In 2024 Minor Cannabinoids And THC Beverages Expected To Boom: Industry Experts Look At Coming Year In Cannabis

With another year behind us with no federal legalization of marijuana and no approval of the SAFE Banking Act, the industry’s biggest problem remains the lack of access to capital. What will happen in 2024? Are we any closer to either of these reforms?

At first glance it might seem so, considering the many marijuana milestones of 2023. Though these positive events beg a few questions: Why are we still waiting for SAFE Banking and rescheduling of cannabis at the federal level? With 24 states having legal recreational marijuana as of 2023, isn’t it more logical to expect to see state-by-state progress? What is prevailing optimism or pessimism?

We asked industry experts and their answers varied.

For Socrates Rosenfeld, CEO and co-founder of Jane Technologies, an online ordering platform service for cannabis dispensaries, the US cannabis industry is at an “exciting point in time. With over 50% of Americans now living in a state with legal cannabis access and the government's recent actions on issues like SAFER and rescheduling, the end of cannabis prohibition has never felt closer to becoming a reality,” Rosenfeld told Benzinga.

He added that it is of great importance for industry operators to continue to invest in scalable solutions to remain competitive. “Powerful digital infrastructure, deep data analysis, and trusted customer relationships will not only be important factors in determining the future winners of the US market but will also shape the global industry's future for generations to come.” 

The Farm Bill Might Be In Focus

To gather more relevant insight, Benzinga also spoke with Patrick Rea, managing director of what is thought to be the longest-running cannabis investment fund, Poseidon Investment Management. Additionally, we gathered the most intriguing quotes from other industry titans.

When it comes to federal reforms, Rea says forecasting is difficult. “After 10 years in the cannabis industry, predicting changes to marijuana regulations on the federal level feels like a fool's errand,” Rea told us, adding that the focus will probably be on hemp.

“Still, we expect cannabis advocates, lobbyists, and lawyers to turn their attention to changing or protecting The Farm Bill where it relates to hemp. Closing, or keeping open, a perceived loophole for intoxicating hemp products is an evolving priority for some in the industry.” 

Rea also advised cannabis companies that are trying to stay afloat to concentrate on managing general and administrative (G&A) expenses. While state-legal marijuana businesses can run profitably already, Rea noted that they “likely won’t become cash cows until the removal of IRS code 280e.” Focusing on managing costs and keeping a positive cash flow is what could help them stay in control in 2024 and beyond.

Rea also suggests the industry take matters into its own hands. “For years, we’ve supported our elected officials to deliver on their promises. Perhaps now is the time to take control of the things we can control. Perhaps with the right mission, vision, and leadership, the cannabis industry can set its standards for safety, integrity, and transparency. The leaders of the industry would need to get on board, but why not take the reins in our hands and drive the industry forward.” 

Political Games

Morgan Paxhia, co-founder of Poseidon Investment Management is more hopeful about cannabis progress in 2024. “I foresee the federal government reclassifying cannabis rescheduled as a Schedule III controlled substance on April 20, 2024,” he said. “Immediately afterward, Democratic leaders like Senator Chuck Schumer and Senator Cory Booker will hold press conferences and try to take a victory lap. In response, certain members of Congress will attempt to stifle this reclassification and force an egregiously high 14% excise tax, which some will try to prop up as a compromise.”

He further predicts that President Biden will fail to capitalize on this historic shift in federal policy, enabling Donald Trump and the Republican Party to attract the youth vote.

“Additionally, I believe hemp-derived Delta-9 THC products and other naturally occurring intoxicating hemp-derived cannabinoids will be forced into regulated channels, closing the Farm Bill loophole,” Paxhia said adding that, unfortunately, there probably won’t be any SAFER Banking Act progress. “Rescheduling alone or rescheduling/memo combo will result in a new wave of liquidity, a surge in M&A activities, equity issuance, and refinanced debts that will bail out many who may not survive otherwise. We will also see new companies listed on CBOE in Canada.”

Lewis Koski, chief strategy officer of Metrc, a provider of cannabis regulatory technology systems, agrees that this could be the year for bigger changes. “2024 is a presidential year, and those years have been pretty good for the expansion of cannabis legalization within the states.” 

Minor Cannabinoids And Marijuana Beverages

Several industry experts agreed that 2024 will be a significant year for minor cannabinoids and also marijuana beverages.

“CPG brands are expected to drive innovation, developing products that cater to a broad range of consumer tastes, with minor cannabinoids becoming increasingly important in their diverse product lines,” said Christine Smith, founder & CEO of Grön (pronounced "green"), one of the largest and most recognized producers of handcrafted cannabis-infused edibles in the American Northwest.

Alleh Lindquist, CEO of FloraWorks, a biotech enterprise focused on rare and novel cannabinoids followed up. “Cannabinoid therapeutics will become the leading emerging market opportunity in the cannabis industry. I expect to see the market becoming more invested in CBN as a potential alternative to other natural sleep aids and existing pharmaceutical options. I also expect to see a continued upward trend in cannabinoid research as our industry seeks to discover the vast therapeutic potential of rare and novel cannabinoids, paving the way for innovation and growth."

A recent report by TD Cowen analyst Viven Azer revealed a shift in consumer behavior, highlighting the clash between legal marijuana and alcohol sales. "Alcohol sales in legal cannabis states underperformed by 100-150 bps over the past five years," revealed Azer, the first senior Wall Street analyst to cover this emerging industry in 2014. She also projected that the cannabis sector will attract 18 million new users while potentially witnessing a decline of two million alcohol users.

Paul Weaver, head of cannabis at Boston Beer SAM shared enthusiasm for cannabis-infused beverages. “As the newest generation of drinkers reevaluate their relationship with alcohol, the popularity of cannabis beverages is an enticing alternative,” Weaver said. “The success of TeaPot, our line of THC-infused iced teas, highlights this emerging demand and we can’t wait to see how the category grows. Whether it’s a marijuana-derived beverage sold in a dispensary or a hemp-derived beverage sold in a liquor store, cannabis drinks are challenging the status quo, have a growing fanbase, and represent the future of adult consumption."

Photo: Benzinga edit with images by Republican Party - Republican National Committee via Wikimedia Commons, Thiago Patriota on Unsplash, Clker-Free-Vector-Images from Pixabay