Cannabis Industry Experts Speak: The Good And Bad Of Business In 2022

This article was originally published on HoneySuckle Magazine and appears here with permission.

As summer brings us to the height of growing season (and for many in the cannabis industry, conference season), those in the know are thinking pointedly about the space’s next moves.

(C) POSIBL

The Cannabis Industry in 2022: The Good

New York’s Office of Cannabis Management recently released its first drafts of packaging, labeling, marketing, and laboratory testing regulations; New Jersey launched its first adult-use retail sales in late April; and Rhode Island legalized adult-use cannabis just last week. The East Coast is primed to be a powerhouse of cannabis business. Meanwhile, the West Coast and Midwest are refining their approaches to social equity.

Politically, 91 percent of Americans nationwide have said they support medical cannabis legalization, while nearly 70 percent favor federal legalization of adult-use. There has never been so much pending legislation focused on legalizing the plant at the federal level: The MORE Act passed the House for the second time in April, while Congress is also considering Representative Nancy Mace’s States Reform Act and the comprehensive PREPARE Act, introduced by Representatives Hakeem Jeffries, David Joyce, and Brian Mast. Senate Majority Leader Chuck Schumer is additionally revising the Cannabis Administration and Opportunity Act (CAOA), a bill he introduced in July 2021 with Senators Cory Booker and Ron Wyden, which will be heard by the Senate this August.

The Cannabis Industry in 2022: The Bad

But not all in the cannabis industry is quite so rosy. Differing state regulations are hindering the growth of brands trying to gain national recognition. High taxes and supply chain issues are threatening the regulated market’s ability to retain customers, who can still go looking for cheaper, faster alternatives in unregulated sectors. And there remains the question of whether legacy operators who want to transition to legal spaces can do so without losing what makes their brands successful (or, more importantly, without incriminating themselves).

(C) POSIBL

Meet the Cannabis Industry Experts

To get a fuller understanding of the state of the cannabis industry, we asked five experts from different parts of the business to share their thoughts. Their insights show we may have a long way to go in this dynamic cannabis revolution, but for all its ups and downs, it certainly is the adventure of a lifetime.

Jesus Burrola, CEO of POSIBL (C) Ben Lalande

Jesus Burrola, POSIBL

Jesus Burrola is the CEO of POSIBL, known as “the cannabis farm of the future.” Already the engine for several of California’s leading brands, POSIBL brings top-of-the-line greenhouse technology to cannabis, pairing its Smart Greenhouses with the best possible genetics to cultivate ethical, sustainable and potent flower.

Andrew DeAngelo (C) Giacobazzi Yanez

Andrew DeAngelo

A global cannabis industry consultant and strategic advisor, Andrew DeAngelo is one of the foremost visionaries to have shaped the state of modern cannabis. He has been instrumental in establishing the structure for major organizations within legal cannabis, particularly as co-founder of Harborside, the world’s oldest and largest medical dispensary system. Over 13 years at Harborside and decades in cannabis advocacy, DeAngelo led the design and development of gold-standard retail for the industry, innovating many “firsts.” His achievements include introducing CBD medicine to heal severely epileptic children as documented in Discovery Channel’s Weed Wars, implementing the first lab-testing program in the history of cannabis dispensing, creating child-resistant packaging for edibles, standardizing inventory tracking, initiating senior outreach, and successfully preventing the federal government from seizing Harborside in forfeiture actions against the company in 2012.

Steven Jung, COO of PAX (C) PAX

Steven Jung, PAX

The Chief Operating Officer of PAX, Steven Jung helps drive one of the world’s best-known and most successful cannabis brands. Known for their award-winning technology, PAX devices are the top vaporizers on the market, considered to bring out the best qualities within the flower. The PAX team is committed to harnessing cannabis as a force for good. To that end, they regularly help advance causes of social justice, access, and equity, while continuing to build upon a legacy of enduring quality and innovation. PAX’s latest product line of Live Rosin Pods launched earlier this year to wide acclaim.

