor Melissa Schiller dove into some of the country’s challenges in March in “Tight on Time: Can Canada’s Licensed Producers Hang On?” as many craft businesses struggled for survival and mammoth cannabis companies fought for solvency. One of the more significant challenges, as in the U.S., is the country’s tax structure, which one company interviewed by Schiller noted trimmed 25% to 30% off the company’s bottom line. And this is in a federally legal country with no 280E burden to carry.
Schiller then explored in October the report that presented findings of a review of the Cannabis Act that was ordered by Health Canada in September 2022. In “Canadian Government Releases Report on Legislative Review of Cannabis Act,” Schiller presented the report’s findings that confirmed much of what was already known about Canadian cannabis businesses’ often insurmountable challenges. “The ‘What We Heard Report,’ published Oct. 10 by Health Canada, presents findings suggesting that legal operators are struggling to turn a profit and become financially viable due to the costly burdens of taxes, mark-ups, fees and regulatory compliance,” Schiller reported.
The review was conducted by an expert panel and solicited feedback from a wide variety of stakeholders. Findings also touched on public health, the illicit market and more.
You can read details of the findings in Schiller’s in-depth article. While some businesses in Canada are finding paths to success, these reports are a stark reminder that federal legalization doesn’t necessarily solve problems from an economic standpoint. (Though there’s no question that, societally speaking, ending federal prohibition is its own great achievement.)
- Noelle Skodzinski