Lulu Tsui, co-founder and CXO of On The Revel (C) On The Revel

Lulu Tsui, On The Revel

Lulu Tsui is co-founder and Chief Experience Officer of On The Revel, a company she created with Jacobi Holland in 2015. Since then, the duo and their dedicated team have utilized a number of curated educational and networking experiences under On The Revel’s umbrella to democratize information for those interested in entering the cannabis sector. On The Revel events, known as Revelry, are conferences focusing on inclusivity in cannabis. The latest Revelry, hosted on June 4, 2022, was the brand’s first live event in Yonkers, New York to honor the evolution of the Empire State’s legal cannabis market. Their regular in-person events along with On The Revel’s Dope People online membership community, podcast, and virtual experiences, celebrate the diverse people that have been and are currently building the cannabis industry in the aim of developing its gold-standard, with opportunities for all.

Jeffrey D. Welsh, Partner at Vicente Sederberg LLP (C) Angel Ooriggi

Jeffrey D. Welsh, Vicente Sederberg LLP

Jeffrey D. Welsh is a partner at Vicente Sederberg LLP, a law firm nationally recognized for its groundbreaking work on cannabis law and policy reform, as well as representing clients in the cannabis and hemp industries. Vicente Sederberg played a pivotal role in advocating for the passage of Colorado’s Amendment 64, which allowed the state to be the first to legalize adult-use cannabis in 2012. Welsh focuses his practice on advising companies, brands, entertainment and media properties, other law firms, and investors on how to navigate the California cannabis marketplace. Prior to joining Vicente Sederberg, Welsh worked in Corporate Business Affairs at the largest talent agency in the world, William Morris Endeavor, now WME | IMG, while simultaneously continuing to work in the legal cannabis industry part-time. In 2015, Welsh co-founded Frontera Law Group with Luke Stanton. Through aggressive networking and an unrelenting desire to be the first mover in the cannabis-to-entertainment/media space, Welsh fostered an extensive network with the current and future tastemakers of the entertainment industry to facilitate deal flow between these two industries. He also co-founded Composite, a full-service creative agency, in 2017; Composite helps guide and grow brands in the legal cannabis industry and specializes in creative and content production, marketing research and strategy, and product development.

On The Revel's Revelry, February 2022. Lulu Tsui (front), with co-founder Jacobi Holland (top left), Head of Content & Community Peter Mercado-Reyes (top right), and Sabastion C (right) (C) On The Revel

How Confident Are You About The Cannabis Industry Compared to Last Year?

STEVEN JUNG

At PAX, we’re more bullish than ever on cannabis. This is underscored by the continuing momentum of state legalization, but even more so by rapidly increasing consumer demand. Adult use cannabis sales taxes generated more than $3.7 billion in state tax revenue in 2021, and in states like Massachusetts, we’re actually seeing cannabis tax revenues outpace those of alcohol. By all accounts, this trend is accelerating, despite the federal government’s inaction thus far.

JESUS BURROLA

Looking at the big picture, the industry continues to make headway with more states legalizing cannabis, and growing overall support from the general public. In that sense, I am very confident that federal legalization is not a matter of "if" but "when" and that is very positive. However, there continues to be a lot of roadblocks to creating a thriving industry. Bad tax policy, overregulation, limited dispensary outlets, and lack of access to capital make it very hard to transition from the legacy market and ultimately that hurts the industry's ability to bring consumers into the legal market.

ANDREW DEANGELO

I am more confident in the growth of the industry year over year than I am in the integrity of the industry year over year. More territories are opening up all over the country which spells growth. At the same time, our industry is less diverse and dynamic than in previous years. That needs urgent correcting.

LULU TSUI

There are still a lot of unknowns, but I am confident that the regulators in the Office of Cannabis Management are trying their best to stay true to the spirit of NY's MRTA. The diversity of voices that we have running our NY program is beautiful to see. Also, the passing of the conditional cultivation licenses for hemp growers and conditional retail licenses for the justice impacted gives me confidence that our state is open to learnings from other markets and feedback from advisors of what would be best for the NY program. The energy and excitement for NY to come online is palpable!

JEFFREY D. WELSH

Last year was the year of consolidation for our industry, due to the global pandemic, economic difficulties, and regulatory constraints in States like California. Cannabis operators found themselves needing to collaborate and work together simply to stay afloat. Operators are checking their egos at the door, a sign of collective maturity and growth.  When coupled with the continued battle for American policy reform, the United Nations rescheduling cannabis, and other international markets legalizing cannabis for adult-use, we continue to build momentum for the commercialization of cannabis nationally and internationally.  Our future is bright, but we must remain vigilant.

(C) Ben Lalande / POSIBL

What Are The Biggest Issues Facing You This Year In The Cannabis Industry?

JEFFREY D. WELSH

In California, we are dealing with the high cost of becoming a regulated operator and maintaining a compliant operation, the obscene tax rates, and the glut of cannabis in the marketplace, which has driven the cost of cannabis to record lows.  All of these factors help to contribute to a thriving illicit market. Nearly all of our licensed clients are also dealing with the need to comply with the California Environmental Quality Act (“CEQA”), an issue that the regulators have punted until now.  While simple in its goal, the complexities of the CEQA process threaten to bring the California industry to a standstill.

JESUS BURROLA

Oversupply of flower and wholesale flower pricing. California farmers are going through what many call a mass extinction event. The obstacles that bad policy has created for the industry and the heavy taxes that both consumers and legal cannabis businesses have to absorb have made demand stall. Limited dispensary outlets have also played a role in creating a big supply and demand imbalance that has most legal growers selling at prices that are not sustainable.

STEVEN JUNG

One of the biggest challenges in cannabis is that we’re operating against a patchwork of state regulations. At PAX, we have some ambitious growth goals for the year, including bringing our new Live Rosin with Natural Diamonds product to new markets. This presents a huge opportunity, but with that comes the reality of having to operate within distinctly different frameworks that impact everything from product formulation to how you go to market. Fortunately, we have a team of incredibly talented people who are up for the challenge.

ANDREW DEANGELO

Bad public policy everywhere is the biggest pain point. The barriers to entry and over taxation have taken a huge toll on everyone from large to small businesses not to mention social equity folks. The wreckage is particularly pronounced here in California where lawmakers continue to fail to reform the adult use framework in Sacramento despite one party rule and knowing it must be reformed. And they say stoners can't get anything done.

LULU TSUI

They say more cannabis is consumed in New York than any other market. How do we ensure that the legacy [operators] who built the existing cannabis industry in New York are able to participate in a meaningful way as legalization moves forward?

(C) POSIBL

Do You Think The Efforts In Congress To Decriminalize Cannabis Federally Will Be Successful?

ANDREW DEANGELO

No. The Democrats don't have the 60 votes needed to overcome the filibuster in the Senate. Biden has done nothing to keep his campaign promises regarding cannabis and has even antagonized our community during his tenure. It appears that Biden and the Democrats would rather lose than make weed legal.

LULU TSUI

Unfortunately, I don’t know if it will be successful. I think many members in Congress have forgotten they are supposed to vote for the betterment of their constituents. Instead, they vote along party lines.

JEFFREY D. WELSH

I wish I was more optimistic here, but I don’t think the existing legislation will get past the Senate. With the way the Senate is currently split, the current bill will need every Democrat and at least 10 Republicans to get to President Biden’s desk, and this outcome is highly improbable given the lack of Republican support for the measure to date. I would imagine the opposition will argue this shouldn’t be a priority right now, due to inflation, crime rate, gas prices, and the crisis overseas.

STEVEN JUNG

I remain hopeful that this Congress or this Administration act to decriminalize cannabis and enact more sweeping reforms that both empower consumer access and address the harms of the War on Drugs. Unfortunately, despite increasing support for the issue on both sides of the aisle, it’s looking more and more likely that federal legalization is further out than makes sense. That said, I’m optimistic that Congress can make incremental progress this year through banking reform and capital market access, and hopefully around issues of social justice and equity.

JESUS BURROLA

Yes, ultimately there are just too many reasons why we need to end the War on Drugs. Politicians can rarely agree on anything, but we have seen recently support for legalizing cannabis on both parties, and it is now an issue that transcends political affiliation, the overwhelming majority of Americans want cannabis legalized. The increased tax revenue and job creation legalizing cannabis can bring, along with stopping the incarceration of Americans will win out against the outdated negative stigmas of cannabis.

(C) PAX

It's Been 10 Years Since Colorado Became The First State To Legalize Cannabis. How Have Consumer Habits Changed?

LULU TSUI

When Colorado first legalized, there were only a handful of product categories available to consumers, mostly smokables such as flower or concentrates and tinctures and balms. With the advancement of technology and further understanding of the plant, there are many more types of products on the market that resonate with the mainstream market. We are definitely at the tipping point where most people are open to consuming cannabis products.

ANDREW DEANGELO

Consumers have so many more non-inhaled forms of cannabis now than in 2012. Vape pens didn't really exist in 2012, let alone nano emulsion drinks like you have today. And everything in-between. Discretion in the experience is something consumers want and that is why vape pens took off so fast. You are also seeing more micro-dosing or high-dosing depending on the consumer. The habits are 360 degrees different today than in 2012.

STEVEN JUNG

Consumer habits have changed significantly over time, both among cannabis enthusiasts and newcomers to the category. There’s been a tremendous amount of product innovation and brands are doing some exciting things to differentiate themselves and compete. We pride ourselves on the quality of PAX products and the level of experience they provide to our customers — they’re more educated today than they were when cannabis first legalized in Colorado and are looking for those products that are more pure, more flavorful and actually retain the natural properties and cannabinoids found in the plant.

JESUS BURROLA

We have seen form factors change, and brands that now cater to different subsets of consumers. We now see beverages and edibles that are no longer focused on high THC, but instead focus on taste, and low dosage to attract people that have traditionally not been cannabis consumers. We have also seen brands start to focus on minor cannabinoids like THCV or CBN to address specific needs of consumers, and a realization that not all cannabis is equal.

JEFFREY D. WELSH

From what I’m seeing, a general trend is that people spend more during a retail visit, but order less frequently. This might be a reflection that cannabis has now become a consistently purchased staple in households, that consumers are using more cannabis and drinking less alcohol, and that they know how long products will last them. Cannabis is also being consumed for different reasons compared to 2010. While the plant can (and should!) be used for purely recreational purposes, continued education and normalization has led to more varieties of products (topicals, tinctures, and low-dose edibles) for mental-health and wellness, sleep, and anxiety. While I live in the very cannabis-friendly bubble of Los Angeles, I’ve also noticed that there is much less stigma around public consumption of the plant.

Prospective cannabis entrepreneurs at Revelry February 2022 (C) On The Revel

Where Do You See The Growth Happening In The Industry? Can There Really Be A Dispensary On Every Corner, Like In Some Cities?

JESUS BURROLA

I see big growth opportunities for food, hospitality and experiential. As the stigma of cannabis starts to disappear, people are exploring their relationship with the plant. I am excited to see how cannabis can be incorporated into these different industries to create unique experiences.

ANDREW DEANGELO

I see growth in new markets and tourist heavy markets like Nevada assuming the pandemic continues to ease. I don't see dispensaries on every corner although they may be forced by zoning rules to concentrate in certain parts of town (usually the bad parts).

STEVEN JUNG

What we really need to be focused on right now is ensuring that consumers actually have access to legal cannabis. That’s not the case everywhere, particularly in large markets like California, where we’re seeing cannabis deserts and the resulting sustainment of the illicit market. Beyond that, we also need to prioritize ensuring that those communities hit hardest by the War on Drugs actually have the ability to participate in this growing industry, both in terms of licensing and benefiting from tax revenues.

JEFFREY D. WELSH

I believe certain markets, New York City in particular, will have a dominant and abundant retail presence. Other cities with comparable foot traffic and easy access to public transportation may follow suit. But with the continued consolidation of the industry, coupled with the increased availability of historical data for cannabis companies to analyze consumer preferences and purchasing patterns, I don’t think it will make sense for the “dispensary on every corner” model. Notably, we will not see the true potential and maturity of our industry until the United States effectuates meaningful banking and insurance reform.  We will also continue to see public support for legalization and reform grow as more States adopt and implement adult-use legislation, eventually leading us to a tipping-point where the federal government will be forced to act.

LULU TSUI

New York is still a global influencer. When New York comes online, the rest of the world will start coming online.